WATER ECONOMY · WATER ECONOMY: DECIPHERING THE CHALLENGES, FINANCING THE OPPORTUNITIES | 5 There...

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WATER ECONOMY:deciphering the challenges, financing the opportunities

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FOREWORD: TACKLING MOUNTING WATER CHALLENGES

Addressing water-related challenges is at the heart of any holistic sustainable development approach. Not only do current water resources play a key role in regulating the Earth system, but they are also embedded in all forms of human development. United Nations’ 2030 agenda well recognizes the pivotal role of water in all environmental and social issues, for it features two specific water-related goals, namely SDG 6 (“Clean Water and Sanitation”) and SDG 14 (“Life below water”) among the 17 established Sustainable Development Goals (SDGs) to be achieved by the end of the next decade. Perhaps more interesting in this agenda is the fact that a series of other established SDGs are simply inseparable from water issues. Let us just mention here the obvious cases of SDGs1 (“No Poverty”), 2 (“Zero Hunger”) and 3 (“Good health and Well-being”) whose achievement by 2030 is out of reach without substantial progress in access to clean water and sanitation services. What’s more, other SDGs such as “Affordable and clean energy” (SDG7) and “Climate action” (SDG13) cannot be properly addressed without paying due attention to the use of water resources, given the energy sector’s high water-footprint.

In light of the above and also given the breadth of the underlying issues and their far-reaching implications, we are initiating with this report what is likely to become a Water Series. This inaugural paper is both

providing an overview of the fundamental issues relative to Water and specifically addresses the challenges associated with the achievement of SDG6 relative to Access to Clean Water and Sanitation.

According to the United Nations’ Synthesis Report on Water and Sanitation released last year “2.1 billion people are still lacking water accessible on premises, available when needed and free from contamination”, and another “4.5 billion are lacking a safely managed sanitation service in 2015”. In the field of wastewater treatment, a lot can still be done, when considering the substantial (over 40%) portion of domestic wastewater remaining untreated, thereby posing risks to the environment and public health.

The challenge of access to water does not end up here and cannot be separated from the broader issue of water scarcity. Albeit traditionally experienced to varying degrees in most parts of the globe, this issue has to be put into the contemporary context of natural resources over-use by populations and by economic sectors. Addressing water scarcity entails further development and propagation of processes and technologies enabling higher efficiency and circularity in the management of water resources, for household as well as business needs, in particular through wastewater treatment and reuse. This holds particularly true in sectors, such as agriculture and manufacturing, of considerable potential risk and impact on aquifers, through potential pollution and resource withdrawal. Present-day water challenges are likely to be exacerbated by such phenomena as population growth/urbanization and climate change, the latter deeply aggravating problems of water scarcity (droughts) or excessive abundance (floods).

As this report reveals, weak responses thus far to these various challenges are not so much the result of a lack of relevant technology and solutions but rather of weak institutional frameworks for resources preservation and enhancement, and/or insufficient focus on the most critical issues. In identifying and rewarding the best practices in the field of water management, thereby in channelling capital towards the most sensible assets and solutions, sustainable finance can provide meaningful instruments to properly tackle these issues.

Orith Azoulay, Global Head of Green & Sustainable Finance

WATER ECONOMY: DECIPHERING THE CHALLENGES, FINANCING THE OPPORTUNITIES | 4

ACKNOWLEDGEMENTS

• Managing EditorOrith AZOULAY

• Main AuthorsRadek JANIvan PAVLOVIC

• Water Index MethodologyHong-My NGUYENCédric MERLE

• With the contribution ofLaurence MARTINEZMonica CHAVEZ Dina JOORYJoséphine RETIERE

• Special AcknowledgementsLaurent AUGUSTE (Veolia Environnement)Thibaut CUILLIERE


There can be no life without water. When scientists search for inhabitable planets, the very first question they ask when gazing into the endless Universe is whether the conditions on a given planet are compatible with the presence of water in some form. Yet down here on the Planet Earth, water only too often receives little attention. Water tends to be “invisible” in our daily lives in the sense that we only start paying attention to water when something goes wrong.

This report has a triple purpose: decipher the main water challenges and risks, understand the role of institutions, policies and the private sector in turning these challenges into business opportunities and, finally, outline the role of green & sustainable finance in ensuring that economic activities able to provide solutions for water-related issues have the access to capital at the scale commensurate with the magnitude of these challenges.

Deciphering the wide set of water challenges and understanding the risks they imply for the society and the economy is a daunting task. Water seems to be almost everywhere and yet it remains poorly understood by many businesses, decision-makers and consumers alike. Water is essential to sustain the life and health of ecosystems and human societies alike. Nevertheless, water can also harm, especially if mismanaged.

Given the pervasiveness of water in natural processes and human activities, this study uses the framework of Sustainable Development Goals (SDGs) as Ariadne’s thread to understand how water relates to the functioning of the biosphere and to socio-economic development. The SDGs can be divided into three thematic groups: environmental, social and economic. The environmental SDGs aim at stewardship of the biosphere. The social SDGs have the objective of ensuring social stability and progress while the economic SDGs aim to improve the economic performance of our societies. Water relates in a more or less direct manner to each of these goals: it can contribute towards their achievement, but it can also undermine them. The SDG-styled Ariadne’s thread starts with the role of water in the biosphere, to reflect that healthy and resilient biosphere provides a foundation upon which socio-economic development can be based. Subsequently, the focus of this study shifts to the relationship between water and socio-economic development.

Water plays an essential role in ensuring that biosphere remains in a state supportive for human development. Water operates within the hydrological cycle, which refers to the continuous water circulation between the Earth and the atmosphere. While the overall amount of water contained within the hydrological cycle remains constant, its distribution across different processes is undergoing a constant change. However, the hydrological cycle is being increasingly disrupted by the impact of human activities. This entails consequences for the functioning of the natural environment, human societies and economies alike.

The increased pressure of human activities upon the natural environment puts water into the dual position of the victim of change and its transmission channel. The concept of tipping points refers to sudden and abrupt shifts in the natural environment which can result in far-reaching and often irreversible changes of the qualitative state of ecosystems. Current human pressure upon the environmental risks triggering several tipping points during this century. The impact of such events would be felt mainly through water and the hydrological cycle. For illustration, tipping points include the collapse of ice sheets which would accelerate sea level rise, hereby damaging assets in coastal areas. Another illustration of a potential tipping point includes dieback of the Amazon rainforest, modification of the El Niño–Southern Oscillation or the shifts of the Indian monsoons. Such events would modify local climate and change the patterns of local water availability, hereby impacting economic activity, particularly agriculture, in entire regions.

The concept of Planetary Boundaries has been conceived to avoid such risks. By identifying the large environmental processes that keep the Planet in a state that can support economic and social development and by quantifying what are the thresholds for triggering tipping points for each of these processes, the framework of Planetary Boundaries delimits the safe operating space for socio-economic development within the environmental limits. While the human use of freshwater is one of the nine planetary boundaries, the others are also influenced by water. This interdependency highlights the importance of the stewardship of water resources for both the functioning of the biosphere and for socio-economic development.

Despite the overall abundance of water on Earth, water suitable for human use is a scarce resource. The concept of water scarcity refers to a lack of available water resources of sufficient quality to meet the water use demands in a certain area. Scarce water availability results from physical unavailability or pollution of water resources while scarce water access results from mismanagement of available water or lacking water infrastructure. In both cases, social and economic consequences can be dire. Two-thirds of the global population face severe water scarcity for at least one month per year, the two most exposed countries in terms of population are India and China.

EXECUTIVE SUMMARY


The quality and quantity of water available for human use are two closely intertwined notions. Water pollution diminishes water quality, which in turn reduces the quantity of water available for human use. Water pollution resulting from human activities comes in multiple forms from a wide variety of sources. While some of the main types of water pollution are widely known, others are yet to be understood. Combined, the different types of water pollution inflict damage to ecosystems and human health, while imposing additional treatment costs on businesses, thereby causing a wide range of economic costs, many of which are not easily expressed in monetary terms.

The Water Footprint concept has been developed to account for the full water impact of human consumption choices, taking into consideration water use at different stages of the supply chain. This concept reveals that most of our water consumption remains “invisible” to our eyes since domestic water consumption over which we have a direct control accounts for around 4% of the water footprint of an average European consumer.

By increasing the variability of precipitation, rising water temperatures, causing sea levels to rise and increasing the frequency and severity of floods and droughts, climate change will further exacerbate current water challenges while also causing new ones to arise. Furthermore, the choices that will be made for climate change adaptation and mitigation will impact both water and energy systems. The decarbonization of the energy sector has potentially far-reaching implications on water resources since water is needed for the production of any type of energy apart from solar PV and wind, hereby acting as a constraint for the production of all the other types of energy. Consequently, the increasingly variable water availability resulting from advancing climate change will become a matter of rising importance for energy security as it can disturb thermal power generation, which currently dominates the global energy mix.

Water can both fuel and undermine social progress and economic development. Water stewardship unlocks the path towards development and the achievement of the SDGs while the mismanagement of water resources and resulting water scarcity acts as a drag on economic growth and risks reversing the already achieved social and economic gains. A study by the World Bank assesses the water-related losses in agriculture, income, human health and property to arrive at a stark conclusion that some regions can see their growth rate diminishes by up to 6% per year by 2050, which would send their economies on a shrinking trajectory.

The consequences of water scarcity also have a strong social dimension. Water pollution and lacking access to drinkable water are felt disproportionately more by the poorer parts of society. In developing countries lacking water supply infrastructure, the burden of bringing drinkable water often falls to women and children. UNICEF estimates that “around 200 million hours are spent every day collecting water, overwhelmingly by women and children”. In such a setting, achieving the SDG 6 by providing reliable and equitable access to clean water and sanitation also has important co-benefits in terms of gender empowerment and human well-being.

Water has been at the origin of social collapse and economic decline in the past and remains a potential source of conflict in the future. Entire civilizations saw their rise and fall conditioned by the natural environment, especially by water quality and availability. The story of Antique Arab Civilization and the Maya Civilization illustrates that even the most sophisticated societies of their time cannot

escape the ineluctable dependency of their social stability and economic development upon the proper functioning of the biosphere in general and upon the hydrological cycle in particular. The far more recent societal and economic

collapse in the Aral Sea region provides a warning that overexploitation of water resources can cause social and economic collapse in an entire region even during our times. The origin of the infamous Dust Bowl occurring in the US during the 1930s can be traced to unfortunate agricultural practices and their impact upon the hydrological cycle. The ongoing Syrian conflict starting in 2011 offers a disquieting reminder that a water-related socio-economic collapse can deteriorate into social unrest and, ultimately, into an armed conflict. It would be misleading to claim that water “caused’ the Syrian conflict. However, water can be traced as one of the factors which contributed to the escalation of tensions in the region. Water-related tensions and potential conflicts are likely to multiply in the future as a growing population will compete for water made increasingly scarce by rising levels of pollution and by climate change-induced

shifts in the hydrological cycle.

From the business standpoint, water can pose three types of risks: analogously to the three channels through which climate change affects financial stability, these three types of water-related business risks

are called physical, regulatory and reputational risks. The physical risk refers to damaged assets, interrupted operations and disturbed supply chains as a consequence of water scarcity, floods, droughts and extreme water

events. The regulatory risk refers to a threat to corporate profitability from regulation and legislation adopted in response to a worsening water crisis. The reputational risk refers to the damaged company brand and reduced

profitability from the loss of consumer base resulting from negative media coverage and controversies related to water management practices.

The challenges of universal access to drinkable water and sanitation services (WSS) and water resources preservation in an ever-thirsty planet may seem overwhelming: while 2.1 billion people still lack access to safe drinking water and 4.5 billion

people continue to lack access to sanitation compatible with the SDG6 objective, water resources and aquatic ecosystems remain under intensive political, cultural and economic pressure to be mismanaged all across the globe and considerable progress still


has to be made to ensure a fully-circular management of water. Improvement on both fronts requires coordination and cooperation among a wide set of stakeholders: national governments, local communities, industrial companies with the highest water footprint both in terms of consumption and pollution of natural resources, multilateral development banks (MDBs) and, last but not least, water companies providing WSS and wastewater treatment solutions.

In lower/middle income countries (LMCs), in particular those facing the most severe water scarcity issues, the first type of response to the serious sorts of water challenges is of institutional nature. It is the national governments’ responsibility to set the appropriate frameworks to attract private expertise and capital and to design policies ensuring both sensible use/management of water resources across all economic sectors and affordable access to WSS. Whilst it still holds true in most countries/regions, this “traditional” approach to water challenges may not suffice to tackle the breadth of risks but also opportunities arising from the ever-growing pressure on water resources against the backdrop of continuing population growth and industrialization.

Progress towards water security probably entails a twofold change of paradigm among various stakeholders. The first one relates to the supply of water fit for human use, be it for households’ or industrials’ needs: analyses of the global trends in the invention and diffusion of water-related technologies reveal a disproportionate emphasis put thus far on supply-side assets and technologies (large-scale freshwater production and distribution infrastructure, desalination, wastewater treatment). Therefore, for the water scarcity issue to be fully addressed and for the world to progress towards a fully circular approach to water resources, much higher attention must be paid to solutions on the demand side. Recent developments in the Chinese chemical sector and in the US Oil & Gas shale industry reveal substantial progress can be achieved in the management of the water cycle in high-impact sectors to foster hydric resources conservation. The second change of paradigm in the water sector relates to the deployment of infrastructures needed to ensure universal access to WSS in LMCs. The magnitude of the investment needs in these countries and the challenges associated with the onboarding of private expertise and capital together call for new avenues to be explored. In lieu of a mere replication of institutional frameworks in place in upper-income level countries, we currently see the emergence of decentralized, project-centric approaches, building on local communities’ involvement and potential cross-subsidies between water and energy.

An interview with Veolia Environnement reveals the breadth of innovation that can be deployed globally to address water challenges: from innovative sanitation projects in Kenya to circular management of water resources by industrials in regions experiencing high levels of water stress and potential reuse of treated wastewater for agricultural purposes in Namibia. In both municipal and industrial segments, in Upper-income countries (UICs) as well as in LMICs, emerging solutions extending the boundaries of the circular economy outside water management are being explored: through the valorization of all sorts of waste for energy and agriculture purposes, they offer supplementary sources of financings for the nascent blue economy.

Funding a sustainable water economy requires mobilizing capital flows commensurate with the magnitude of water challenges. Taking into consideration the limited availability of public money and the scale of investment needed, the private sector’s capital flows are dearly needed to address the rising tide of water challenges. Green & sustainable finance instruments can become efficient tools for the needed capital reallocation. These can be capital market instruments (equity and fixed income) or project/corporate financing (loans) instruments.

Financial institutions can play their part in addressing water challenges by offering advisory services and innovative financial products covering the capital markets as well as project and corporate financing.


TABLE OF CONTENTS

1. THE RISING TIDE OF WATER CHALLENGES AND RISKS .............................12

1.1/ WATER AND THE BIOSPHERE: WHY WATER MATTERS FOR THE HEALTH OF THE NATURAL WORLD .............................................................................................................................14

1.1.1/ WATER PLAYS AN ESSENTIAL ROLE IN NATURE BY REGULATING AND SUPPORTING THE BIOSPHERE. DIMINISHING QUALITY OF WATER RESOURCES HAS FAR-REACHING BIO-PHYSICAL CONSEQUENCES .................................... 14

Regulatory and supportive functions of water in the biosphere .................................................................................... 14

Water-related tipping points in the Earth system .......................................................................................................... 16

Water as a planetary boundary ..................................................................................................................................... 17

Interaction of water with other planetary boundaries .................................................................................................... 19

1.1.2/ WATER ENDOWMENT AND HUMAN USE OF WATER: USABLE WATER RESOURCES ARE SCARCE AND MADE EVEN SCARCER BY HUMAN ACTIVITY ...................................................................................................................... 20

How much water is out there: global water endowment ................................................................................................ 20

How much water is actually useful for human activities: water scarcity ....................................................................... 20

How human activity impacts water quantity: water withdrawals and use ..................................................................... 22

How human activity impacts water quality: water pollution .......................................................................................... 23

Water footprint: a surprising perspective on the water requirements of our daily consumption choices ........................ 24

1.1.3/ WATER AND CLIMATE CHANGE: FUTURE EXACERBATION OF CURRENT WATER CHALLENGES ....................................... 25

Impacts of climate change on water resources and extreme water-related events ....................................................... 25

Reshaping energy systems to tackle climate change: what implications for water ....................................................... 26

1.2/ WATER, THE SOCIETY AND THE ECONOMY: WHY WATER MATTERS FOR SOCIAL AND ECONOMIC DEVELOPMENT ................................................................................................. 28

1.2.1/ WATER AS A SOURCE OF SOCIO-ECONOMIC DEVELOPMENT ........................................................................................... 28

Water as both a source of and a drag upon economic development .............................................................................. 28

Water and gender equality ........................................................................................................................................... 30

1.2.2/ WATER AS A SOURCE OF INSTABILITY: HOW SOCIETIES RISE AND FALL DEPENDING ON WATER CONDITIONS ............. 30

The role of water in the fall of ancient civilizations ....................................................................................................... 30

The role of water in socio-economic collapses of the recent past ................................................................................ 32

Water and conflict: a very recent illustration of a water-related socio-economic collapse resulting in an armed conflict 33

Water and peace: projections placing water at the very center of future tensions ......................................................... 34

1.2.3/ WATER AS TRIPLE SOURCE OF RISK FROM A CORPORATE PERSPECTIVE ....................................................................... 34

Physical risk ................................................................................................................................................................ 35

Regulatory risk ............................................................................................................................................................ 35

Reputational risk ......................................................................................................................................................... 35


II/ TURNING WATER CHALLENGES INTO BUSINESS OPPORTUNITIES:

THE ROLE OF INSTITUTIONS, POLICIES AND THE PRIVATE SECTOR .....36

2.1/ NAVIGATING THE WIDE VARIETY OF POSSIBLE ANSWERS TO WATER CHALLENGES .....................................................................................................................................37

2.1.1/ OVERVIEW OF POSSIBLE SOLUTIONS AT VARIOUS STAGES OF WATER SUPPLY CHAINS .............................................. 37

Water supply chain: similar assets, diverging outcomes ............................................................................................... 37

Institutional frameworks: understanding who owns/operates/finances water infrastructures ....................................... 38

A wide range of possible solutions to water challenges ................................................................................................ 40

2.1.2/ THE ROLE OF WATER POLICIES AND INSTITUTIONAL FRAMEWORKS IN ADDRESSING WATER CHALLENGES ............... 41

The economics of water: water policies in theory and in practice ................................................................................. 41

Equity and affordability issues related to water and sanitation services ....................................................................... 42

Water tariff differentiation according to location or end-use of water ........................................................................... 42

Elasticity of water demand for irrigation: what effects can be reasonably expected from water pricing policies? .......... 43

The consequences of an inadequate institutional framework: the case of India ............................................................ 43

The importance of a consistent policy support: the case of Singapore ......................................................................... 43

2.1.3/ UNDERSTANDING THE PATTERS OF WATER-RELATED TECHNOLOGICAL INNOVATION ................................................... 45

Global trends in water-related technology innovation ................................................................................................... 45

2.2/ INVOLVING THE PRIVATE SECTOR TO TACKLE WATER CHALLENGES ........................ 46

2.2.1/ WHAT DRIVES THE PRIVATE SECTOR MANAGEMENT OF WATER RESOURCES?............................................................... 46

Various drivers of private sector innovation in the management of water resources ..................................................... 47

Chemical sector’s increasingly circular use of water resources: the case of Shanghai Chemical Industry Park (SCIP) .. 48

Water management as part of business optimization strategy: the case of the US shale oil and gas industry ............... 48

2.2.2/ ATTRACTING PRIVATE CAPITAL TO FINANCE WATER ASSETS IN LOW & MIDDLE-INCOME COUNTRIES ........................ 49

Water infrastructures funding gap in LMICs: deciphering a multi-faceted challenge ..................................................... 49

The emergence of innovative financing schemes and institutional frameworks to channel private capital and expertise towards water infrastructures ................................................................................................................ 50

2.2.3/ UNDERSTANDING THE PERSPECTIVE OF A PRIVATE COMPANY PROVIDING WATER SOLUTIONS ACROSS THE GLOBE: AN INTERVIEW WITH VEOLIA ..................................................................................................................................................... 51

Providing access to water and sanitation services in low-income countries ................................................................. 51

Sustainable management of water resources as an integral part of water services offer for clients ............................. 51

3/ AN IMPACT-BASED APPROACH TO CHANNELING CAPITAL

TOWARDS THE WATER ECONOMY .........................................................................53

3.1/ EXISTING TOOLS AND MARKET PRACTICES FOR IMPACT-BASED FINANCING OF THE WATER ECONOMY ........................................................................................................................... 54

3.1/ TOOLS AVAILABLE TO ISSUERS AND INVESTORS TO LOCALIZE, ASSESS AND MANAGE WATER-RELATED CHALLENGES 54

The Water Risk Monetizer – identification and monetization of water risks for businesses .......................................... 55

Ceres Investor Water Toolkit - evaluation and engagement with water risks in investment portfolios ........................... 55


WWF Water Risk Filter - identification and visualization of water risks ......................................................................... 56

CDP Global Water Report ............................................................................................................................................ 56

ESG rating agencies as a potential source of water data .............................................................................................. 56

3.1.2/ AN OVERVIEW OF WATER-RELATED KEY PERFORMANCE INDICATORS (KPIs) AND USE OF PROCEEDS (UoP) CATEGORIES FOR IMPACT-BASED FINANCIAL INSTRUMENTS ................................................................................................... 56

Key performance indicators (KPIs) .............................................................................................................................. 57

Use of Proceeds (UoP) ................................................................................................................................................. 61

Water assets eligible as a UoP category according to the Climate Bonds Initiative (CBI) ............................................. 61

Water assets eligible as a UoP category according to the Green Bond Principles (GBP) ............................................... 63

The use indicators for impact reporting: an illustration with suggestions from the GBP ............................................... 64

Neither KPIs nor UoP but still green & sustainable? ..................................................................................................... 64

3.1.3/ WATER IN THE EU TAXONOMY OF SUSTAINABLE ECONOMIC ACTIVITIES: WHY WATER MATTERS FOR THE EU ACTION PLAN ON SUSTAINABLE FINANCE ................................................................................................................................. 65

The EU action plan on sustainable finance and the EU Taxonomy of sustainable economic activities ........................... 65

Water supply and treatment ......................................................................................................................................... 65

Centralized wastewater treatment ............................................................................................................................... 66

Binary eligibility thresholds ......................................................................................................................................... 66

Universality of criteria .................................................................................................................................................. 67

3.2/ RECENT DEVELOPMENTS IN SUSTAINABLE FINANCE AND THEIR RELEVANCE FOR THE WATER ECONOMY ...........................................................................................................67

3.2.1/ WATER ASSETS IN THE COLOR RATING METHODOLOGY UNDERLYING THE NATIXIS GREEN WEIGHTING FACTOR ......... 67

Green Weighting Factor as an internal capital allocation mechanism for a bank ........................................................... 67

Context-dependent criteria .......................................................................................................................................... 68

3.2.2/ WATER INDICES: AN OPPORTUNITY FOR EQUITY INVESTORS TO TACKLE WATER CHALLENGES WHILE REWARDING CORPORATE INNOVATION ........................................................................................................................................................... 68

Preservation of freshwater and marine resources: A step-by-step guide to build a Water and Ocean portfolio ............ 68

Why a holistic approach must be considered ................................................................................................................ 68

Focus on high stake sectors ........................................................................................................................................ 69

Stock picking: a scoring methodology based on water-related KPIs ............................................................................. 72

3 EXAMPLES OF COMPANIES INCLUDED IN THE WATER5D INDEX .... 76

UTILITIES ............................................................................................................................................76

FOOD & BEVERAGES .......................................................................................................................76

TEXTILE & APPAREL ......................................................................................................................... 77

APPENDIX ........................................................................................................... 78

BIBLIOGRAPHY: ................................................................................................. 81


1. THE RISING TIDE OF WATER CHALLENGES AND RISKS

Deciphering the wide set of water challenges and understanding the risks they imply for the society and the economy is a daunting task. Water seems to be almost everywhere and yet it remains poorly understood by many businesses, decision-makers and consumers alike. Water is essential to sustain the life and health of ecosystems and human societies alike.

Given the pervasiveness of water in natural processes and human activities, we will use the framework of Sustainable Development Goals (SDGs) as Ariadne’s thread to understand the importance of water and to navigate the labyrinth of water challenges facing our world. The SDGs, adopted by all United Nations Member States in 2015, are the only sustainable development roadmap the world has agreed upon to date. SDGs provide a holistic framework for sustainable development of human economies and societies by integrating the three pillars of sustainability: environmental stewardship, economic performance and social stability. Out of the 17 SDGs illustrated in the figure below, two of them are dedicated to water: providing clean water and sanitation for all (SDG 6) and preserving life below water (SDG 14). But the story of water within the sustainable development agenda does not end here: all the other SDGs depend on water, whether they cover the environmental, economic or social aspects of sustainability.

Source: United Nations

Human societies and economies, as well as ecosystems, are complex systems with a multitude of interdependencies and a high degree of interconnectedness. As a consequence, the SDGs are also interdepended and connected with each other rather than being stand-alone goals that could be achieved without any consideration of their interaction with the others. This means that contributing towards the achievement of one of the SDGs also has some degree of influence upon the achievement of the others. Conversely, undermining the objectives set out in one of the SDGs can have a negative influence upon the aspects covered by the others, be they of economic, environmental or social nature.

G ALS

G ALS

SUSTAINABLEDEVELOPMENT

INDUSTRY, INNOVATION AND INFRASTRUCTURE

REDUCE INEQUALITY

SUSTAINABLE CITIES AND COMMUNITIES

RESPONSIBLE CONSUPTION AND PRODUCTION

DECENT WORK AND ECONOMIC GROWTH

LIFE BELOW WATER

LIFE ON LAND

PEACE, JUSTICEAND STRONG INSTITUTIONS

PARTNERSHIPS FOR THE GOALS

CLIMATE ACTION

AFFORDABLE AND CLEAN ENERGY

NO POVERTY

ZERO HUNGER

GOOD HEALTH AND WELL BEING

QUALITY EDUCTION

GENDER EQUALITY

CLEAN WATER AND SANITATION

SUSTAINABLEDEVELOPMENT

Water and the Sustainable Development Goals (SDGs) Two SDGs are directly about water, all the others are linked to it in some way

Sustainable Development Goals (SDGs) provide a roadmap for human development by offering a holistic perspective on how to solve economic, environmental and social challenges.

The picture presenting all the 17 SDGs might suggest that you can select your favorite set of SDGs and focus solely on their achievement without considering the others. Such perception is misleading as it does not take into consideration the interdependency of environmental, economic and social aspects of human development.


The concept of “SDG cake” offers a visual representation of the interdependence of different aspects of sustainable development: it represents a hierarchical organization with the biosphere as a foundation, society based upon the solid foundation of a healthy biosphere and finally, the economy as a cherry on top of the cake depending upon healthy biosphere and a functioning society. The figure below provides this hierarchical representation of the SDGs. In this perspective, achieving the SDGs related to the stewardship of the biosphere is an essential task. Doing so lays down the proper biophysical foundations for socio-economic development and prosperity. Conversely, failing to do so risks undermining current social and economic achievements by creating a natural environment not supportive of human development. The economic objectives are represented on the top of the SDG cake to highlight that apart from a healthy biosphere, the long-term economic performance also requires a functioning society as an enabling factor.

Let us start navigating our way through the labyrinth of water challenges by focusing on the foundation of the SDG cake, the biosphere.

The essential role of water in the natural environment remains “invisible” to our sight as long as it is carried out properly. When human interference or changing climatic conditions disturb these water function, the importance of water suddenly becomes very visible. To understand why the protection and sustainable use of water resources is one of the foundations of socio-economic development, the SDG-styled Ariadne’s thread has to lead us first through the biosphere.

Water as the foundations for the achievement of all the other SDGs The concept of “SDG cake” presents interdependency of environmental, economic and social aspects of sustainable development.

Source: Adapted from Stockholm Resilience Centre

SDGs are interdependent. The SDGs related to the biosphere are presented as the foundation for the achievement of both social and economic SDGs. The achievement of economic SDGs requires both a functioning society and a healthy biosphere.

Achieving an SDG contributes towards the achievement of others. Failing to achieve an SDG has a negative impact on other SDGs.

SOCIETY

Life below water

Life on land

Climate action

Clean water and sanitation

No Poverty

Sustainable citiesand communities

Peace, justice and strong institutions Affordable and clean energy

Good Health and well being

Quality education

Gender equality

Zero hunger

Decent work and economic growth

Industry, innovation and infrastructureReduce inequality

Responsible consumption and production

Partnerships for the goals

Water plays an essential role in the biosphere

Biosphere is the foundation for socio-economic development.

Functioning society requires healthy biosphere

Economic performance depends upon the state of the society and the biosphere

BIOSPHERE

ECONOMY


1.1/ WATER AND THE BIOSPHERE: WHY WATER MATTERS FOR THE HEALTH OF THE NATURAL WORLD

Water fulfils numerous functions in the natural environment by regulating and supporting the development of the biosphere. When the pressure of human activities and of the changing climate alters the quality and quantity of water resources available, the natural environment can change significantly, often in an abrupt and irreversible manner. Water is both the transmission channel and the victim of such large-scale changes.

1.1.1/ WATER PLAYS AN ESSENTIAL ROLE IN NATURE BY REGULATING AND SUPPORTING THE BIOSPHERE. DIMINISHING QUALITY OF WATER RESOURCES HAS FAR-REACHING BIO-PHYSICAL CONSEQUENCES

Water operates within the hydrological cycle, which refers to the continuous water circulation between the Earth and the atmosphere. The hydrological cycle involves a wide set of processes, the most important being evaporation, precipitation, transpiration, condensation, and runoff. While the overall amount of water contained within the hydrological cycle remains constant, its distribution across different processes is undergoing a constant change, which has important consequences for the functioning of the natural environment, human societies and economies.

Regulatory and supportive functions of water in the biosphere

To understand why the hydrological cycle and its alterations by human activity are so important for the natural environment, it is convenient to divide water resources into “blue” water and “green” water (figure below). Blue water is the part of rainfall water which enters into lakes, rivers and groundwater aquifers. Green water is the part of the rainfall which is intercepted by vegetation, stored in soils, used by plants and ultimately returned into the atmosphere via evapotranspiration.(1)

(1) Evapotranspiration refers to the evaporation of water stored in soil and to the transpiration of water by plants. - (2) Formally, resilience refers to “the ability of a system to cope with disturbance without crossing tipping points into a new stability domain, to adapt to change, and transform into a new state following a regime shift (tipping into a new social-ecological equilibrium)” (Falkenmark et al., 2019).

BLUE WATERFresh surface water (lakes

and rivers) and groundwater (underground aquifers).

GREEN WATERPrecipitation stored in the soil or temporarily staying on top of the

soil or vegetation.

Water regulates Earth’s climate, supports the production of biomass and the development of human economies and societies. It is a crucially important element determining the capacity of socio-ecological systems to adapt to changing conditions, to withstand shocks and to transform in situations of crisis (Falkenmark et al., 2019). For illustration, elements as diverse as the Amazon rainforest, Indian monsoons and the Sahara Desert all play an important part in regulating the Earth system and maintaining its resilience(2) (Folke et al., 2010) and they depend crucially upon the water cycle. Moreover, water also acts as a driver and amplifier of shocks affecting these systems. The figure below presents the functions played by the stocks and flows of both blue water and green water.

Source: Adapted from Falkenmark et al. (2019). Images purchased from Shutterstock.


The three functions played by green water in the biosphere are regulatory, productive and moisture feedback. The regulatory function of green water is fulfilled by evaporation and transpiration flows, air moisture, soil moisture and by water in living matter. Combined, they regulate the Earth’s energy balance and climate system via multiple channels such as cloud formation, carbon sequestration, regulation of temperature and of albedo(3). The productive function of green water refers to the role of evaporation in sustaining the growth of biomass and the production of food and bioenergy. Finally, the moisture feedback function regulates the water cycle over land via recycled evaporation (Falkenmark et al., 2019).

The four functions played by blue water in the biosphere are the provision of water supply for society, transport, productive and regulatory functions. The water supply function is performed via water withdrawals (this topic is further developed in section 1.1.2.) used for domestic, industrial and agricultural consumption. The transport function refers to the ability of river flows and base flows (shallow subsurface(4) flows) to carry nutrients and pollution. The impacts of transported nutrients and pollution depend upon the state of aquatic ecosystems: additional nutrients can be both helpful and harmful depending on local conditions. The productive function is carried out by water in lakes, wetlands, and rivers where it sustains the growth of aquatic biomass and by the use of withdrawn water for irrigation in agriculture. Finally, the regulatory function covers a wide set of processes. Aquatic ecosystems are regulated by river flows and base flows. The Earth’s energy balance and climate are regulated by albedo modifications and by carbon storage performed by wetlands, groundwater, glaciers, and permafrost. Sea levels and some geological processes are regulated by glaciers and groundwater (Falkenmark et al., 2019).

While the functions of blue and green water are performed locally, their disturbance can be felt globally. This is the case because the Earth system is interconnected, and its components are continuously interacting with each other. The term “Earth system” refers to all the interacting physical, biological and chemical processes on our planet. The next passage in the labyrinth of the biosphere leads us to the concepts of tipping points and large-scale shifts in the Earth system. In this setting, water can be at the origin of such changes, act as their channel or be the victim of their impact.

(3) Albedo refers to the reflection of solar radiation. - (4) Not to be confused with underground flows which occur deeper below the Earth’s surface.

FUNCTIONS OF BLUE WATER FUNCTIONS OF GREEN WATER

Water supply for society: withdrawn water.

Transport: nutrients and of pollution carried by river flows

Productive: sustaining the growth of aquatic biomass & agricultural production of food.

Regulatory: regulation of aquatic ecosystems, Earth’s energy balance and climate, sea levels and geological processes.

Regulatory: regulate the Earth’s energy balance and climate system.

Productive: growth of biomass and the production of food & bioenergy.

Moisture feedback: recycled evaporation regulates water cycle over land.

The multiple functions played by the stocks and flows of blue water and green water dynamically interact with each other.

Source: Adapted from Falkenmark et al. (2019). Image purchased from Shutterstock.


West AfricanMonsoon ShiftDiebackof amazon

rainforest

Boreal forestdieback Atlantic deepwater formation

Melt of greenland ice sheet Climatic

change-inducedozone hole?

Boreal forestdieback

Permafrost andtundra loss?

Arctic sea-ice loss

Change in ensoamplitude

or frequency

Instability of west antarcticice sheet

Changes in antarctic bottom water formation?

SaharaGreening

Indianmonsoonchaotic

multistability

Population density (persons per km2)

no data 0 5 10 20 100 200 300 400 1000

Water-related tipping points in the Earth system

To appreciate why water is so important to keep the biosphere supportive for human development and to understand why human pressure upon the environment can have large-scale impacts often felt through water, we have to introduce the concepts of “tipping points” and “regime shifts”.

Tipping points refer to critical thresholds in the Earth system. Once a tipping point is reached, an entire system(5) can change into a qualitatively new state, often abruptly and irreversibly. Formally, a tipping point(6) is defined as a “critical threshold at which a tiny perturbation can qualitatively alter the state or development of a system” and the term “tipping element” has been introduced “to describe large-scale components of the Earth system that may pass a tipping point” (Lenton et al., 2008).

Human activities result in a rising pressure upon the natural environment, which increases the risk of triggering several different tipping points. The resulting regime shifts that would occur imply important impacts on ecosystems as well as upon human societies and economies. Recent scientific advances explore human-induced shifts in interactions(7) in the Earth system, modification of feedback(8) mechanisms and a potential triggering of tipping points. The results of this work are presented in the following figure (adapted from Lenton et al., 2008), which identifies the tipping points at risk of being triggered during the 21st century(9) and localizes the corresponding tipping elements on the world map. The text boxes in the figure highlight several water-related tipping points and their consequences.

(5) In this setting, we refer to large-scale components of the Earth system. However, tipping points can also occur in economic and social systems. An interested reader may wish to refer to work of Professor Sornette for a technical discussion about regime shifts in stock markets and their underlying mechanisms. A book summarizing Sornette’s work about the topic can be found at https://www.jstor.org/stable/j.ctt7rzwx - (6) An accessible account about tipping points is given in a lecture “Tipping Points in Climate and Biosphere Function» available at https://www.youtube.com/watch?v=_F4ET3sQXW4 - (7) Interactions between environmental processes and systems, for instance the interaction between the hydrological cycle and the biosphere. - (8) Positive feedbacks are amplifying, self-reinforcing mechanisms. Negative feedbacks are dampening mechanisms. Both positive and negative feedback loops play a crucial role in the regulation of the Earth system and maintenance of its resilience. - (9) Other potential tipping elements whose thresholds could be exceeded after the end of this century or whose qualitative change would only manifest after this millennium are excluded. The question of the time horizon to be considered when evaluating impacts of climate change and the weight given to outcomes in different periods of time is known to economists as “discounting”. For a comprehensive overview of the issues of discounting, please refer to the dedicated chapter in OECD (2018): “Cost-Benefit Analysis and the Environment”. The issue is as relevant to economists and scientists as it is to philosophers. Moral philosophy in particular has some interesting insights regarding this topic. For an excellent framing of the issue, please refer to Dietz, Hepburn and Stern (2008).

Water and tipping points: risk of regime shifts in the Earth system Human pressure can push natural systems through a tipping point into a qualitatively new state. Water is both a victim

and a transmission channel of such large-scale shifts.

Source: Adapted from Lenton et al. (2008). Images purchased from Shutterstock.

Collapse of Atlantic thermohaline circulation

Collapse of aquatic ecosystems

Map of large-scale components of the Earth system which may pass a tipping point during the 21st century

Triggering water-related tipping points would result in disruption of economic activity and could eventually lead to social and political instability

Modification of El Nino Southern Oscillation (ENSO)

Desertification and savanisation

Collapse of West Antarctic Ice Sheet, melting of Greenland & Arctic ice sheets

Greening of Sahara and Sahel (a rare illustration of an economically beneficial tipping point induced state shift)

Destabilization of Indian Monsoon

https://www.jstor.org/stable/j.ctt7rzwxhttps://www.jstor.org/stable/j.ctt7rzwxhttps://www.youtube.com/watch?v=_F4ET3sQXW4https://read.oecd-ilibrary.org/environment/cost-benefit-analysis-and-the-environment_9789264085169-en#page1https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1090572


Water can be the trigger, the transmission channel or the victim of large-scale regime shifts in the Earth system triggered by human pressure.

Triggering some of the tipping points would result in modification of precipitation and droughts, hereby impacting agricultural production and economic activity in entire regions. For illustration, deforestation resulting in a dieback of Amazon rainforest would cause a significant loss of biodiversity and decreased rainfall. A large fraction of precipitation in the Amazon basin is currently recycled, but deforestation reduces the three cover, which leads to decreased precipitation, longer dry seasons and increased summer temperatures. This, in turn, impacts the agricultural productivity in Latin America, farming communities and related economic sectors.

In some cases, the consequences of large-scale regime shifts in the Earth system can be felt across large distances, often through the hydrological cycle. For illustration, the collapse of the Atlantic thermohaline circulation(10), modification of the El Niño-Southern Oscillation (ENSO) and the destabilization of the Indian Summer Monsoon (ISM) would all result in a modification of rainfall patterns and of the length of droughts and floods season. This would disrupt agricultural productivity and economic activity in concerned regions and impact the livelihoods of local communities. On a more positive note, one of the rare beneficial examples is the potential greening of Sahara and Sahel resulting from modification of West African Monsoon (WAM) circulation (Lenton et al., 2008).

Climate change itself can act as a trigger for other tipping points, with consequences being felt mainly through water. Melting of Greenland ice sheet and the potential collapse of the West Antarctic Ice sheet would both result in sea level rise of several meters over the course of the next few centuries. Moreover, the melting of sea ice would expose the ocean surface which is much darker than ice sheets – darker ocean surface would absorb more radiation and hereby amplify the warming(11). Another example of a climate change-induced tipping point is the melting of permafrost and consequent massive release of frozen methane. Permafrost stores large quantities of methane. The melting of permafrost would release large quantities of methane – a potent greenhouse gas – into the atmosphere, thereby amplifying global warming and undermining global efforts for climate change mitigation (SDG 13).

Appendix 1 (Adapted from Lenton et al. (2008)) provides a summary of the tipping points which can be reached during the 21st century and briefly outlines the main consequences.

Once a tipping point has been reached, the regime shift can occur abruptly and may not be reversible(12). It may, therefore, be desirable to understand under which conditions tipping points are reached, in order to avoid their triggering. The concept of Planetary Boundaries has been conceived to do just that.

Water as a planetary boundary

The concept of planetary boundaries (figure below) has been conceived as a “safeguard” against the risk of destabilizing the natural environment by triggering the tipping points.

Planetary boundaries identify the safe operating space for socio-economic development within the environmental limits. By identifying the large environmental processes that keep the Planet in a state that can support economic and social development and by quantifying what are the thresholds for triggering tipping points for each of these processes, the scientific community has identified nine planetary boundaries. Active stewardship of these boundaries gives a good chance of keeping the Planet in a state where the SDGs can be achieved. Conversely, transgressing the planetary boundaries triggers the risks of biosphere destabilization, ultimately leading to the creation of an environment hostile to socio-economic development.

The nine planetary boundaries include three big systems, four variables working slowly in the background and two not yet quantified parameters. The three big systems are climate change, ozone depletion and ocean acidification. Paleoclimatic records show that these systems have tipping points which were crossed in the distant past and resulted in a large-scale change of conditions on Earth. The four “slow variables” work silently in the background as they regulate the Earth system and provide the resilience of the Planet. For these variables, planetary boundaries were identified as interference into the nitrogen and phosphorus cycles (biochemical flows), rate of biodiversity loss (biosphere integrity), the land-use change and the freshwater use. These “slow variables” regulate the growth of biomass on the Planet and ensure natural carbon sequestration, which regulates the climate. Finally, air pollution and chemical pollution were identified as the last two boundaries (novel entities and atmospheric aerosol loading), but their boundary values were not yet quantified.

(10) Thermohaline circulation refers to the “part of the ocean circulation which is driven by density differences”. Factsheet about Atlantic thermohaline circulation is available at http://www.pik-potsdam.de/~stefan/thc_fact_sheet.html. - (11) An illustration of a positive (or “self-reinforcing”) feedback loop. - (12) On a human timescale. On a geological scale, only a few events are truly irreversible, but this is largely irrelevant for human perspective given the brevity of human life relative to the timeframe relevant for geological processes.

http://www.pik-potsdam.de/~stefan/thc_fact_sheet.htmlhttp://www.pik-potsdam.de/~stefan/thc_fact_sheet.html


Freshwater use has been identified as one of the nine planetary boundaries. It sets a quantitate threshold for the human withdrawal of freshwater. This reflects the importance of the global water cycle for the regulation and support of the natural environment. Water acts as a “bloodstream of the biosphere”, providing and regulating environmental services and building organic matter in soils, which in turn provides soil fertility and sustains agricultural activities.

The freshwater use planetary boundary tracks the global levels of the consumptive use of blue water(13) and sets the boundary value at the threshold of 4000 km3 per year. The purpose of this boundary is to avoid regime shifts in the functioning of ecosystems dependent upon water flows. Good news is that current human consumptive freshwater use estimates stand around the value of 2,600 km3 per year. That is within the safe operating space determined by this boundary. The bad news is that there may not be enough consumptive freshwater use left for providing both food security and carbon sequestration in the future. An analysis by Rockström et al. (2012) suggests that ensuring food security (SDG 1) and mitigating climate change with carbon sequestration (via reforestation and capture of carbon in soils(14)) would push human consumptive use of freshwater beyond the safe levels of the water planetary boundary. This is just one illustration of important trade-offs implied by the biophysical limits for socio-economic development.

The interaction between the planetary boundaries could be described by the motto of The Three Musketeers: “One for all, all for one”(15). In other words, pressure upon one boundary, for instance, continuous change of climate, impacts the environmental processes which constitute the other planetary boundaries. An illustration of how different boundaries interact with each other through water is given below.

(13) Water from rivers, lakes, reservoirs, and renewable groundwater stores (see above). - (14) Noteworthy is the latter technology still being at an infant stage with no clear timetable for widespread use in the perspective of climate change. For these reasons, we do not elaborate on the role of CCS as a key energy policy option to reach carbon neutrality in section 1.1.3 and rather focus on suggested pathways involving the use of biofuels and green hydrogen. - (15) “Unus pro omnibus, omnes pro uno” in the Latin original.

Water as one of the nine Planetary Boundaries Planetary Boundaries identify nine processes that regulate the stability and resilience of the Earth system and propose thresholds for each process within which socio-economic development can safely continue.

Source: Adapted from Steffen et al. (2015) and Rockström et al. (2009).

Crossing these boundaries increases the risk of generating large-scale abrupt or irreversible environmental changes.

Staying within these boundaries gives a good chance to keep the biosphere in a state supportive for socio-economic development.

Novel entities

Stratospheric ozone depletion

Atmospheric aerosol loading

?

??

Ocean acidificationBiochemical flows

Freshwater use

Biosphere integrity

Climate change

Below boundary (safe)

Nitrogen

Phosphorus

Geneticdiversity

Boundary not yet quantified Beyond zone of uncertainty (high risk) In zone of uncertainty (increasing risk)

The concept of Planetary Boundaries determines the “safe operating space” for socio-economic development within environmental constraints

Functional diversity

Land-use change


Interaction of water with other planetary boundaries

The biophysical processes identified as planetary boundaries interact with each other. Just like all the SDGs are connected to water (as illustrated by the SDG cake), so are the other planetary boundaries. For illustration, ocean acidification alters oceanic chemistry and changes the pH of surface water. The increasing acidity of oceans changes marine ecosystems, which in turn can impact the development prospects of fisheries and coastal communities. Another illustration of how other planetary boundaries impact water is the aerosol loading in the atmosphere. The interaction of aerosols with water vapor in the atmosphere influences the hydrological cycle by affecting the patterns of atmospheric circulation and cloud formation. Consequences of such interaction include changing the behavior of tropical monsoons and related socio-economic costs. Another example involves the alteration of the phosphorus and nitrogen cycle by agricultural activity. The large-scale use of phosphorus and nitrogen as fertilizers alters their natural cycles in the environment. The resulting larger intake of nitrogen and phosphorus into water bodies cause algae blooms, which in turn starves aquatic ecosystems of oxygen. Lack of oxygen can result in “dead” zones, which has negative consequences for fisheries and aquaculture but also for the values of properties in the vicinity.

The figure below provides an illustration of how the other planetary boundaries impact water and how water can influence the processes identified as the other planetary boundaries.

Interaction of water with other Planetary Boundaries Planetary Boundaries are interdependent and influence each other

Source: Adapted from Steffen et al. (2015) and Rockström et al. (2009).

Key environmental processes identified as other Planetary Boundaries also have impact upon water

Changing land use modifies the patterns of the exchange of water between the land surface and the atmosphere, which regulate the climate.

Ozone depletion results in higher amounts of UV (ultraviolet) radiation reaching the surface, damaging both marine and terrestrial biological systems.

Rising sea levels.

Aerosols loading into the atmosphere influences the hydrological cycle by affecting the patterns of atmospheric circulation (influence on tropical monsoons) and of cloud formation.

Around a quarter of anthropogenic CO2 emissions dissolve in the oceans. This alters oceanic chemistry and changes the pH of the surface water. Increasing acidity modifies the structure of marine ecosystems.

Agricultural use of fertilizers increases the intake of nitrogen and phosphorus into the sea, where they cause algal blooms, which in turn leads to oxygen-starved aquatic ecosystems (eutrophication of freshwater systems).

Novel entities

Stratospheric ozone depletion

Atmospheric aerosol loading

?

??

Ocean acidificationBiochemical flows

Freshwater use

Biosphere integrity

Climate change

Below boundary (safe)

Nitrogen

Phosphorus

Geneticdiversity

Boundary not yet quantified

Beyond zone of uncertainty (high risk)

In zone of uncertainty (increasing risk)

The pathway through the labyrinth of the biosphere has led us across the concepts of regulatory and supportive functions of water in the biosphere, the threat of tipping points and the safe operating space determined by the planetary boundaries. Whether the key environmental processes on our Planet remain within these boundaries depends, amongst other factors, upon how water resources are managed. This is why the next steps alongside our SDG-inspired Ariadne’s thread lead us to the issues related to the human use of water endowment.

Functional diversity

Land-use change


1.1.2/ WATER ENDOWMENT AND HUMAN USE OF WATER: USABLE WATER RESOURCES ARE SCARCE AND MADE EVEN SCARCER BY HUMAN ACTIVITY

The distribution of stocks and flows and blue and green water in the hydrological cycle changes continuously in the natural environment. However, the human use of water resources modifies the hydrological cycle, which in turn disturbs the functions provided by water. In order to achieve the SDGs related to the sustainable use of natural resources and to the stewardship of the biosphere, we have to understand the impacts of human use of water upon global water resources.

How much water is out there: global water endowment

At first glance, water may appear as an abundant resource: after all, around 70% of Earth’s surface is covered by water. However, this figure has little relevance in terms of water use from the human perspective. To be useful for human activities, water has to be available at the right time, in the right place, in a sufficient quantity and at the appropriate quality levels.

Water useful for human activities is actually a scarce resource, despite the overall abundance of water resources when considered globally. The figure below (UN Food and Agriculture Organization, FAO) presents the composition of global water endowment. The figure shows that 97.5% of all water on Earth is salty, which is rather impractical for human use. Further 1.75% remains frozen in glaciers and in permafrost around the poles, which is one again of a limited use for human activities. As a consequence, humanity has to rely mainly on the remaining 0.75% of water available on our planet (The Economist, 2019).

Global water endowment How much water is located on Earth and how much of that quantity is available for human use?

Source: UN FAO

Freshwater accounts for merely 2.5% of water stored on Earth, the rest is saline

Oceans96.5%

Salinelakes0.07%

total globalwater

Glaciersand

Ice caps68.6%

Groundwater30.1%

freshwater

Ice andSnow73.1%

Lakes20.1%

surface water andother freshwater

Salinegroundwater0.93%

Freshwater2.5%

Surface waterand otherFreshwater1.3%

Atmospheric water0.22%

Biological water0.22%

Swamps andmarshes2.53%

3.52%

The concept of water scarcity discussed below indicates how much water in a given area is useful for human use.

How much water is actually useful for human activities: water scarcity

Water scarcity is a threat affecting every continent to a certain extent. It refers to the lack of sufficient available water resources to meet the water use demands in a certain area. Such a situation can result either from scarce water availability or scarce water access. Scarce water availability is a natural consequence of the physical scarcity of water resources. Scarce water access is a human-made issue and can be the result of several causes: a managerial failure to ensure regular water supply, a lack of appropriate water supply infrastructure or even a lack of political will to provide water access to certain areas for strategic or geopolitical reasons.

Water scarcity can be defined either in terms of “cubic meters of water available per person per year“ or in terms of “water withdrawal as % of water resources”. In both cases, several kinds of scarcity can be distinguished based on how serious the scarcity challenge is. By looking at the figure below (adapted from FAO), it might appear that water scarcity is an issue facing merely a few unlucky countries while being of little consequence to most others. This is not the case.

Soil moisture


A considerable part of the human population faces water scarcity at some point every year. At a first glance, the figure above seems to imply that water scarcity is of little concern for most countries (63% and 64% of countries are shown as facing no water stress according to the former and latter definition of water scarcity). Nevertheless, these numbers are considered on an annual basis and conceal the true magnitude of water scarcity challenges. This is the case because both water availability and water consumption are subject to strong interannual variations. When assessed at a monthly rather than annual basis, the issue of water scarcity becomes far more dire: “two-thirds of the global population live under conditions of severe water scarcity at least 1 month of the year. Nearly half of those people live in India and China. Half a billion people in the world face severe water scarcity all year round” (Mekonnen and Hoekstra, 2016).

The two countries which are the most concerned by water scarcity in terms of people having to live under severe water stress for at least a month are India (1 billion) and China (900 million). Moreover, significant parts of population facing severe water scarcity during some part of the year also live in the US (130 million, clustered mainly in the West – California - and the South - Texas, Florida), in Bangladesh (130 million), Pakistan (120 million, majority of whom are located in the Indus basin), Nigeria (110 million) and Mexico (90 million) (Mekonnen and Hoekstra, 2016).

The main takeaway messages about the two kinds of water scarcity and about the populations concerned are presented in the figure below.

Percentage of countries experiencing water stress

Litres per dayper person

Cubic metresper yearper person

1 400 or 500

2 700 or 1 000

4 600 or 1 700

absolute water scarcity

63%

12%

10%

6%

9%

water scarcity

water stress

no water stress

unknown

absolute water scarcity

64%

13%

12%

3%

8%

water scarcity

water stress

no water stress

unknown

Percentage of countries experiencing water stress

Withdrawal as % of resources

75

60

20

Source: Adapted from UN FAO

Water scarcity Water scarcity refers to a situation when water supply fails to match water demand.

Source: Adapted from the UN FAO, the Water Footprint Network, Mekonnen and Hoekstra (2016). Image purchased from Shutterstock.

WATER SCARCITYLack of sufficient available water resources to meet the water use demands in a certain area.

Scarce Water Access

Managerial Failure

Scarce Water Availability

Physical Scarcity

< 20%

Percentage of population

20% - 40%

40% - 50%

50% - 60%

60% - 80%

80% - 99%

100%

“Two-thirds of the global population live under conditions of severe water scarcity at least 1 month of the year. Nearly half of those people live in India and China. Half a billion people in the world face severe water scarcity all year round”. (Mekonnen and Hoekstra, 2016)


The lack of availability of water suitable for human use is a challenge facing most of the global population, with varying degrees of urgency and severity. Let us now have a closer look at how much water humanity uses and why.

How human activity impacts water quantity: water withdrawals and use

Water withdrawals(16) are defined as “freshwater taken from ground or surface water sources, either permanently or temporarily, and conveyed to a place of use” (OECD, 2019). Most of the withdrawn water is used by agriculture, which accounts globally for 69% of water withdrawals, far ahead of industries (19%) and municipalities (12%) as shown in the figure below (adapted from UN FAO). Agriculture is the sector using most of the withdrawn water in every continent apart from Europe for reasons outlined below.

At world level, the breakdown of present-day water withdrawals by main economic sectors reveals the prominent share of agriculture

(16) Also referred to as water abstractions. - (17) Thermoelectric power plants generally either burn materials (fossil fuels, wood, waste, etc.) or use controlled nuclear explosions to generate steam that turns a turbine connected to a generator. Cooling water removes heat from the vapor (thereby converting it into water) in a non-contact heat exchanger, a device through which the process water comes in close proximity to the cooling water (close enough to transfer heat from one stream to the other), but the two streams do not mix (FAO, 2011, http://www.fao.org/3/a-bc822e.pdf ).

(69%) and the more modest share of industries (19%). However, as economies and societies develop, the nature of water uses evolves and the share of industries in total water withdrawals tends to rise. Such rise is attributable to manufacturing activities, but more importantly to electricity generation. This is because fossil-fueled and nuclear power plants consume large volumes of freshwater for cooling purposes(17), which highlights the high level of interdependency between water and energy.

The breakdown of water uses in Europe by sectors provided below highlights the preeminence of industrial activities taken as a whole over agriculture (48% vs. 40%), but also the importance of electricity generation (28%) due to the share of the abovementioned fossil-fueled and nuclear technologies in EU-28 generation mix (70% of total generated volumes in 2016).

Water quantity and water quality are closely intertwined notions. From the standpoint of the functioning and the health of the

WATER WITHDRAWAL DISTRIBUTION

Source: Adapted from UN FAO

69%agriculture 19%industries 12%municipalities

WITHDRAWAL FOR AGRICULTURE

> 90%

> 10%

17

36

Number ofcountries

SECTORIAL WATER WITHDRAWAL COMPARAISON Agriculture Industries Municipalities

% of withdrawaldedicated

to agriculture

EUROPE

AMERICAS

OCEANIA

ASIA

AFRICA

WORLD

20% 40% 60% 80% 100%0%

Irrigation (including fodderand pasture for livestock)

Livestock watering and cleaning Aquaculture

BREAKDOWN OF WATER USE IN EUROPE BY SECTORS (2015)

Source: European Environmental Agency

Industry40%

12%

48%

Agriculture

Households

28%

18%

2%

industry

Electricity

Services industries

Mining andManufacturing

http://www.fao.org/3/a-bc822e.pdf


biosphere, it does not matter only how much water people withdraw but also in what state is that withdrawn water returned to the environment. This brings us to the issue of water pollution.

How human activity impacts water quality: water pollution

Water pollution diminishes water quality, which in turn aggravates the aforementioned water scarcity issues: polluted water may not be suitable for human use, at least not without costly pre-treatment. After entering the water, pollution alters its composition. By diminishing the quality of water and by undermining the health of ecosystems, pollution reduces their ability to dilute and assimilate pollutants, which can lead to further accommodation of pollutants in the environment.

Water pollution resulting from human activities comes in multiple forms from a wide variety of sources. The figure below (adapted from OECD, 2017) presents the nine main types of water pollution and outlines the broad categories of associated impacts.

Water pollution: main types of water pollution and their impacts Pollution diminishes the quality of ecosystem services and imposes a wide range of economic costs

Source: Adapted from OECD (2017), Images purchased from Shutterstock.

Eutrophication

SalinitySedimentation

and organic materials

Plastic particle pollution

Acidification

Microbial contamination

Toxic contaminants

Thermal pollution

IMPACTS

Degradation of ecosystem services

Water treatment costs

Health-related costsReduced property values

Opportunity costs of further development

Impacts on economic activities (agriculture, fisheries, industrial manufacturing and tourism)


(18) Assuming the baguette weight of 300 grams and its fabrication from French wheat which has itself a water footprint of 517 liters per kg. - (19) Assuming the volume of 125 milliliters. - (20) Assuming the volume of 125 ml of wine

While some of the main types of water pollution are widely known, others are yet to be fully understood. Plastic pollution in oceans, rivers and lakes is receiving increasing public attention and some progress is being made to collect and reuse plastics and, ultimately, to replace them by other substitutable materials. Conversely, the issue of “contaminants of emerging concern” is for the time being mostly absent from public debates and from corporate strategies. This broad category refers to chemicals recently discovered in water that were previously either unknown or present only at insignificant levels. Such chemicals can come from pharmaceutical and personal care products as well as from industrial processes. Little is known about their health impacts and about the manner in which they interact with each other or with other pollutants. Eutrophication refers to an excessive accumulation of minerals and nutrients (phosphorus and nitrogen nutrient loading are one of the nine planetary boundaries discussed in the previous section) in water bodies where they cause algal blooms, which in turn starves water of oxygen. Lack of oxygen dissolved in water can diminish revenues from fisheries and aquaculture and cause the decline of biodiversity. Thermal pollution refers to the elevated temperature of water bodies as a result of human activities and often relates to the use of water for cooling purposes in industrial processes as well as in nuclear and coal power generation. Ocean acidification (another of the nine planetary boundaries) is one of the consequences of climate change, as explained in the section dedicated to Planetary Boundaries. Microbial contamination of water is particularly important from the standpoint of socio-economic development, since some of the developing countries may not have the means to ensure a sufficient level of water treatment services, hereby exposing the population to health risks related to the presence of microbes in water.

The variety of types of water pollution results in a wide range of negative impacts and economic costs. By diminishing the health of ecosystems, water pollution reduces their ability to play a regulatory and supportive role in the natural environment. In terms of economic costs, water pollution is felt via several channels. Polluted water requires additional treatment before it can be used by humans, which increases water treatment costs and impacts the revenues of agriculture and industries. Water pollution can also cause health and sanitary problems, which diminishes human well-being and requires additional health-related expenses. Moreover, polluted water can reduce property values in adjacent areas and diminish revenues from tourism, hereby dampening the economic prospects of local communities.

Given the interplay between water quality and quantity, attempts to account for the impact of human activities upon the natural water endowment have to take into consideration both water withdrawals and water pollution. The concept of water footprint aims to do just that.

Water footprint: a surprising perspective on the water requirements of our daily consumption choices

The water footprint concept has been developed to quantify and localize water needed to produce the goods we buy, accounting for water use and water pollution all the way from water withdrawal to the final product in supermarket shelves. Formally defined as “the volume of freshwater used to produce the product, measured over the various steps of the production chain”, the water footprint accounts for the amount of water consumed and polluted during the production of consumer goods.

The water footprint can be divided into three components. The blue water footprint refers to the use of surface water and groundwater, the green water footprint refers to water from precipitation used while the grey water footprint accounts for the water needed to dilute the pollution resulting from production processes.

Each of these components is particularly relevant to different human activities. The blue water footprint is most relevant for irrigated agriculture as well as industrial and domestic water use. The green water footprint is particularly important for agriculture and forestry. Finally, the grey water footprint is of particular interest when accounting for the water impacts of heavily polluting industries and activities.

It may come as a surprise that the “visible” water use at home represents just a tiny proportion of the overall human footprint, around 4%. The remaining 96% is “invisible”, for it relates to the water consumed and polluted in the making of products we buy. For illustration, a study by Hoekstra (2015) found that 89% of the water footprint of an average Italian consumer is related to agricultural products and another 7% to industrial products, the remaining 4% being water used at home, which is the only part of the water footprint over which consumer actually has a direct control.

The key points about the concept of water footprint as well as its illustration with a few common consumer goods are presented in the figure below (adapted from the Water Footprint Network). For illustration, it takes around 155 liters of water to produce a French baguette(18) and another 130 liters to enjoy a cup of coffee(19). While this may seem like a lot, the water footprint of beef is in a league of its own: 15 400 liters of water for 1kg of steak. This is the case since around 98% of the water footprint of animal products consists of the water footprint required for growing the feed for these animals. While reducing the consumption of meat is the obvious choice in terms of water footprint reduction, many of us may not be quite ready to make such a sacrifice. In that case, the choice of meat also matters as chickens are far less water-intensive than pigs or cows. It should be noted that these numbers are global averages and local water use practices can have an influence upon the overall water impact of products, for better or worse. The water footprint of additional products (crops and animal products) is provided in appendix 2 based on data from the Water Footprint Network.


It is left to the reader to contemplate over the weekend that a pint of beer requires almost 150 liters of water while a glass of wine(20) of 125 milliliters is responsible for another 110 liters.

Water Footprint How much water is actually needed to produce the goods we buy?

Source: Adapted from the Water Footprint Network. Images purchased from Shutterstock.

Blue water footprint

Water used from surface or groundwater resources

Grey water footprint

Polluted water and freshwater needed to dilute this pollution

Green water footprint

Rainwater used

“Volume of freshwater used to produce the product, measured over the various steps of the production chain.“

WATER FOOTPRINT

Our direct water consumption is merely a small fraction of our overall water footprint.

Most of the water we consume is “hidden” in the production chain.

Water footprint of a few products (in liters)

155 Liters 130 Liters

110 Liters 8 000 Liters

148 Liters 15 400 Liters

(20) Assuming the volume of 125 ml of wine

Having seen the wide range of current impacts of human activity upon the water endowment, it is now time to consider their evolution in the future. This brings us to the issues related to climate change, which will influence both the availability of water and the patterns of its use by humans.

1.1.3/ WATER AND CLIMATE CHANGE: FUTURE EXACERBATION OF CURRENT WATER CHALLENGES

Changing climate will cause shifts in the hydrologi

WATER ECONOMY · WATER ECONOMY: DECIPHERING THE CHALLENGES, FINANCING THE OPPORTUNITIES | 5 There...

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