The big drying – growing water stress

Most of California, the U.S. Southwest and Central states had been obliged to deal with an on-going water crisis. Water (over-)use continues in the U.S. Midwest with triple pressure from farming, industrial water uses, and household consumption. Similar situations can be found around the world, from the Mediterranean to Africa, parts of Asia and Latin America.

The World Resources Institute ranked future water stress (ratio of withdrawals to supply) in 167 countries and found that 33 countries will likely face extremely high water stress by 2040, with 14 countries in the Middle East alone.1 Climate change is expected to play an increasing role as well. Detectable trends towards more frequent drought conditions before the end of the 21st century can be observed in particular in the Mediterranean, South Africa, and parts of the Americas.2

Water scarcity, drought and wildfires already lead to significant economic losses today. As population and economic values continues to grow in affected areas loss potentials will increase as well.

Regarding water consumption, the industries in strongest competition for decreasing water resources are the agricultural and beverage sectors as well as the energy and mining industries. Severe water stress in these areas could impact global food production and related commodity prices. In addition, the energy industry could see limits to their production if water is not readily available. Besides water availability, water quality is also often adversely impacted by the energy, mining and agricultural industries.

As a side effect of increased drought, forests generate less yield and at the same time contain more fuel for large scale wildfires. In some regions of the world, food security is the dominant risk factor and has just recently increased the famine risks for parts of Africa. If combined with conflict areas
such situations can lead to humanitarian crisis and migration.

Potential impact:

  • Losses in agricultural, energy and forestry sectors due to drought conditions will likely increase. At the same time, this is a chance to enhance water-efficient practices and to provide parametric insurance solutions.3
  • The risk of large scale wildfires affecting wide areas remains aconsiderable long-term risk that is likely to increase.
  • Drought-induced soil subsidence can create property damage from cracks in buildings and other infrastructure.4
  • Water pollution events in the energy, mining and agricultural sectors could lead to environmental liability exposures, including clean-up costs.
  • Weak water governance can create uncertainty as decisions on water use for energy, agriculture and further purposes are often lacking.
  • Many water basins cross country borders which can lead to regional or even larger scale conflicts between nations.5 Thus cross-border cooperation is a key issue.
  • Mass migration (often in combination with humanitarian crisis) from drought affected areas to areas with sufficient water sources, putting additional pressure on water rich regions.
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1 http://www.wri.org/blog/2015/08/ranking-world%E2%80%99s-most-water-stressed-countries-2040
2 Orlowsky B. and Seneviratne S.I. (2013) “Elusive drought: uncertainty in observed trends and short- and long-term CMIP5 projections”, Hydrol. Earth Syst. Sci., 17, 1765
3 https://www.worldenergy.org/publications/2016/the-road-to-resilience-managing-the-risksof-the-energy-water-food-nexus/

4 http://www.swissre.com/media/news_releases/nr_20110704_soil_subsidence.html
5 http://worldwater.org/water-conflict/


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