Risk management |
The economics of water risk
New research from global professional services company GHD reveals billions of dollars of water risk to the global economy over the next 28 years
Water risk Aquanomics reveals that water risk will not be spread
evenly across countries. In terms of total water-related GDP losses between 2022 and 2050, it is estimated that the US will be hit hardest, with projected losses of US$3.7 trillion. The study has found that with a temperate climate, high resilience and widespread insurance protection, the UK faces relatively low levels of water risk to GDP, with projected annual losses of 0.1%, the lowest economic impact relative to other nations in the study. However, as identified recently with the prominence
of water risk in UK news, pockets of the country are disproportionately affected, with water shortages in Southeast England and, often sporadic, major flooding threatening communities across the UK. Regarding the study, John Hensman, UK Water
Above: Chickamauga Dam on the Tennessee River in the US at near flood stage after weeks of rain in the region during February 2019. The US will be hit hardest by water risk, with projected losses of US$3.7 trillion Credit: Shot Stalker /
Shutterstock.com
INCREASINGLY FREQUENT AND SEVERE water- related events such as droughts, floods and storms, not only pose a grave threat to global economies, but to the communities and natural ecosystems that rely on a balanced water cycle for survival. According to a new GHD study called Aquanomics:
The Economics of Water Risk and Future Resilience, the future economic impact of water risk will be felt across a diverse range of climates such as Australia, Canada, China, the Philippines, the UAE, UK and the US. While the economic shock of water risk will accelerate throughout the century, it is a pressing concern this decade; between now and 2030, water risk could cost these key economies an estimated GDP loss of US$1.3 trillion, rising to US$5.6 trillion by 2050. This study says it is the first to calculate the impact of
water risk on GDP across economies as a whole and at a sector level. The research combines insurance data with econometric modelling to demonstrate the wider economic impact of increased future water risk.
Estimated GDP loss caused by water risk by country between 2022 and 2050 Country
Philippines Australia US
Canada China UAE UK
Total GDP loss $124billion $312billion
$3.719trillion $108billion
$1.144trillion $27billion $153billion
Market Leader at GHD, said: “The UK population is forecast to reach 75 million by 2050, which will only increase pressure on areas experiencing water stress. Building resilience and adaptability into our systems that collect, treat, store, and distribute water must be addressed now. Effective infrastructure is critical for sustained economic growth and adequate well-being, but current investment levels are insufficient to repair our ageing water systems, accommodate current and future urban growth, meet stricter environmental regulations, or adequately adapt to climate change. “Strategic water planning that ensures affordability,
resilience and sustainability for the public, industry and the natural environment is urgently needed, but the scale and complexity present a real challenge for government, regulators, water companies and water intensive sectors such as energy, agriculture, and manufacturing. It is critical that these industries come together to collaborate with other water stakeholders,” he says, “to enable a sustainable, vibrant and resilient environment in the UK that can respond to the major impacts that climate change is having.”
China The report goes on to give more details about specific
Average annual GDP loss 0.7% 0.6% 0.5% 0.2% 0.2% 0.1% 0.1%
countries, including China. Described as a highly diverse country, both in geography and ethnography, this brings a high degree of vulnerability to climatic hazards. The country’s historic exposure to massive flooding in its two major river basins (the Yellow and the Yangtze), as well as in smaller catchments, has led to a focus on developing water infrastructure and canalising rivers to reduce the impact of flood disasters since ancient times. More recently, China has redefined itself as an “ecological civilisation” with priorities including reducing water pollution, protecting wetlands and building “sponge cities”
42 | November 2022 |
www.waterpowermagazine.com
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