Economic impact nexus’
Significance of the water-energy-food nexus comes in life, when one looks at its current and projected economic impact. Brazil, for instance, offers an example of the “ripple effect” of water scarcity on food and power production and economic impact.7 The country is experiencing a persistent drought whose economic impacts were identified early in 2014 by the Wall Street Journal (WSJ).8 According to this WSJ survey, “The biggest shock will come from food costs because the ongoing drought is pushing up the price of fruits and vegetables.” The drought is projected to continue to affect the production of coffee, sugar cane, and other crops, with resultant fallout to the country’s economy.
The scarcity trajectory: Business as usual in water, energy, and food.
- Population growth. The global population recently crossed 7 billion and is increasing by about 70 million people per year, with most of the growth in emerging economies. Total global population is expected to reach 8.1 billion by 2025 and 9.6 billion by 2050.
- Energy demand. Global primary energy consumption is projected to grow by 1.6 percent per year from 2011 to 2030, adding 36 percent to global consumption by 2030.
- Water demand. By 2030, assuming an average growth scenario and if no efficiency gains are realized, global water requirements will grow from 4,500 billion cubic meters to 6,900 billion cubic meters—about 40 percent above current accessible and reliable supplies.
- Urbanization. More than half of the global population now lives in cities, and increasing urbanization results in increased industrialization and increased water use.
- Water scarcity is also impacting the energy sector in California.28 Typically, natural gas and hydropower are the state’s top two sources of energy. However, as a result of water scarcity, lessened river flows have compromised the capacity to generate hydroelectricity, increasing the state’s reliance on natural gas for electricity and leading to both higher prices and increased greenhouse gas emissions. According to a recent Pacific Institute report, between October 2011 and October 2014, California’s ratepayers spent $1.4 billion more for electricity than in average years because of the drought-induced shift from hydropower to natural gas.29 A longer view reveals an even more startling economic impact: Factoring in the dry years from 2007 to 2009, the total additional energy cost to the state’s electricity users during the six years of recent drought was $2.4 billion.