Water crisis?

Spotlight on Water: Introduction
OECD Observer

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To most people, water is a public good, like air. Yet in practice, its proper management and distribution raise inherent challenges of allocation, which is where economic principles can help. Supplying water costs money. Moreover, though a renewable resource, it is fragile and can be spoiled.

There are various demands made of it, from farming to industry, and energy production. Most of all, water is the essence of life and clean water is vital for human health.

Currently, about 1 billion people around the world routinely drink unhealthy water. Most countries have accepted the goal of halving by 2015 the number of people worldwide who do not have access to safe drinking water and sanitation. Even if these goals are met (which will be difficult), they will still leave more than an estimated half a billion people without access to safe drinking water supplies and over 1 billion without access to adequate sanitation facilities. Poor water quality and bad sanitation are killers; some 5 million deaths a year are caused by polluted drinking water.

Hardly surprising, since in the developing world, 90% of all wastewater still goes untreated into local rivers and streams. Some 50 countries, with roughly a third of the world’s population, also suffer from medium or high water stress, and 17 of these extract more water annually than is recharged through their natural water cycles. The strain affects surface freshwater bodies like rivers and lakes, but it also degrades groundwater resources.

With populations growing, these stresses will intensify. Over the last 50 years, global water withdrawal has quadrupled while world population doubled. The OECD’s Environmental Outlook 2001 sees global water withdrawal increasing by 31% between 1995 and 2020. By 2015, one in five people will live in big cities, compared to one in nine today and urban populations in developing countries will have doubled by 2025. Many urban piped water systems are unreliable and all require large investments.

Freshwater use is not the same everywhere. East Asia, Latin America, Africa and several other regions use about one-third as much water per person as the average for OECD countries, and almost one-fifth of what is used in North America. There are also significant variations within the OECD, with the US consuming ten times the amount of Denmark or the UK, for instance.

Water problems also affect developed countries. True, access to drinking water is no longer a major issue, and OECD countries have sharply reduced industrial and urban discharges to waterways and cleaned up the worst polluted rivers and lakes. Also, per capita water use has fallen in OECD regions by almost 11% since 1980, indicating some decoupling of water consumption from economic growth.

But degradation of groundwater resources continues and pollution from farm chemicals has in some cases worsened, while there is contamination by heavy metals and persistent organic pollutants. While access to water services has increased significantly, costs have risen and many OECD countries now face concerns about affordability and equity.

Holistic policies are therefore needed, and the coherence of those policies has to be assured. For example, policies that support output subsidies for farming also often place additional stress on water resources. Efforts to finance, maintain and upgrade water infrastructure are also sometimes compromised by inadequate pricing of these services.

Thirsty farms

Who uses most of the water? Not households for a start; they account for just 8% of global water abstraction. The heaviest water user globally is agriculture, which is responsible for about 69% of total freshwater abstraction (of which 45% accrues to the 30 OECD countries). Worldwide agricultural demand for water will continue to grow, but industry is likely to be the fastest growing water user overall, particularly in developing countries. For most countries, irrigation water represents over 80% of total agricultural water use. Water use for irrigation continues to grow.

Industry accounts for 23% of global water abstraction. It is the fastest growing user of freshwater worldwide and demand is expected to more than double over the next two decades. Industrial abstraction has declined in OECD countries thanks largely to efficiency gains. The most water-intensive industries include pulp and paper, chemicals, and food and beverages.

One consequence of this rising demand is scarcity. The global per capita availability of freshwater has dropped from 17,000 m3 a year in 1950 to 7,300 m3 in 1995. There are now more people in the world, of course, but there has also been a decline in available uncontaminated freshwater resources. This scarcity is not just on the surface; groundwater abstraction is beginning to exceed replenishment in some locations. Add to this the specter of pollution from industry, mining and farming around the world, including the major cities, and the picture worsens.

What can be done? It may be a cliché to say that once the political will is there to act, then everything is possible. Yet it does appear from experience, as the articles in this spotlight suggest, that to get the water balance right requires a mixture of public leadership and management, market knowhow and exploiting science and technology. It also demands partnerships, both between countries and among players.

Certainly, simply throwing money at the problem will not work, not least because of the huge sums required. Estimates by Cosgrove and Rijsberman (see references) put the bill at $75 billion a year over the next 25 years for water supply and sanitation, not counting renovation or rehabilitation. Total investment in water supply and sanitation in 1995 – excluding that made directly by industry – was estimated at $30 billion. In other words, the level of investment would have to more than double. As for the Millennium Development Goal of halving the population without access to safe drinking water by 2015, some estimate that $14-$30 billion a year would be needed on top of the $30 billion already being spent to achieve the target.

The plain aim has to be to establish management that can efficiently augment supply and reduce waste while maintaining equity and affordability between income and age groups, as well as regions. The poor, elderly and children are particularly vulnerable. In the poorest countries, one in five children dies before the age of 5, mainly from infectious diseases related to insufficiency of water quantity and quality.

But while the aim is clear, the means are more complex. Take privatisation, for example. Governments have in several countries moved from being the sole provider of water infrastructure services, to being mainly the regulator and public guarantor, as private companies taking over some elements of infrastructure operations.

However, privatisation is not a panacea. Governments and other stakeholder users need to assure good governance in the sector, so as to spur investment and foster the highest standards of corporate practice.

Still, if properly exploited and adapted to needs, the market can help achieve greater efficiencies in water supply and management. Even where governments retain most of the control over provision and operations, business can still play key roles in financing, building and managing facilities.

Water is a fragile resource that is quite different from, say, ore and oil deposits. It is at once renewable through the natural cycle, yet if spoiled or over-abstracted, it effectively becomes non-renewable. It is unpredictable: even in normally arid regions, floods can cause havoc. And it can disappear entirely from a region if its natural cycle is disturbed by climatic or geological shifts, or sheer over-use.

The UN International Year of Freshwater 2003 will help the international community focus on the seriousness of the issues ahead. Managing water properly is in everyone’s self-interest.

Rory J. Clarke


Cosgrove, W.J. and F.R. Rijsberman (2000), World Water Vision: Making Water Everybody’s Business, Earthscan Publications for World Water Council, London.

OECD (2003), Improving Water Management: The OECD Experience, Earthscan Publications for World Water Council, London.

©OECD Observer No 236, March 2003

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