World Economic Forum – Global Risks 2011

Agriculture is the dominant water user, consuming more than 70% of total global water demand. Industrially produced meat is especially waterintensive, requiring up to 20,000 litres of water to produce a kilogram, compared to approximately 1,200 litres to produce a kilogram of grain. Both population growth and increasing meat consumption in emerging economies will therefore have a tremendous impact on resource needs.

As Figure 9 shows, over the next 10 years, the world population is expected to rise from the current 6.83 billion to approximately 7.7 billion, with most of the growth in emerging economies. The United Nations Food and Agriculture Organization (FAO) projects a 50% increase in demand for food by 2030, and the International Food Policy Research Institute (IFRI) expects a 30% increase in demand for water, with other estimates rising to over 40%. The International Energy Agency (IEA) forecasts that the world economy will demand at least 40% more energy by 2030; producing this energy will draw heavily on freshwater resources. For such increased demand for water, food and energy to be realized, significant and perhaps radical changes in water use will be required as well as new sources for food and energy production exploited.

For food production, supply-related challenges may limit the ability of farmers to meet growth in demand. Already, major grain-producing areas – in China, India and the United States, for example – depend on unsustainable mining of groundwater. In some regions, such as North Africa and Australia, climate-related changes of precipitation have already critically reduced the levels of freshwater supply. In northeast China, one of the country’s main grain-producing regions, climate change could increase drought losses by over 50% by 2030.

Climate change is likely to be exacerbated by meeting the growing demand for energy. Over 75% of the global increase in energy use from 2007-2030 is expected to be met through fossil fuels, especially coal, and an estimated 77% of the power stations required to meet demand are yet to be built.

Unintended consequences abound. For example, because of policy incentives designed to reduce vehicle emissions, by 2030 the IEA predicts that at least 5% of global road transport will be powered by biofuel – over 3.2 million barrels per day. However, producing those fuels could consume between 20-100% of the total quantity of water now used worldwide for agriculture. This is clearly an unsustainable trade-off. Another example is shale gas extraction, which promises access to new reserves of fossil fuels, but is highly water-intensive and may pose a risk to water quality.

Phrase of the day: Asset Price Collapse.

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