World Bank: Fresh Water Scarcity could Shrink Global Economy

May 6, 2016Global Challengesby EW News Desk Team

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On Tuesday, the World Bank reported that fresh water scarcity could be the biggest problem facing the economies of the world. Economies across large portions of the planet could shrink dramatically by 2050 as climate change causes fresh water scarcity issues.

A few regions may suffer particularly badly. One standout is the Middle East, where gross domestic products (GDP) could slip by as much as 14% unless the region comes up with ways to significantly reallocate the supply of fresh water.

This would require improved efficiency standards, investments in technologies to produce greater quantities of fresh water (such as desalination plants), and means of recycling water.

On the other side of the coin, climate change could lead to extreme floods and loss of snow pack. Snow may be replaced by rain that runs off, meaning no additional flow of fresh water during spring thaws.

It also creates drought and higher evaporation rates, so precipitation that does fall dries too quickly to be of use. Rising sea levels also allow saltwater to flow into aquifers and water bodies that were once filled with fresh water, salinating them and rendering them undrinkable.

During a telephone conference with reporters, World Bank Lead Economist Richard Damania said of the situation, “When we look at any of the major impacts of climate change, they one way or the other come through water, whether it’s drought, floods, storms, sea level rise…Water is, of course, the center of life, but it’s also at the center of economic activity.”

Aside from affecting agriculture, fresh water sources could also impact every other sector of an economy. Although the impact of water scarcity would not be felt evenly across the globe, and Western Europe and North America would largely be spared, the overall damage to the global economy and political situation could be devastating. The damage would be particularly bad for developing economies, such as China, India, or Brazil.

Aside from the Middle East, the Sahel belt (the region of Africa below the Sahara) would likely dip by about 11%. A similar downturn would probably occur in Central Asia.

These conditions are not written in stone, however. Measures to reallocate fresh water could ease these conditions and even lead to economic gains in some regions, according to the World Bank. For example, it posited that carefully planned and executed reallocation could actually create an 11% rate of growth in GDP in Central Asia by 2050.

"If you're making money out of water, particularly if you're using a lot of water as a commercial user, then it's reasonable to suggest that you pay minimally enough to cover the cost of providing you with that water…This might well mean free water if you are exceedingly poor," Damania said.

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