It is the time of the year again – Davos in Switzerland is playing host to the 2014 annual meeting of the World Economic Forum. This is arguably the world’s most influential gathering of business and political leaders, economists and anybody else who thinks he or she has a big idea for improving the state of the world. One of the many global issues the World Economic Forum seeks to both address with stakeholders and put a spotlight on in order to raise the general public’s awareness is the impact of climate change on the water-food-energy nexus. On January 20, it published prior to the annual meeting a report titled “Climate Adaptation: Seizing the Challenge”.

The report describes the water-energy-food nexus “as the inextricable link between food, energy and water systems, where the use of and strains on one of these resources can affect the other. (…) Similarly, water production, distribution and treatment are all energy intensive functions and can be affected by energy shortages and pricing.” The report concludes that “climate change today is placing increasing stress on this nexus.” According to the World Economic Forum, this illustrates the need for an integrated multi-sector and multi-scale approach in order to address the impact of climate change on the nexus.

The problem is complex and each part of the nexus both has an impact on, and at the same time, depends on the other. The GRACE Communication Foundation highlights how the three systems intersect: “Energy is needed to treat and transport water [while] water is needed to produce electricity and transport fuels; and while both energy and water are needed to produce food, the quality of that water, [in turn], can be affected by food and energy production.” The availability of global freshwater resources has already become critically compromised in many regions. The UN system distinguishes between two widely-used definitions of ‘water scarcity’: The first, ‘physical water scarcity’ occurs when there is not enough water to meet demand due to severe environmental degradation, declining or depleted groundwater reservoirs, and unequal water distribution. The second, ‘economic water scarcity’ occurs when a region lacks adequate investment and proper water management to put necessary infrastructure in place for respective populations to use existing water sources.

As for the future impact of climate change on the water sector, the WEF report cites research projecting that the “area of land subject to increasing water stress due to climate change [will] be more than double that with decreasing water stress.” This is something the general public will likely grasp intuitively. Thus, perhaps more interesting and important is the projection that “precipitation will increase in high latitudes and parts of the tropics, while it will substantially decrease in lower mid-altitude regions (arid and semi-arid)”. Note, any increased precipitation in the High North of the Northern hemisphere – e.g. around the Arctic Circle in Russian Siberia or Canada – due to warmer temperatures will basically result in a freshwater loss for the planet. The melted freshwater stored in the form of ice sheets will eventually end up in the Arctic Ocean as saltwater. This is obviously very counterproductive on top of the fact that it will contribute to a rising sea level.

The future impact of climate change on energy consumption as well as production is as alarming. According to the World Bank, which launched a new initiative at the World Future Energy Summit and International Water Summit in Abu Dhabi on January 20, 2014, water scarcity is already threatening the long-term viability of energy projects worldwide. Examples cited by the World Bank for the impact of water shortages include the shutdown of thermal power plants in India, decreased energy production in power plants in the U.S. and threatened hydropower capac​ity in countries such as China and Brazil. The ‘New Thirsty Energy’ initiative is intended to help countries at risk to mitigate the impact of water scarcity on energy security.

In a world where the rural poor gravitate towards the big urban centers, energy consumption is expected to increase significantly. Air-conditioning systems will be in high demand to cope with higher temperatures and in regions with declining groundwater reservoirs governments will have to build expensive infrastructure to either move water via pipelines to the densely populated urban centers or invest in expensive and highly energy-intensive desalination plants. Demand for the latter – especially for large-scale seawater desalination plants – will grow in the Arabian Gulf region due to a lack of water resources, growing young populations and even changing preferences for food and consumption in General. Note that China managed through environmental degradation to put itself in a worse position and stormed to a top rank on this – if you like – “desalination transplant list”.

 Desalination Plants

Christopher Gasson of GlobalWaterIntel (GWI) further notes “that although the Arabian Gulf countries are home to 36% of the world’s desalination capacity, only 40 million people live in the region. The reason is water availability.

UN Water estimates that 1.2 billion people live in regions facing water scarcity, while 600 million more are likely to encounter water scarcity by 2025. The situation can be expected to worsen given rapid population growth in many drought-stricken regions, climate change, water investment and management shortfalls, and inefficient use of existing freshwater resources. Simply increasing global desalination capacity is no panacea either due to the fact that the number one cost associated with desalination is energy consumption. Moreover, costs of desalinating seawater – taking into account the necessary infrastructure, energy consumption and maintenance – tend to be higher than for any of the alternatives.

Cost Structure

Therefore, not only is it important to be aware of the nexus itself – this also applies to the regulator, i.e. any energy production cannot just ignore the impact on water, food supply or the environment – but most importantly, it is crucial to quantify the impact of climate change on the nexus. Only then are we able to move from abstract problem recognition to solving the concrete problem at hand.

The WEF report recommends measures that favor demand reduction over those that increase supply and argues for an implementation consistent with knowledge about the myriad connections between the three systems and the impact of climate change. The gap between countries that have both food and water security and those that do not will widen in the future, leading to greater dependency on trade by the latter. “Much of the adaptation measures developed to tackle climate change have so far been reactive, triggered by past or current events. Yet the need is for them to be anticipatory and based on some assessment of conditions in the future,” a cited OECD report adds.

Thus it is key for companies in the industrial sector to be aware of water usage statistics and adapt towards more efficient use. Even though engineering solutions such as desalination plants can add to a country’s freshwater supplies, cheaper and less energy-intensive solutions should be pursued and enabled by water conservation and cross-border collaboration. Only yesterday did the government of the UAE, the world’s seventh biggest per capita consumer of energy according to World Bank data, announce that in order to discourage water and energy waste, power utilities in the UAE introduced tiered water and electricity charges. Further, technology – especially in the form of ‘Big Data’ – has a crucial role to play in helping governments make informed decisions based on satellite-driven sensors tracking geological changes and weather patterns. Yet, one problem is here to stay; namely, that both water and food security do not have an obvious impact on economic growth, at least in the short and medium term, which differs from energy prices and their instantaneous impact on a country’s global competitiveness.