An estimated $1.2bn (£790m) in maize, soy and wheat crops may be at
risk in US states where competition with industrial water users,
especially fracking, is high, A redundant sign cautions people not to dive into the Kern River, which
was dried up by water diversion projects and prolonged drought in
Bakersfield, California.
The recent World Economic Forum Global Risks
report identifies the 10 “biggest threats to the stability of the
world” over the next 10 years. These are difficult times, and the
catalogue of potential threats includes many that may seem familiar,
including high unemployment, war and the spread of infectious disease.
It is particularly telling, therefore, given the dangers confronting us,
that the report points to water crises as one of the top global risks.
Competition for increasingly scarce water resources is already a real
and compelling issue, impacting economies and societies in both the
developing and developed world. Shortages are localised, which can
create an immediate impact on communities, but also have the potential
to have truly global consequences.
The US has a significant influence on the global food trade, from
essential cereal crops to fruits and nuts. Indeed, the US accounts for 32% of global corn production and 31% of global soybean production (pdf) – both vital staples. As a result, the ongoing water crisis in California – the country’s largest agricultural producer – may threaten the price and availability of certain commodities worldwide.
The situation is exacerbated, globally and in the US, by intensified
competition between agriculture and industry. Driven by population
growth, urbanisation and climate change, power
generators, chemical producers and oil and gas fields are increasingly
in a rivalry with agricultural lands over finite freshwater resources.
Electric power generation in particular is both highly dependent on the local availability of freshwater and extremely water intensive
(pdf). On average, research from MSCI ESG has demonstrated that
electric utilities consume 11 times more water than all other industries
combined.
At the same time, industrial water users typically have a higher
capacity to absorb the increased costs associated with rising water
prices in comparison to agricultural water users, threatening an impact
on crop production and yield if farmers are priced out of the market.
