Table Of ContentOECD Studies on Water
Water Security for Better Lives
Water is essential for economic growth, human health, and the environment. Yet governments around the
world face signifcant challenges in managing their water resources effectively. The problems are multiple and
complex: bilions of people are stil without access to safe water and adequate sanitation; competition for water OECD Studies on Water
is increasing among the different uses and users; and major investment is required to maintain and improve
water infrastructure in OECD and non-OECD countries. This OECD series on water provides policy analysis
and guidance on the economic, fnancial and governance aspects of water resources management. These
aspects generaly lie at the heart of the water problem and hold the key to unlocking the policy puzzle. Water Security for Better Lives
Contents
Chapter 1. Why does water security matter?
Chapter 2. Applying a risk-based approach to water security
Chapter 3. Achieving water security targets through market-based instruments
Chapter 4. Policy coherence toward water security
Annex A. Glossary of terms
Annex B. Basic water facts
Annex C. Costs and distributional impacts of inaction
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OECD Studies on Water Water Security for Better Lives
OECD Studies onWater
Water Security
for Better Lives
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PREFACE
Preface
Water security is one of the defining challenges of our time. By the middle of the next century, over
40% of the global population will live under severe water stress. As global population increases, so
will tensions among different water uses.
This challenging outlook on water security, together with an increased severity in floods and
droughts brought about by climate change, is an urgent call for better managing water risks, including
water shortages, excesses, pollution, and other risks to freshwater systems (rivers, lakes, aquifers).
The key lies in adopting an approach based on knowing, targeting, and managing water risks.
Awater supply crisis – a decline in the quality and quantity of freshwater – is perceived by many
experts to be one of the top five global risks, both in terms of likelihood and impact. Until recently,
water risk management has largely focused on providing an appropriate short-term crisis response,
aimed at protecting human lives and critical assets from disasters, ignoring the long-term
management of water security.
This report, Water Security for Better Lives, proposes a fundamental shift in the approach
followed by governments to tackle water security challenges. It argues in favour of a risk-based
approach to improve water security in a cost-effective manner. Water management involves decisions
about the allocation of risk reduction efforts and their associated costs. The usefulness of a risk-based
approach lies in making these judgements explicit, through both informed policy discussion with
relevant stakeholders, as well as policy responses tailored to the agreed levels of risk.
Implementing a risk-based approach relies on better understanding the context of water supply,
demand, quantity and quality; in correctly assessing the relevance of economic efficiency versus equity
concerns; and in identifying policy and economic instruments that promote greater water security. The
aim is to develop strategies that avoid, reduce, transfer or improve our capacity to bear water risks.
The report also provides guidance on how to implement this approach from a government
perspective and addresses the need for policy coherence when managing the trade-offs between water
security and other economic, environmental, and social policy objectives.
I am delighted that the OECD is joining forces with other international organisations, governments,
business and civil society to address the water security challenge and promote better water policies for
better lives.
Angel Gurría
OECD Secretary-General
WATER SECURITY FOR BETTER LIVES © OECD 2013 3
TABLE OF CONTENTS
Table of contents
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Chapter 1. Why does water security matter? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
The water outlook. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Applying a risk-based approach to water security: A conceptual framework . . . . . 16
Implementing the risk-based approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
What are the costs and impacts of inaction? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Chapter 2. Applying a risk-based approach to water security . . . . . . . . . . . . . . . . . . . . . 29
Applying the “know”, “target” and “manage” framework. . . . . . . . . . . . . . . . . . . . . . 30
Country cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Chapter 3. Achieving water security targets through market-based instruments . . . . 65
Economic principles and instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Water supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Water demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Water quantity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Water quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Integrated water resource management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Chapter 4. Policy coherence toward water security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Spillover effects of sectoral and environmental policies on water security . . . . . . 107
Effects of non-water environmental markets on water security:
Some empirical evidence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
A framework for managing trade-offs between policies. . . . . . . . . . . . . . . . . . . . . . . 114
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
Annexes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
Annex A. Glossary of terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Annex B. Basic water facts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Annex C. Costs and distributional impacts of inaction . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
WATER SECURITY FOR BETTER LIVES © OECD 2013 5
TABLE OF CONTENTS
Tables
2.1. A framework for matching risk management to the level
of water shortage risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
2.2. Key developments in managing water risks in Alberta’s
South Saskatchewan River Basin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
3.1. Summary of possible market-based instruments
for water security management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
4.1. Effects and costs of combined greenhouse gas and nitrogen policies,
Lake Rotorua . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
B.1. Water resources on earth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
B.2. World distribution of freshwater . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
B.3. Sources of global freshwater use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
B.4. Freshwater use on earth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
B.5. Global consumption of freshwater withdrawn . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
B.6. Energy water demand outlook, 2010-35 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
C.1. Cost benefit analysis of improving water supply and sanitation
at the global level per year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
C.2. Cost benefit analysis of past disease outbreaks in Japan. . . . . . . . . . . . . . . . . . . 150
C.3. Economic costs of unimproved water, sanitation and hygiene
in Southeast Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
C.4. Risk drivers of child mortality from diarrhoea in Mexico . . . . . . . . . . . . . . . . . . 157
C.5. Health-related expenditure as a share of income in Mexico. . . . . . . . . . . . . . . . 157
C.6. Drivers of bottled water consumption in the OECD area . . . . . . . . . . . . . . . . . . . 158
C.7. Costing groundwater overdraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
C.8. Features of groundwater irrigated agriculture in major
groundwater abstraction economies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
C.9. Cost of coping with groundwater overdraft in Karnataka . . . . . . . . . . . . . . . . . . 167
Figures
1.1. Acceptable, tolerable and intolerable risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.2. Interpretation of readings from the Nilometer . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.1. Setting the acceptable level of risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
2.2. Environmental water to be recovered in the Murray-Darling Basin, 2006-24 . . . 51
2.3. Water apportionment zones for surface water and groundwater, France . . . . . . . 54
2.4. Benefits of artificial groundwater recharge for emergency use,
Central andWest Coasts Basins of Los Angeles . . . . . . . . . . . . . . . . . . . . . . . . . . 56
3.1. Reaching the optimal level of pollution via emissions taxes
and emissions permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
B.1. Renewable freshwater per capita in the OECD area . . . . . . . . . . . . . . . . . . . . . . . 126
B.2. Decoupling of freshwater abstraction from GDP in the OECD area . . . . . . . . . . 130
C.1. Social costs of inaction with respect to groundwater management . . . . . . . . . 146
C.2. Nitrogen and phosphorus load in selected European catchments. . . . . . . . . . . 148
C.3. Cost of increased colon cancer from nitrate in groundwater-based
drinking water in Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
C.4. Drinking water consumption patterns in OECD countries . . . . . . . . . . . . . . . . . 150
C.5. Correlation between the level of country development
and surface water quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
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TABLE OF CONTENTS
C.6. Correlation between cholera, income level and water supply
and sanitation in the world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
C.7. Correlation between diarrhoeal disease mortality and country
water and sanitation coverage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
C.8. Correlation between level of country development and water
and sanitation coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
C.9. Improved sanitation coverage in the world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
C.10. Estimated deaths from diarrhoea in the world . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
C.11. Nitrogen from untreated urban wastewater in the world . . . . . . . . . . . . . . . . . . 155
C.12. Access to safe water in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
C.13. Basic sanitation, poverty and child mortality from diarrhoea in Mexico . . . . . 157
C.14. Exposure to drinking water pollution in the OECD area . . . . . . . . . . . . . . . . . . . 158
C.15. Cost of groundwater depletion as a share of GDP in MENA countries . . . . . . . . 159
C.16. Saltwater intrusion due to groundwater overdraft in Europe . . . . . . . . . . . . . . . 160
C.17. Groundwater overdraft in Texas, 2010-60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
C.18. The Groundwater Management Areas of Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
C.19. Economic cost of unmet water needs in selected regions of Texas . . . . . . . . . . 163
C.20. Economic cost of groundwater overdraft in selected regions of Texas . . . . . . . 163
C.21. Sector-wise economic cost of groundwater overdraft
in selected regions of Texas, USD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
C.22. Sector-wise economic cost of groundwater overdraft
in selected regions of Texas, % of total sectoral income . . . . . . . . . . . . . . . . . . . 164
C.23. The cost of land subsidence in the United States . . . . . . . . . . . . . . . . . . . . . . . . . 165
C.24. Groundwater use in major groundwater abstraction economies . . . . . . . . . . . . 165
C.25. Groundwater withdrawal by sector in major groundwater
abstraction economies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
C.26. Return to cost ratios of rice and wheat cultivation in Punjab, India . . . . . . . . . 167
WATER SECURITY FOR BETTER LIVES © OECD 2013
7
ACKNOWLEDGEMENTS
Acknowledgements
This report brings together OECD work on water security from the last two years that has
been undertaken under the umbrella of the OECD Horizontal Water Programme (HWP). The
HWP brings together expertise from the Environment Directorate, the Trade and Agriculture
Directorate, the Public Governance and Territorial Development Directorate, the Directorate
for Financial and Enterprise Affairs, and the Development Co-operation Directorate.
Preparation of this report was co-ordinated by Gérard Bonnis from the Environment
Directorate, under the overall supervision ofAnthony Cox, Co-ordinator of theOECDHorizontal
Water Programme. Substantive inputs to the report were provided by: Kathleen Dominique
from the Environment Directorate (Chapter 1 and Annex A); Ian Prosser, Science Director,
Water for a Healthy Country Flagship, The Commonwealth Scientific and Industrial
Research Organisation (CSIRO) Canberra ACT, Australia (Chapter 2); Quentin Grafton,
Director, Centre forWater Economics, Environment and Policy (CWEEP), Crawford School of
Economics and Government, The Australian National University, Canberra, Australia
(Chapter 3 and Annex B); Suzi Kerr, Senior Fellow, Motu Economic and Public Policy
Research, Wellington, New Zealand (Chapter 4); and Tamás Medovarszki from the
Environment Directorate (Annex C).
The report also benefited from the presentations and discussions at the OECD Expert
Workshop:Water Security: Managing Risks and Trade-offs in Selected River Basins, held in
Paris on 1 June 2012. The country case studies from the workshop can be found at
www.oecd.org/water.
Editorial support by Janine Treves and Patrick Love is gratefully acknowledged.
Sama Al Taher Cucci assisted in the preparation of the report for publishing.
8 WATER SECURITY FOR BETTER LIVES © OECD 2013
ABBREVIATIONS
Abbreviations
2030 WRG 2030 Water Resources Group
ADB Asian Development Bank
AQUASTAT Information system on water and agriculture (FAO)
AUD Australian dollar
BoD Burden of disease
BRIICS Brazil, Russia, India, Indonesia, China and South Africa
CatNat Insurance Scheme for Natural Catastrophes (France)
CEWH Commonwealth EnvironmentalWater Holder (Australia)
COAG Council of Australian Governments (Australia)
CSIRO Commonwealth Scientific and Industrial Research Organisation (Australia)
ETS Emission trading scheme
EU European Union
EUR euro
FAO Food and Agriculture Organisation (UN)
GBP United Kingdom pound
GDP Gross Domestic Product
GHG Greenhouse gas
GL GigaLitre (billion Litres)
IBT Increasing block tariff
IEA International Energy Agency
IPCC Intergovernmental Panel on Climate Change
IWMI InternationalWater Management Institute
IWRM Integrated water resource management
MDB Murray-Darling Basin
MDGs Millennium Development Goals (UN)
MENA Middle East and North Africa
MINAS Nitrogen and phosphorus accounting system (Netherlands)
NPS Non-point source
PES Payments for ecosystem services
UN United Nations
UNEP United Nations Environment Programme
USD United States dollar
USGS United States Geological Survey
WATSAN Water supply and sanitation
WEF World Economic Forum
WFD Water Framework Directive (EU)
WHO World Health Organisation (UN)
WWAP WorldWater Assessment Programme (UNESCO)
WATER SECURITY FOR BETTER LIVES © OECD 2013 9
