The Economic Implications of Water Shortages

Better water management is a key factor in reducing U.S. water consumption that can be replicated in other parts of the world.

Typically, when we consider water shortage issues around the world, the focus is on water scarcity. We often look at certain regions of the world—and at times, in our own country—when there is not enough water to meet the needs, or customary needs, of the community. 

However, there is another element to water shortages that is becoming almost as important and critical.  Water shortages can have very serious negative economic impacts that will exacerbate over time if they are not addressed in the coming years. This was made clear by a somewhat under-reported study released in May 2016 by the World Bank.

The report, High and Dry: Climate Change, Water and the Economy, found that water shortages and erratic and uncertain water supplies, along with rising populations and elevated incomes, means expanding countries may see their gross domestic product (GDP) decline by as much as 6 percent in the next 30 years. This decline will be most significant in areas of the world where water supplies may currently be meeting community needs, however, prospects for this to continue are either uncertain or likely to get much worse over time. This includes such areas as Central Africa, East Asia, and the Middle East.

Just for clarification, it is clear that growing populations will put more stress on limited water supplies. However, what often is overlooked and something we have witnessed in the past 20 years is that as emerging economies expand and lifestyles improve, the demand for water grows considerably. In our own country, some studies have found that a family earning $150,000 per year will often use twice as much water as one bringing in $75,000.

We should also note that current water crises may not be just the result of inadequate rainfall, poor water storage and delivery systems, and other factors that traditionally play key roles in water shortages. What we see happening in many parts of the world is a growing competition between people and industry when it comes to freshwater. As industry and agriculture expand in such areas of the world as India, the needs of people are often minimized when it comes to water consumption. Precedence in these areas is given to industry, agriculture, energy development, construction, etc.

Other key points of the study include the following:

  • Water insecurity could multiply the risk of conflict between countries.
  • Food prices will become less stable and unpredictable, often resulting in dramatic cost increases.
  • Droughts and water shortages have been tied to spikes in violence and unrest within countries.
  • Just as people migrated from one area to another due to water shortages in ancient times, we could see that repeated in coming years.

Silver Linings
Many people are not fully aware of the economic impacts of water shortages, but there is another—more positive—development that many people may be unaware of as well. At least here in the United States, we are using a lot less water.

Water usage in the United States peaked in the early 1980s at approximately 440 billion gallons of water per day (bgd). By 2010, it was down to about 350 bgd. On a per capita basis, water use fell by about 1,300 gallons per day to 1,100 during this same period. (We should also note that between 1980 and 2010, the population of the United States grew from 220 million to 309 million.)

How this was accomplished in the United States is the same way we can help reduce water consumption in many areas of the world. This potentially could put off or eliminate water shortages and scarcity and their many negative impacts, including economic. It is all based on using water more efficiently.

For instance, as mentioned, in certain parts of the world people are given a back seat to energy development when it comes to water. Over the past 10 years, thermoelectric power plants, which use about half the water in the United States, have developed closed-loop systems to cool equipment in these power-generating facilities, reducing water consumption by about 20 percent.

Another factor in reducing U.S. water consumption, which can be replicated in other parts of the world, is better water management. This can apply to a number of things, but a perfect example of improved water management has been witnessed in California during the past 40 years. In the late 1970s, due to a severe drought, the state had to implement major water restrictions after just one year of drought. Since 2011, the state has endured several years of drought but did not formally implement restrictions until the fourth year.  This was the result of enhanced water management.

More efficient water-using fixtures are also playing a pivotal role. In commercial facilities, 40 percent of all water is used in restrooms. High-performance toilets and no-water urinals have helped reduce consumption dramatically. Remember, one no-water alone reduces water consumption by as much as 40,000 gallons per year.

Repeating these and many other water efficiency strategies around the world will likely result in similar water reduction. And instead of a 6 percent decline in GDP, the World Bank report adds that many parts of the world may actually see a 6 percent growth in GDP with these and other steps taken.

A frequent speaker and author on water conservation issues, Klaus Reichardt is founder and managing partner of Waterless Co. LLC, located in Vista, Calif. Reichardt founded the company in 1991 with the goal to establish a new market segment in the plumbing fixture industry with water conservation in mind. The company's key product, the Waterless No-Flush urinal, works completely without water.

Featured Webinar