Aquanomics is a term that describes the economics of water risk and future resiliency. GHD, a global water, energy and urbanisation consultancy, has published Aquanomics, a report that assesses the impact of water stress on global economies. It is the first report that has calculated the economic impact of water risk at a GDP and sector level.
The report’s authors estimate that water risk from droughts, floods and storms could wipe $5.6 trillion from the GDP of just seven countries by 2050. The UK alone is looking at a possible loss of $153 billion.
But these losses aren’t just something that may occur in the future, they’ve already started happening. It’s estimated that in 2022, there has already been an average annual GDP loss of $0.1 trillion as a result of water risk, which will rise to $1.3 trillion by 2030 and $3.3 trillion by 2040.
Globally, the biggest water risks come from storms, floods and droughts - it is estimated that 100 million people were adversely affected by storms, floods and droughts in 2021. There are more occurrences of large volumes of rainfall, which increase flood risks when systems are overwhelmed. On the other hand, there are also longer and hotter periods of drought which can lead to wildfires, which are damaging to agriculture and wildlife, as well as buildings and infrastructure.
At the same time, we are depleting our natural resources by over-abstracting underground aquifers, rivers and lakes. We are also clearing and draining large areas of forest and wetland.
All businesses are dependent on water, but there are sectors that will be more affected by water risk than others. In the aquanomics model predicted by GHD, the manufacturing and distribution sector will lose the most; storm damage or flooding will affect output, and water scarcity can impact production. It is predicted that between 2022 and 2050, this sector alone could lose up to $4,211 billion as a result of water risk.
The other main sectors that are predicted to face significant losses are fast-moving consumer goods (FMCG) and retail ($1,104 billion), banking and insurance ($514 billion), agriculture ($332 billion), and energy and utilities ($237 billion).
There is no one-size-fits-all solution to the aquanomics problem. What is needed is for everyone - government, businesses and communities as well as the water sector - to adopt a long-term strategic view of resource management. The aquanomists suggest this can be achieved by following three principles:
The water risk that will cause the biggest impact in the UK in the future is flooding. Aquanomists predict floods could make up 45% of the overall economic impact, with storms 37% and drought 19%.
When it comes to flooding, periods of heavy rainfall will affect areas where rivers and sewers don’t have a big enough capacity to take the water away. This results in flooding, especially in areas where homes and businesses have been built on floodplains. Groundwater risk management will therefore play an important role in helping the UK become more resilient to flooding, and water efficiencies will help businesses become more resilient to water shortages.
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