22 Mar 2017
Stemming the Tide of the World's Water Shortage
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Though more than 70 percent of the earth’s surface is covered by water, access to clean water is quickly becoming one of the world’s most pressing problems.

Harvard Business School faculty members John Macomber and Forest Reinhardt are members of the School’s Business and Environment Initiative, whose research focuses on the intersection of and interplay between nature and business. Both have written extensively on the social and economic implications of water scarcity, including the Mexico City water shortage, the California water crisis, drought in Australia, and desalination efforts in San Diego. Below, they summarize the high stakes, far-reaching consequences, and best bets at solving water shortage issues.


What kinds of risks do water shortages pose, and how far along is the problem?

JOHN MACOMBER: Until recently, water was plentiful. With just a few billion people on earth, there were fewer long-lasting inorganic contaminants in play and lower individual consumption. But times have changed, and water use has not. The same water management regimes we have had for centuries are no longer effective. The effects of water shortage range from inconvenience (people of means in Mexico City or Mumbai can buy household water from trucks) to illness (situations like the poisonings from public water in Flint or Philadelphia will increase) to the potential abandonment of major cities. We are arguably already seeing this in Sudan and Syria. Global capitals like Beijing and New Delhi, which are far from the ocean and rely on ground water fed from snowmelt in the Himalayas, are currently in jeopardy. In Gurgaon, outside of Delhi, for instance, the water table has fallen 100 feet in just the last 20 years. In the US, in Bakersfield, California, the figure is closer to 400 feet – and the ground itself is subsiding, like a sponge drying up and shrinking. From a quality point of view, in recent decades society has made great strides in reducing water-borne diseases like cholera, typhoid, and dysentery. But we may even be sliding backward on those fronts as clean water gets more and more stressed.

“THE EFFECTS OF WATER SHORTAGE RANGE FROM INCONVENIENCE...TO ILLNESS...TO THE POTENTIAL ABANDONMENT OF MAJOR CITIES.”

FOREST REINHARDT: Water is obviously critical to human life: for drinking and bathing, for growing the crops on which we depend for food, for processing and transporting the materials and energy on which our prosperity is based. In wealthier countries like the US, a drought means farmers’ crops suffer and transportation systems are impaired. In poorer countries, the consequences are much more severe: deprivation, hunger, social dislocation, conflict. As the human population grows, human water requirements grow, too, and increasing prosperity causes water demands to grow even faster than the population. Meanwhile, we’re learning to be wary of extracting too much water from our rivers and streams because of the impact on those ecosystems and others downstream.

What are the biggest challenges and impediments to clean water? Are they political, technological, cultural?

FR: The biggest challenge we face in the water world is that while we talk about how valuable a resource it is, we don’t actually value it. Water in the US, for example, is allocated according to a complicated set of laws that mostly privilege the descendants of the earliest European users: “first in time, first in right.” The system creates disincentives for people with surplus water to sell it to people who want more (which, of course, is what we do with natural gas or potatoes or almost anything else). The old institutional systems, in which people basically took what they wanted, worked fine a century ago when there were fewer of us and we weren’t so prosperous. But they are outdated and in need to repair, no less than physical infrastructure like the dams and levees in California.

“THE BIGGEST CHALLENGE WE FACE IN THE WATER WORLD IS THAT WHILE WE TALK ABOUT HOW VALUABLE A RESOURCE IT IS, WE DON'T ACTUALLY VALUE IT.”

The linkages between water and energy, too, are both important and daunting. We hear a lot about the water requirements of energy production—from water-intensive sources like tar sands to cooling water required to operate our power plants and even the water required to float barges that move much of our coal and crude oil. Equally impressive, and less discussed, are the energy requirements of water supply. We have unlimited amounts of water along every seacoast, but desalination is energy- and capital-intensive. Also, water is heavy and awkward to transport, as anyone who has lugged a five-gallon bucket can attest. If we were to desalinate sea water in coastal California and then lift it over the coast ranges to the farmers in the central valley, the pumping costs would roughly equal the costs of the desalination.

JM: The situation begs for one of the most substantial behavioral changes of all time. We currently behave, understandably, as if water is free. It is wasted leaking out of supply lines, in storm drains and sewers. The short-term fixes in those instances are obvious: Mend leaky pipes, don’t waste tap water, don’t get all your calories from beef (since it’s so water-intensive), and don’t flush every bit of waste water back into the sea. But the path to the larger solution is quite obscure. Few politicians get elected with a promise to fix leaky pipes (and dig up roads for a decade). Most people moving into the global middle class want to get their protein from beef and poultry more than from fish and plants. And the “yuck factor” has not made storm and sewer water reuse palatable…yet.

Where is water being handled well?

FR: In Australia, in contrast to the US, governments have established water property rights that look a lot like land property rights—they’re perpetual, they’re credible, and their existence means that every water user is cognizant of its opportunity cost. A farmer in New South Wales who’s thinking of planting low-value alfalfa in a dry year can hop on her computer and verify that she can sell the water to a grower of almonds or oranges elsewhere for more than she can earn by planting the alfalfa. Her California counterpart, however, faces such a thicket of transactional and legal impediments in selling his water that it’s easier for him just to produce that low-value crop. In poorer nations, market-based systems may not be immediately feasible, but the basic principle remains the same: We need to design incentives so that water flowers where it is most needed.

JM: Water is often handled well in countries where its lack threatens the very existence of society. Israel, for example, could not function as an advanced economy just relying on rainfall and the Jordan River. The nation conserves and desalinates water and recycles sewer water as part of national competitiveness or even national survival. Similarly, Singapore (reliant on Malaysia for its water for years) elected for strategic reasons to pursue water independence by building reservoirs and promoting NEWater—high-grade water reclaimed from the toilet but cleaner than most rainwater.

What are some of the most promising measures to combat water shortages that you’ve seen?

JM: Broadly, this existential crisis can be averted with long-term thinking. Some of the key innovations are simple. One is district water: Local-scale extraction and treatment plants that serve 5-1000 families and don’t rely on the central government to eventually drop a giant plant and piping system in place. My case studies on the Sarvajal village water franchising model in rural India or district scale water in Tanzania are illustrations. As it turns out, citizens are willing to pay the fully-loaded “cost recovery price” – not for the water per se, but for the extraction, treatment, storage, delivery, collection, and retreatment of water.

Another is that the provision of water is attractive to investors. American Water is involved in providing the resource to about 15 million people in the United States and Canada. Veolia and Suez are each multi-billion dollar companies, and the world’s ten largest water companies together have revenue in excess of $100 billion. It’s a big industry and just getting started, as more and more municipalities elect to privatize some or all of their water services. Singapore International Water Week attracts hundreds of exhibitors. So, there are economies of scale in the provision of water and there are opportunities to provide water via water purchase agreements, with capital subsidies, or by direct assignment of assets. All, in theory, bring private sector capital, capability, and capacity to the fore in delivering the clean water we all need to thrive in the future, without sacrificing local control.

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