W’Bank Report Highlights Impact of Climate-driven Water Scarcity on Economic Growth

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Abimbola Akosile

A new World Bank report has revealed that water scarcity, exacerbated by climate change, could cost some regions up to 6 per cent of their Gross Domestic Product (GDP), spur migration, and spark conflict.

The report, which was released in Washington, USA on Tuesday and titled ‘High and Dry: Climate Change, Water and the Economy’, stated that the combined effects of growing populations, rising incomes, and expanding cities will see demand for water rising exponentially, while supply becomes more erratic and uncertain.

Unless action is taken soon, the report said, water would become scarce in regions where it is currently abundant – such as Central Africa and East Asia – and scarcity will greatly worsen in regions where water is already in short supply – such as the Middle East and the Sahel in Africa. These regions could see their growth rates decline by as much as 6 per cent of GDP by 2050 due to water related impacts on agriculture, health, and incomes.

Nigeria, which has several types of vegetation belts ranging from mangrove forest to desert, also has a Sahel savannah belt in the northern part of the country; and the impact of climate change is already being felt in the higher temperature across the country and the receding Lake Chad, which reportedly serves as the source of livelihood to more than 1.5 million people.

The report also warned that reduced freshwater availability and competition from other uses – such as energy and agriculture – could reduce water availability in cities by as much as two thirds by 2050, compared to 2015 levels.
Water insecurity could multiply the risk of conflict, the report added. Food price spikes caused by droughts can inflame latent conflicts and drive migration. Where economic growth is impacted by rainfall, episodes of droughts and floods have generated waves of migration and spikes in violence within countries, it said.

“Water scarcity is a major threat to economic growth and stability around the world, and climate change is making the problem worse,” said World Bank President Jim Yong Kim. “If countries do not take action to better manage water resources, our analysis shows that some regions with large populations could be living with long periods of negative economic growth. But countries can enact policies now that will help them manage water sustainably for the years ahead.”

The negative impacts of climate change on water could be neutralised with better policy decisions, the report said, with some regions standing to improve their growth rates by up to 6 per cent with better water resource management.
“There is a silver lining,” said the report’s author and a World Bank Lead Economist, Richard Damania. “When governments respond to water shortages by boosting efficiency and allocating even 25 per cent of water to more highly-valued uses, losses decline dramatically and for some regions may even vanish. Improved water stewardship pays high economic dividends.”

In the world’s extremely dry regions, more far-reaching policies are needed to avoid inefficient water use. Stronger policies and reforms are needed to cope with deepening climate stresses, the report stated.
It outlines policies and investments that can help lead countries to more water secure and climate-resilient economies. These include better planning for water resource allocation, adoption of incentives to increase water efficiency, and investments in infrastructure for more secure water supplies and availability.

The report follows the appointment last month of 10 heads of government to a High Level Panel chaired by the UN and World Bank to mobilise effective action to accelerate the implementation of Sustainable Development Goal (SDG) 6, which focuses on ensuring the availability and sustainable management of water and sanitation for everyone.

During the recent COP21 in Paris, the World Bank announced a significant boost in funding for water programmes in India, the Niger River Basin, Morocco and Kenya to help tackle water challenges.
The 6 per cent figure represents a median across the various scenarios considered under business-as-usual water policies. In general the numbers inform us under business-as-usual water policies, GDP is 6 per cent lower than what it would have been without climate change pressures.
Also, a lot of variation across regions, so there are no major effects on Western Europe but more severe effects on warmer, drier parts of the world, which are also typically poorer.