World water demand to increase 40% by 2030

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A 2030 Water Resources Group report on the world’s water scarcity released last week has posed the challenge of how to get beyond the perception that water is a human right, rather than a scarce resource that can be priced in a way that drives conservation. It adds that water issues are increasingly becoming a real business risk.

The forecasts in the 185-page McKinsey & Co report suggest demand for water will be 40% higher in 20 years than it is today, while in the most rapidly developing countries it will be up more than 50%. It also notes that today 1.1 billion people don’t have access to clean water, with the so-called water gap increasing at an accelerating rate.

The report, Charting our water future: Economic frameworks to inform decision-making, focuses on four countries with diverse water issues – China, India, South Africa and Brazil. Collectively, by 2030 they will account for 40% of the world’s population, 30% of global GDP and 42% of projected water demand.

However, it also shows that while meeting competing demands for water will be a considerable challenge, it is possible to close the growing gap between water supply and demand.

According to Martin Stuchtey of McKinsey, “we are not saying there is one way to close the water gap, and we fully acknowledge the complexity of the water arena”.

Meanwhile, it is estimated that agriculture accounts for roughly 70% of global water use, meaning that the push for biotech crops would have a big impact on the water gap.

“Water shortages will create business opportunities,” said Michael Mack, CEO of Syngenta a Swiss-based agribusiness firm, which is developing genetically engineered, drought-resistant strains of wheat and corn.

“Biotech crops are literally two years away,” he said.

“Biotech crops will help not only in poor countries but in water-rich regions of Canada and Russia, which will be able to grow more wheat per acre, then sell the output to countries that water-constrained.

“Getting more productive agriculture on the existing farmland is the highest priority.”

This is known in the trade as more crop per drop. But the idea would only succeed if governments and environmental groups, particularly in Europe, can be persuaded that genetic engineering will generate more good than harm.

Meanwhile, Peter Brabeck-Letmathe, the chairman of Nestle questioned whether the idea of water as a “human right” is a useful way to frame the conversation.

Brabeck-Letmathe said people have a right to water for their basic needs – perhaps 25 litres a day. But he argued that adequate pricing of water will be needed to curb waste.

“It’s not a human right to wash your car, to fill up your swimming pool, to water your golf course,” he said.

In South Africa, according to Brabeck-Letmathe, residential users are given a monthly allocation of ‘free’ or subsidised water – presumably enough for drinking, cooking, bathing and sanitation – and then charged a premium for usage beyond that.

In addition, McKinsey executives and others said, “free or subsidised electricity in rural India contributes to water shortages there because farmers have no reason not to pump as much water as they can out of the ground”.

The executives pointed to drip irrigation as both a more effective and more efficient way to deliver water and fertilizer to crops.

The report shows that payback on investment in drip irrigation could take as little as one year in some cases. The issue is farmers in poor countries like India don’t have the capital to invest in it, so charging them more for water won’t do any good.

They would need access to financing, or the ability to share the costs of an irrigation system with neighbours, or government or NGO subsidies for the pipes, which would provide a more sustainable solution that subsidizing electricity or water.

The report, was commissioned by companies such as Coca-Cola, Nestle, SAB Miller and Syngenta, along with the World Bank/International Finance Corporation.

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