Water: Conflict or Cooperation

World Water Day this year highlights the role of cooperation in managing the many competing needs for the resource, a topic near and dear to Future 500's heart. Demand for water is surging as global population booms and developing economies continue their steady hum.

Meanwhile, climate change is projected to greatly alter water supply, placing additional strain on many already water-stressed regions (see: tensions over water use in China). Demand is projected to far outstrip supply, creating conditions for geopolitical conflict – unless we can successfully reorient the global economy’s use of water. Water subsidies have a major distorting effect on the market’s pricing signals, encouraging inefficient use and suboptimal allocation of our limited water supplies. At various levels we see instances of this precious resource being wasted, from rice farms in arid California to cotton in Uzbekistan. Fair pricing of water could encourage more investment in water infrastructure and increased efficiency economy-wide.

The scale of the problem is immense. The United Nations has designated 2013 as UN International Year of Water Cooperation, and if we are to ensure that water fosters cooperation and not conflict, we will need to ensure each individual’s basic needs are met – that everyone has access to affordable, quality fresh water.

Meeting this need will only require a small percentage (roughly 2 percent) of the world’s fresh water supply. But upholding the human right to water hinges on how we value water – in other words, how we price the remaining 98 percent. The UN estimates that 90 percent of the world’s water is allocated to the agricultural and industrial sectors, leaving only 10 percent for municipal and domestic use. As water becomes increasingly scarce, some activists worry that “water will flow uphill to money” – with big industries outbidding municipal and other interests for preferential access.

This conflict has begun to manifest across many areas in which Future 500 works, such as energy and materials. Our goal, as in all our program areas, is to harness tensions to push for systemic solutions. In fact, ready solutions exist to mitigate conflict, but in order to get a better understanding of the solution, let’s look first at how agricultural and energy interests are coming into more direct competition for access to water resources.

Competition over scarce Resources

Between industries, competition for water is intensifying. Energy interests are coming into conflict with agricultural interests in China, India, the U.S. and elsewhere. One major factor is that energy production is becoming increasingly water intensive. The International Energy Agency projects that, within the next 25 years, fresh water use from energy production will double – increasing the prevalence and intensity of competition. For the most part, the rise in water use is attributable to coal and biofuels, not natural gas or shale oil.

In the American West, however, the recent boom in energy production owes much to water-intensive hydrofracking technology, which can require up to 5 million gallons of water per well. Ongoing drought conditions in states like Colorado and Texas exacerbate the burgeoning tensions between agricultural and energy interests over depleting water stores. Agriculture still claims the large majority of the region’s water, but as aquifers run dry, the projected uptick in energy’s share of water is stoking fears that oil and gas companies will outbid other interests and procure privileged access.

Tensions between stakeholders are on the rise. Ben Rainbolt, executive director of Rocky Mountain Farmers Union has publicly expressed fears that "We're not going to be able to raise the food we need." Slate Williams, general manager of the Crockett Groundwater Conservation District in Texas stated his demand bluntly: "I want them to quit using fresh water for fracking."

A bigger well - efficiency and fair pricing

Thankfully, in the United States institutions are still capable of addressing such issues before they lead to full-fledged conflict. Environmentalists and industry have mobilized to push water up the legislative agenda. Texas Governor Perry recently signed a bill requiring companies disclose water usage at each well. Industry and municipal groups are coalescing around the idea of water recycling, and top environmental NGOs are pushing for more funding towards water infrastructure and more efficient use of water. However, these solutions will likely prove insufficient in the absence of systemic reforms aimed at fairly pricing water across the economy.

What is needed, then? First, it is important to observe the fallacy in thinking of this conflict over water resources as inevitable. Competing sectors need not squeeze one another out to procure water resources; instead, we can focus on efficiency and productivity, growing the size of our shared proverbial well. Water supplies may be determined by the hydrological cycle, but by incentivizing water efficiency through eliminating of subsidies and introducing a fair price on water, we can harvest more productivity from our limited supply.

Peter Brabeck, chairman of Nestle, understands that access to water is the biggest long-term threat to his business. He sees misuse of water as a consequence of its systematic undervaluing. Within the corporate community, he is leading the charge to correct this, urging his peers to build water stewardship principles into their core business strategies. Through his work with Water Resources Group, he also advocates for stronger relationships between companies in different sectors, as well as between corporations, NGOs and governments, to come up with solutions jointly.

"I am the first one to say water is a human right…This amount of water is the primary responsibility of every government to make available to every citizen of this world, but this amount of water accounts for 1.5% of the total water which is for all human usage….Where I have an issue is that the 98.5% of the water we are using, which is for everything else, is not a human right and because we treat it as one, we are using it in an irresponsible manner, although it is the most precious resource we have. Why? Because we don't want to give any value to this water. And we know very well that if something doesn't have a value, it's human behaviour that we use it in an irresponsible manner.”

Towards Water Cooperation

Given the global scale of the problem, we need progressive leaders across sectors - corporate, NGO, and government - to come together to attack water subsidies that systemically distort global water markets and to ensure human needs are met. Proper pricing would increase the cost of fresh water – a cost that U.S. consumers are willing to pay. This would encourage unconventional energy producers to use water more efficiently and creatively, like the companies in Pennsylvania that now voluntarily use abandoned mine drainage to frack their wells. If implemented economy-wide, such incentives would reserve fresh water for socially optimal uses – drinking, farming, etc. Under such a regime, farmers will also tend to grow less water-intensive crops, excepting the markets that would bear the higher price without the help of subsidies. Businesses like semiconductor manufacturers will be better able to predict water use and pricing as they consider multi-billion dollar investments. Cities will be able to make investments to repair the nation’s stock of aging, leaky infrastructure. Transparent, fair pricing of water will encourage cooperation, reduce conflict and bring efficiency to society’s allocation of this precious resource.

Water is still a key input in the food and energy sectors. Stakeholder engagement can be an effective tool in promoting cooperation and reducing conflict over its use, enhancing the mission of World Water Day.

Furthermore, the imperative to both feed and power our society has led our team at Future 500 to reorient our water initiative towards system-wide approaches that manage tradeoffs and improve outcomes across sectors. Our goal is to encourage stakeholders to address the issue at a local, regional, national or global level to find what works, and then seek to refine, adapt and replicate the model elsewhere. Check back for an overview of our current initiatives and the formal rollout of our revamped water program.

Image credits:

UN World Water Day