Trillions of dollars in economic value are at risk in water-dependent sectors, according to environmental not-for-profit WWF, which has shined a spotlight on freshwater resource challenges in a new report.

WWF released the report on Monday to set out the global economic contribution of water, and drew attention to threats affecting “the world’s most precious and yet undervalued resource”.

“At the core of this water crisis lies the dire decline of freshwater biodiversity and ongoing degradation of our ecosystems. Over five decades, one-third of wetlands have vanished, and freshwater species populations have plummeted by 83 per cent on average,” said Kirsten Schuijt, WWF director general.

With an estimated economic value to the global economy of $58 trillion, the report said that freshwater ecosystems are in a downward spiral with water-dependent industries including agriculture and energy particularly susceptible to threats.

Further analysis outlined that the economic benefits of water, such as direct consumption and agriculture amount to at least $7.5 trillion in annual value. Whereas, unseen benefits such as soil health, storing carbon, and mitigating floods have economic benefits of around $50 trillion annually, according to the report.

Analysis from WWF’s Water Risk Filter tool shows that 10% of global GDP is currently generated in high water risk areas but this could rise to 46% by 2050 due to climate and socio-economic change, according to the organisation.

WATER STRESS

Freshwater resources are facing a number of threats from economic activities, and are a major focus of the report, which outlines eight key threats that can cut across sectors:

• Overexploitation: excessive use of lakes, rivers, wetlands, etc. beyond natural recharge capacity;
• Climate change: change in temperature and rainfall patterns;
• Water pollution: including due to pesticides, fertilisers, human waste, etc. leading to acidification;
• Flow modification and fragmentation: river diversions due to infrastructure;
• Destruction or degradation of habitat: due to land use changes;
• Invasive species: can destabilise aquatic food chains;
• Saltwater intrusion: intrudes on freshwater and limits drinking water supply and crop yields and harms wildlife;
• Infectious diseases: from pollution, pathogens, and warming waters.

The report picks out several key industries that it says could be majorly affected by these threats.

Most notably, agriculture is the most dependent sector. Irrigated agriculture produces 44% of the food production worldwide, 60% of which is highly water-stressed due to over-extraction.

Other industries include renewable energy production, which accounts for 10% of global freshwater removals.

Less obvious industry case studies can be susceptible to water-related threats within their production processes. For example, the 2021 droughts in Taipei slowed the water-intensive production of microchips leading to substantial shortages in global supply chains.

Beyond the industrial challenges, biodiversity is also threatened, according to the report.

Two-thirds of the world’s largest rivers are no longer free-flowing, affecting neighbouring habitats, water quality, and animal migration patterns, while wetlands are continuing to be lost three times as fast as forests, WWF said.

Rivers, lakes, and wetlands are also biodiversity hotspots, home to 40% of all known species.

POLITICAL OPTIMISM

Despite the nature and economic threats outlined in the report, WWF points to promising political developments that could help to address the crisis.

The draft Nature Restoration Law under the EU Green Deal includes goals on peatlands and restoring 25,000 km of rivers.

Inland waters were also explicitly included in the Kunming-Montreal Global Biodiversity Framework, which targets the protection of 30% of freshwater ecosystems and the restoration of 30% of the world’s degraded rivers, lakes, and wetlands by 2030.

Policy incentives have also emerged in recent years, such as the Colorado River deal, agreed in May 2023, whereby the United States government is financially compensating irrigation districts, cities, and Native American tribes in Arizona, California, and Nevada with US$521 per acre-foot of water that they do not use. The payments aim to decrease water use by 13% in the lower Colorado basin, according to WWF.

However, the organisation urged more action from government, industry, and financial institutions to address the high-level challenges, many of which focus on redirecting financial flows.

Dedicating 50% of public climate finance to adaptation, boosting water risk disclosures, and ending harmful subsidies are some of the actions outlined that have the potential to solve the global water crisis.

By Tom Woolnough – tom@carbon-pulse.com

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