How will climate change affect you? Probably through water.

That’s the major message of a new World Bank report that finds the ways governments treat water can have a profound effect on the economy.

Good water management could lead to a six percent increase in global GDP by 2050, while bad management – or simply business as usual in some places – could reduce GDP by as much as 14 percent in the Middle East, 12 percent in the Sahel, and 11 percent in Central Asia. Poor water policy could even lead to sustained declines in GDP in some places, via losses in agriculture, health, income, and property.

The basic problem is that demand is ever increasing while supply remains finite. In addition, supply  is becoming harder to predict as climate change shifts rainfall patterns. Without major improvements in water efficiency, global demand could exceed supplies by 40 percent over the next 15 years.

To assess how climate change will affect water supply, the authors modeled water runoff in 235 river basins under different conditions and emission scenarios. They then compared those changes to current conditions to identify the most vulnerable regions. For example, Colombia is expected to see a considerable decline in runoff, but the current level of rainfall is already so high, the risks are considered minimal. For arid countries like Iraq, the same decline could have much more severe consequences.

A broad belt stretching from West Africa through the Middle East and South Asia to Japan encompasses the most vulnerable countries. Many of these countries’ river basins, home to 60 percent of the world’s population, already exist in a “state of near-permanent water stress.”

Supply and Demand

To narrow the gap between supply and demand, the World Bank recommends expanding supply, such as by building more physical infrastructure, like dams. But it also cautions that without corresponding efforts to manage use, demand tends to increase at the same rate, leading to little change in water dependence. (Indeed, though the bank is primarily focused on infrastructure and economic policy, others have noted the importance of social change to improving water security and climate adaptation.)

Governments have several options to address the demand side. There are top-down planning and regulatory schemes, and bottom-up pricing and permitting changes. In areas of scarcity, groundwater withdrawals should be monitored and managed to increase performance and avoid pumping aquifers dry. The authors also recommend making it easier to import food in countries that have “no comparative advantage in food production where water resources are being degraded in the attempt to force increases in food supply.”

Market-based solutions, such as changing pricing and incentive structures, are also a part of the answer, according to the World Bank. The report says water pricing is commonly misunderstood. Where water is free or extremely cheap, poor people tend to be worse off and inefficiency and environmental degradation increase.

The Middle East, for example, is the most water-scarce region in the world, which should encourage users to take advantage of every last drop. But the opposite is true. Very low water prices and high subsidies, especially for irrigation, are in part responsible for the worst water productivity rates in the world. Some worry that Yemen, where many farmers have replaced grape vines with more water-intensive qhat, will become the first modern country to literally run out of water.

About Conflict and Migration…

The report makes clear connections between the physical processes of climate change and hydrology and socio-economic results, including economic growth, poverty alleviation, and inequality. These links are especially compelling coming from an organization that plays a leading role in international trade, investment, and financing for developing countries.

One place where the report’s arguments are a little loose is the small section on migration and conflict. Civil conflict and instability are invoked throughout the report as potential consequences of ignoring water concerns. Violent conflict and migration can result from food price spikes, drought, floods, and income inequality, according to the report.

There are indeed legitimate concerns around these kinds of risks (see the New Climate for Peace report for a comprehensive breakdown of seven), but there are also many open questions about how exactly climate change affects stability and human mobility. Oversimplifying these complex interactions can lead to poor policy and unintended consequences.

In one case, the report also seems to misstate one of its supporting pieces of evidences, citing a study that found democratic institutions improved after rainfall declines to argue that rainfall shocks, “by straining government budgets,” make “regime change more likely” and “ignite conflicts.”

In their Climate Change Action Plan, released early last month, the World Bank committed to producing a “flagship analytical report” on climate change, migration, and conflict next year, so perhaps we will see a fuller treatment of these dynamics then.