The World Economic Forum’s recent Global Risks report lists the “top ten threats to global stability” over the next 10 years. Many of these are familiar issues, such as high unemployment, war, and infectious diseases, while the water crisis is one of the most pressing global crises.
California's water shortage fuels global food crisis
With dwindling water resources and increasingly fierce competition, both developed and developing countries are affected. Regional water scarcity not only directly impacts local communities but can also trigger global consequences; for example, water scarcity in the United States can affect global food trade, including grains, fruits, and nuts.
The United States produces 32% of the world's corn and 31% of its soybeans, both of which are important food crops. Therefore, water shortages in California, the largest agricultural state in the U.S., could affect global product prices and availability.
Higher water prices are more likely to attract industrial and energy sectors to compete for water.
Competition for water between agriculture and industry is worsening both in the United States and globally. Factors such as population growth, urbanization, and climate change are driving competition for limited freshwater resources from power generation, chemical production, and oil and gas fields.
Power generation is closely linked to the availability of local water resources and is a highly water-intensive industry. According to the MSCI (Morgan Stanley Capital International) Global Sustainability Study, power generation facilities consume 11 times more water than all other industries combined.
At the same time, industry is generally better able to absorb rising water prices than agriculture. If agricultural products are eliminated from the market due to price factors, it will also affect crop production and harvest.
Water resource pressures may escalate agricultural-labor conflicts.
In the United States, 18% of farmland is irrigated, with irrigated crops including corn, soybeans, wheat, and hay, as well as water-intensive crops such as sugar beets, sugarcane, rice, and cotton. Water resources in the United States are already under significant pressure, with 412 densely irrigated agricultural counties facing severe water shortages, meaning that 23% of all farmland in the US has water problems.
Nevertheless, MSCI's Global Sustainability Study indicates that one-third of publicly traded power companies in the United States draw water from areas with high water stress to generate electricity. One-quarter of these publicly traded power companies are located in areas with high water stress and intensive irrigation.
Competition for water with industry could impact approximately $1.2 billion (about NT$3.75 billion) worth of corn, soybeans, and wheat crops, representing a relatively small percentage (about 0.2% to 1.2%) of total production. However, the problem has already spread to other crops. In states like North Dakota, Texas, and California, where water-intensive oil and gas industries are booming, the affected area for major local crops such as sugar beets and cotton is up to six times larger.
If this competitive situation regarding water resources in the United States continues, it could lead to asset entrapment in agriculture (stranded assets), reduced productivity, and increased conflict between farmers and industry. In the medium term, policymakers must establish water use priorities.
Sources: Environmental Information Center (2015-02-16)
