Economics of the Global Water Supply

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Economics of the Global Water Supply

There are few non-negotiable demands in life.  But two of them are becoming increasingly worrisome in our modern world.  One is food, and the other is water, without which food can't be grown. 

As we've reported before, the worldwide supply of fresh water is more than adequate for the foreseeable global population demands.  But the distribution of that water suffers from a chronic imbalance.  In many places in the U.S. and abroad, the water supply is so plentiful that water is virtually free.  Water bills — for actual water, not for sewer improvements or other add-on costs — are extremely low.  But, even in America, some areas, such as Southern California, do not have enough water to go around.  In fact, the entire water supply for the Los Angeles area is imported by way of aqueducts.  Likewise, in the Mideast, as well as in parts of China and India, there's definitely not enough fresh water to go around.  As a result, a billion people can't reliably find enough potable water on any given day.  For example, 17 percent of all the people in the world live in India, but only four percent of the world's fresh water is available there.

Making matters worse, the fresh water that people do have is often wasted and used inefficiently. 

McKinsey & Company recently assembled an organization called the 2030 Water Resources Group, composed of a wide range of international corporate stakeholders.  These included The Coca-Cola Company, Nestlé, SABMiller brewing company, the Standard Chartered Bank, The International Finance Corporation, and others.  The group's study focused on ways to meet the demands for increasingly scarce water resources by the year 2030.  The report, published in 2009, cited a lack of transparency when it comes to the economics of water.  It examines such issues as supply and demand, new technologies to close the gap between the two, and what incentives can be put in place to change the way people use — and waste — water.

The report, titled "Charting Our Water Future:  Economic Frameworks to Inform Decision Making,"1 cites problems such as insufficient economic data, opaque management, inefficient allocation, and poor investment.  For such an essential resource, the lack of sophistication in its management is appallingly haphazard.  Without a rational approach to water management, it will become increasingly likely that food and energy will be negatively impacted in the coming decades.

Today, the world's human population uses 4.5 trillion cubic meters of water a day.  But water use by 2030 is expected to rise to almost seven trillion cubic meters a day, which is 40 percent above the amount of water that is available for use today...

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