Indirect management of cross-boundary water sustainability using Virtual Water

December 9th, 2013

Dr. Benjamin L. Ruddell, Arizona State University, United States

This article is one of the ten finalists of the Global Water Forum 2013 Emerging Scholars Award.

Water scarcity is cited as one of the greatest challenges of the 21st century.1 The ultimate cause of this scarcity is expansion of the human enterprise across the majority of the Earth’s surface, especially the use of water to produce valuable goods and services such as energy, food, and manufactured goods. When too many human users compete to use a water resource stock, someone must decide who, or what, runs dry. Some of the most densely populated locales on Earth are now facing these choices for the first time.2 Awareness is growing that reforms of water policy and economic practice3 are required to address water scarcity. These reforms necessitate cooperation between governments and water users around the world. However, no government or other entity has authority to manage water across the world’s many hydrological and political boundaries. This poses a fundamental question: in a complex and globally connected world, who must cooperate to solve a water scarcity problem, and how can this cooperation occur?

Direct cooperative solutions to global water scarcity bring water to where it is needed or boost water use efficiency. Direct action is important, but has limited potential. Water, like other primary resources4, is difficult to transport because of the huge weight and volume required- a literal river. Nations have tried to tackle water scarcity directly by storing and moving rivers between basins, but even the Central Arizona Project5 and the South-North Water Diversion Project in China are merely regional. Technology promises direct solutions through desalination and water reuse, but this requires expensive capital and energy inputs unaffordable to the largest water users, especially irrigated agriculture. Direct cooperative solutions to global water scarcity problems are therefore currently unfeasible.

Meanwhile, an indirect cooperative solution to local and regional water scarcity has emerged. Virtual water is an indirect or outsourced water resource impact, usually via economic trade. For example, whenever you turn on your lights at home, you are outsourcing water use and many other indirect impacts of electrical generation to the power utility, and importing virtual water embedded in that power. This concept illustrates that there are substitutes6 for local water use. Economic trade is mankind’s ten-thousand year old cooperative solution to every kind of localized resource scarcity. Because many parts of the Earth are still rich in water, trade in the services of water has the potential to affordably address local and regional water scarcity problems.7

If water were the main factor in economic decisions, markets would already source less valuable virtual water imports from water-rich locations and to suppliers with less costly, and usually less water-efficient, production processes. This is an effective and desirable cooperative arrangement for both importers and producers of virtual water. However, because water is only one factor among many affecting trade8, the virtual water trade network tends to be a side effect of non-water macroeconomic and market forces9, rather than a result of strategic cooperative decisions to advance water sustainability.

In the absence of clear market signals for water scarcity, a savvy virtual water importer should strategically manage its water supply chain. The network of indirect impacts is essential knowledge for water and climate sustainability, and for the resilience of the coupled natural-human system that binds the Earth’s ecosystems, rivers, climate, and economies together. Every indirect impact implies indirect exposure to distant water resource risks. Virtual water importers should maximize the sustainability, diversity, and reliability of their direct and indirect Water Footprints10. As with carbon footprints11 and sustainable forestry standards12, an enterprise can promote water sustainability13 by sourcing virtual water imports from locations with abundant water and strong governance. This is a key to cooperation across hydrological and political boundaries. Virtual water importers can apply pressure upstream through the supply chain to enhance their suppliers’ water sustainability, by adopting a policy of doing business with suppliers that minimize unsustainable water resource impacts.

Simple water use efficiency or consumptive water use metrics are inadequate foundations for sustainability policy because they ignore the value of the water resource itself, which changes from place to place, time to time, and user to user. Even today, many water impacts are essentially free, meaning they have negligible opportunity costs because they are below applicable Adverse Resource Impact14 thresholds. It is important to distinguish between these free water impacts as compared with impacts in excess of cost thresholds. Water sustainability indices, including both virtual water and water footprint indices, should consider thresholds15 established in each location to safeguard the most priceless non-market social and environmental values of water. Water sustainability indices that consider cost thresholds, such as Water Scarcity FootprintsF1, provide more information for policy because they consider the cumulative impacts of all users, in excess of cost and value thresholds. Such alternative indices may be used in place of standard water footprints for virtual water accounting.

Wealthy and water-scarce regions apply increasingly intense16 indirect pressure against global water resources, through demand for virtual water imports. Savvy virtual water importers can strategically use this market pressure to advance water sustainability in distant locations. In anticipation of mounting global market pressures on local water resources, some farsighted water authorities14 are working to identify their freshwater ecosystem thresholds and to compare the values that can be created through direct and indirect uses of water. These local authorities and users have the final say in what values are ultimately promoted by direct water use within their hydrological and political boundaries. Via economic trade in water-related goods and services, indirect cross-boundary cooperation between virtual water importers and producers will increasingly control the fate of our water resources. Strategic management of this indirect cooperation can help us achieve water sustainability in an increasingly globalized and water-scarce 21st century.

Footnote:

F1. Water Scarcity Footprint is defined as the portion of the Water Footprint of a process that exceeds some Adverse Resource Impact threshold defining safe use limits and thresholds where opportunity costs become significant; this sustainability index necessarily includes the aggregated effects of all users and phenomena affecting the water stock.

References:

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2. USBR (2012), ‘Colorado River Basin Water Supply and Demand Study’, U.S. Bureau of Reclamation, December 2012.

3. Lovins, A.B., L. Hunter Lovins, and P. Hawken (1999), ‘A Road Map for Natural Capitalism’, Harvard Business Review, Reprint 99309.

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5. Central Arizona Project, http://www.cap-az.com/, accessed 4 November 2013.

6. T. Allan (2002), The Middle East water question: Hydropolitics and the global economy: Ib Tauris.

7. Hoekstra, A.Y. and Mekonnen, M.M. (2011), ‘Global water scarcity: monthly blue water footprint compared to blue water availability for the world’s major river basins’, Value of Water Research Report Series No.53, UNESCO-IHE, Delft, the Netherlands.

8. Reimer, J.J. (2012), ‘On the economics of virtual water trade,’ Ecological Economics, 75: 135-139.

9. Wichelns, D. (2013), Virtual Water: Helpful perspective or misleading impressions? Global Water Forum, October 28, 2013, available at: https://www.globalwaterforum.org/2013/10/28/virtual-water-helpful-perspective-or-misleading-impressions/.

10. M. M. Aldaya, A. K. Chapagain, A. Y. Hoekstra et al. (2012), The water footprint assessment manual: Setting the global standard, Routledge.

11. T. Wiedmann, and J. Minx (2007), ‘A definition of ‘carbon footprint’, CC Pertsova, Ecological Economics Research Trends. 2, pg.55-65.

12. Sustainable Forestry Initiative, http://www.sfiprogram.org/, accessed 4 November 2013.

13. CWF (2013), ‘Sustainable Water Management: CWF Launches Pilot to Develop Sustainable Water Management Profile for Water Managers’, California Water Foundation, http://californiawaterfoundation.org/page.php?id=71&menuid=77&ajax=100, accessed 4 November 2013

14. Mubako, S.T., Ruddell, B.L., and Mayer, A. (2013). ‘The Relationship between Water Withdrawals and Freshwater Ecosystem Water Scarcity Quantified at Multiple Scales for a Great Lakes Watershed’, J. Water Resour. Plann. Manage., 10.1061/(ASCE)WR.1943-5452.0000374.

15. Poff, N. L., Richter, B. D., Arthington, A. H., Bunn, S. E., Naiman, R. J., Kendy, E., Acreman, M., Apse, C., Bledsoe, B. P., Freeman, M. C., Henriksen, J., Jacobson, R. B., Kennen, J. G., Merritt, D. M., O’Keeffe, J. H., Olden, J. D., Rogers, K., Tharme, R. E., and Warner, A. (2010), ‘The ecological limits of hydrologic alteration (ELOHA): a new framework for developing regional environmental flow standards’, Freshwater Biology 55: 147-170.

16. Dalin, C., M. Konar, N. Hanasaki, A. Rinaldo, and I. Rodriguez-Iurbe (2012), ‘Evolution of the global virtual water trade network’, PNAS, 109(21): 8353.

Dr. Ruddell’s professional experience is in the field of Science and Engineering research and education in a collaborative University setting. He is a scientist of complex systems (systems characterized by highly interconnected relationships and feedback). His current professional goals are the advancement of the science of complex Coupled Natural-Human (CNH) systems, especially in hydrology, climate, energy, water, ecosystems, and in urban environments, and the development of excellence in the practice of STEM Education in a University setting.

The views expressed in this article belong to the individual authors and do not represent the views of the Global Water Forum, the UNESCO Chair in Water Economics and Transboundary Water Governance, UNESCO, the Australian National University, or any of the institutions to which the authors are associated. Please see the Global Water Forum terms and conditions here.