Markets & Finance

A World of Water Woes


Droughts and rising populations are stressing supplies of the precious liquid. Could we be nearing the next major natural resource crisis?

From Standard & Poor's RatingsDirectWater may be the source of the next major natural resource crisis. A rising world population; increased demand for water for agriculture, industry, and energy production; and a growing desire for safer and more plentiful water supplies are pressuring existing resources. At the same time, climate change may be reducing the availability of fresh water. Most citizens of Europe and North America have taken for granted access to cheap, safe water. People in Asia, Africa, and Latin America would like to. Will all of us have to start thinking harder about it?

Drought conditions in several parts of the world have increased the attention paid to water resources recently. In the U.S., the drought in the Southeast that began last year is the second-worst in the region's history and has strained state and city governments, including that of Atlanta. Australia, a country where water has always been very limited, has been suffering from a severe dry period. The continuing lack of rainfall in much of Africa has increased fears of famine and war.

At the same time, nonhousehold demand for water, particularly for irrigation, has been growing. Ethanol production requires more crops, which in turn demand more water. Potential exploitation of shale oil and tar sands for energy also requires water for processing. Increased development raises the need for electrical power, which requires water to generate electricity at hydro dams or to cool nuclear or fossil-fuel plants.

But the most significant problem is that an increasing population is pressing on limited water resources. The most rapid population growth is in the Middle East and Africa, the part of the world with most limited water resources.

How Water Is Used

Water use can be divided into consumptive and nonconsumptive uses. Consumptive uses either remove water from the system through evaporation (such as irrigation) or leave it contaminated and in need of major treatment to return it to the system. Nonconsumptive uses recycle the water into the system with little change, as in the case of most cooling systems, both for power and industrial uses.

The use of water has been relatively stable in the U.S. since 1980, after growing rapidly in the previous decades (see chart). The reasons for the decline in per capita usage aren't completely clear, but the fall-off was concentrated in irrigation and thermoelectric power.

Power Generation The reduction in use for thermoelectric power reflects changes in power generation and in technology. More plants now use closed-loop cooling systems, which require less water, as opposed to the older, "once-through" cooling systems, which are gradually being phased out as owners renovate power plants. In addition, power generators' increased use of natural gas has reduced the need for water. With gas becoming more expensive, utilities could shift back toward coal, although this has regulatory consequences because of carbon dioxide and other emissions. Power generators' use of water fell to 195 billion gallons per day in 2000, from 210 billion in 1980. This use is largely nonconsumptive, in that virtually all the water is returned to the stream with little significant change (at least with modern cooling).

Agriculture Irrigation represents nearly two-thirds of consumptive water use. Its use declined to 137 billion gallons per day in 2000 from 150 billion in 1980. The rise before 1980 was associated with a sharp rise in land under irrigation. Since 1980, farmers have slowed the addition of irrigated land and shifted to more efficient ways to water their crops (sprinklers or micro-irrigation instead of flooding). Less than one-half of irrigated acreage (29.4 million out of 61.9 million) used surface irrigation (flooding) in 2000. Sprinklers and micro-irrigation are more capital-intensive than surface irrigation but require significantly less water. California, not surprisingly, accounts for 72% of the micro-irrigation acreage—the most expensive but most efficient system.

Industrial and Mining Use Industry and mining account for a relatively small portion of water use, less than 6% of the total in 2000 (23.2 billion barrels per day). However, much of the mining consumption is in areas with very limited water supplies. In addition, the exploitation of shale oil deposits in the American West would require water, again in an area where all the water is already taken up by downstream uses, including agriculture. Recent technological advances in shale-oil processing significantly reduce water requirements, but the potential problem is still there.

Public Water Supply and Household Use Use of water through public water supplies, which serve mostly households and commercial establishments, continued to rise until 2000, but more slowly. From 1950 to 1980, usage rose 3% per year. In addition, there were 3.59 billion gallons per day of self-supplied water (wells), mostly in rural areas. Public water use rose to 43.2 billion gallons per day in 2000, from 34 billion in 1980, and only 14 billion in 1950. Growth has slowed since 1980 but continues to rise 1.2% annually.

Much of the focus on demand management has been on household water use, which accounts for about 5% of total use (about 40% of the public water supply), but more than 10% of the consumptive use. Adding in wells would give another percentage point to the ratio. Agricultural uses are larger and perhaps easier to control technologically, but there are political obstacles to any major changes. Moreover, because farms were there first, the cities have had to control their own use rather than take water away from farmers.

Estimates of how water is used vary from survey to survey. Most of the results, however, suggest that about one-third of household water is used outside the house, primarily for watering foliage, but also for car washing and other uses. In a national study of 12 cities ("Nature of Residential Water Use and Effectiveness of Conservation Programs," BASIN, 1998), outdoor usage accounted for 53% of the total (see chart). Other estimates (from the Environmental Protection Agency) suggest that overwatering wastes about one-half of that.

Indoor water use accounts for about 69 gallons per person per day, mostly in the bathroom, with toilets accounting for 27% of indoor usage and showers and baths 19%. Washing clothes accounts for another 22%. Dishwashers use a low 1.4%. Leaks cost the average household 14% of the water used.

Cities have made important strides in reducing water usage when necessary. In the mid-1980s, for example, Boston faced water shortages as a result of severe drought. By mandating and subsidizing more efficient plumbing and by fixing leaks, the city managed to reduce per capita usage by 31% between 1980 and 2003 (Don Henrichsen, "Water Pressure," National Wildlife Magazine, June/July 2004). New York began a similar program in the early 1990s, saving 70 million gallons per day. Per capita water use in New York City is 60% of that in drought-plagued Los Angeles.

A Patchy Geographical Distribution

Overall, the amount of rain falling in the U.S. is more than adequate, especially compared with the rest of the world. However, fresh water supplies aren't evenly distributed. Lack of water has been and remains a severe problem in the Southwest. Except for occasional droughts, it is not a serious long-term problem in the rest of the country.

The worst water shortage historically for the U.S. was the Dust Bowl of the 1920s and early 1930s. As described in The Worst Hard Time by Timothy Egan, the crisis arose from a period of heavier-than-normal rain in the south-central U.S. Following that was a decade of low rainfall, resulting in devastation of the farms and the region's ecology. A similar pattern has played out in the Sahel region of Africa and in Darfur.

Today's troubles are less the result of the swing in rainfall than of rising populations. Especially in the U.S. Southwest, the growing population base in a year of low rainfall has caused substantial problems. In the Southeast, the second-lowest rainfall total on record has collided with increasing populations to create a major drought. In most of the rest of the country, rainfall has been normal or above normal.

The international distribution of water is still more uneven. While the Americas and Europe have relatively abundant fresh water supplies, Africa and Asia have more limited resources (see chart). Rising populations will increase the stress in these regions, while populations in Europe and North America are growing more slowly. By 2025, the availability of water in Africa will approach crisis levels, not just in the immediate sub-Saharan regions, as it is now, but throughout the continent. The problem is aggravated by the lack of adequate water treatment facilities, which can make even the limited water supplies unusable.

How Global Warming Fits In

It seems strange that global warming may actually cause water shortages. After all, if glaciers are melting and sea levels rising, shouldn't that mean more water? But there is a difference between water and usable water. Salt water doesn't help farmers.

Global warming's effect on total rainfall is somewhat ambiguous. Some models suggest that rainfall could slightly rise, while others indicate it will decline (Peter Gleick, "Water: The Potential Consequences of Climate Variability and Change for the Water Resources of the United States," U.S. Global Change Research Project, U.S. Geological Survey, September 2000). However, all show that rainfall patterns will change. This creates a problem because current agricultural arrangements are matched to historical rainfall. If the rains change, the farmers will have to adapt or move.

The timing of the rain may also change. A reduced snow pack will mean less availability of water in the spring and early summer, when farmers need it most. Many models show more monsoon-like conditions in the southern U.S., with heavy rains for part of the year followed by seasonal droughts. This shift will require significant investment in reservoirs, and it will reduce availability at times when crops need rain most.

The problem will be much more critical in tropical countries, where almost all models show higher temperatures and less rain. The shift will further cut incomes in the poorest regions of the world, and in areas where water is already least available. Countries like Australia, which already has a severe deficiency and has been depleting the aquifers at an alarming rate, will have significant additional strain on water resources. (For an interesting discussion of Australian water, see Jared Diamond's Collapse)

Coping with rising populations and the vagaries of rainfall, and dealing with the still-debated effects of climate change will be difficult for those whose job it is to manage the world's stressed water supplies. There are solutions, although many of the proposals seem costly and, in some cases, use so much energy as to be self-defeating for the global economy. The capital required to improve water treatment, so that more of it can be used, to transport water to where it is needed, to change technologies to use less water, and, in extreme cases, to desalinate water, will be a strain on the public infrastructure. The cheapest way to create water is to conserve and reuse it.


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