Global Change: Impacts on Water and food Security

This chapter describes the implications of global change for water and food security, focusing on the precarious situation of the poor in global change processes. While overall economic growth is reaching an increasing number of poor, and education and income opportunities have increased tremendously in many parts of the (urban) developing world, new challenges in the water-for-food arena are set to tip the balance towards increased hunger and childhood malnutrition with often irreversible, life-long consequences, particularly in parts of sub-Saharan Africa and South Asia, unless policy reforms and investments are urgently undertaken to ensure access to safe water and food under these global change processes. Key challenges whose outcomes need to be made more pro-poor include the global trade and finance regime, climate change, energy policy, investment policy, and foreign direct investment.

Feeding the world’s growing population will depend to a large extent on irrigation, but the future of irrigation water supplies is increasingly constrained by growth in other sectors. Other challenges, including declining water quality, falling groundwater tables, and growing environmental demands for water further constrain water availability for irrigation. Moreover, globalization and trade liberalization will increasingly impact water use and food production. Some of these challenges will be mediated by what we label the new ABCs of the future of water and food security: Aquaculture, Biotechnology, and Climate Change. In order to address these old and new challenges, fundamental changes in water management are necessary. With the right reforms in water management, implementation of appropriate economic incentives and investments in water infrastructure and agricultural research, progress can be made toward solving these challenges.

Water availability, access, and use has ensured food and livelihood security for millions. In the future, food and livelihood security may be challenged due to global environmental changes, particularly global climatic changes, that evidence has gradually shown to be appearing. The Intergovernmental Panel on Climate Change (IPCC) has projected that the global mean surface temperature will rise by 1.4–5.8°C by 2100 due to increases in atmospheric carbon dioxide concentration. Climate variability is also projected to increase, leading to uncertainty in the onset of monsoons and more frequent extreme weather events, such as more severe droughts and floods. These environmental changes are known to affect all aspects of the hydrological cycle, which in turn may alter the balance between food demand and supply in time and space in many parts of the world. Regions such as South Asia and Africa are expected to be particularly vulnerable to these environmental changes due to their large population, predominance of agriculture, and limited resource base. The potential impact of climatic changes on the quality of fruits, vegetables, cereals and medicinal plants can have a negative impact on emerging trade opportunities for these commodities in many countries. To ensure future water and food security, greater attention is now needed on adaptations to climatic change, which calls for increased diversification, improved land use and natural resource management policies, increased use of biofuels, improved risk management through early warning systems and crop insurance, and wastewater recycling in agriculture.

This chapter explores the impacts that rapid growth in biofuel demand has on agricultural prices, the consumption levels of key staple commodities, and the resulting impacts on food security and nutrition. The results clearly show a “food-versus-fuel” tradeoff that any national plan for biofuel expansion should take into account. Intensified biofuel production would likely increase the number of malnourished people. Rapid biofuel expansion also has a significant impact on international trade, particularly the global trade balance of maize. In addition, the results indicate that expansion of biofuels would increase the stress on regional water supplies only marginally; however, a significant expansion of biofuel production in areas facing water scarcity could exacerbate the problem. Aside from food security concerns, the expansion of biofuels entails additional tradeoffs with environmental sustainability, and the goals of overall economic growth and poverty reduction.

Increases in international trade have a variety of effects on the environment through the location, scale, and techniques of production. International trade may also have special effects on transboundary resources, such as international rivers as trade provides greater opportunities for policy coordination between trading partners who share a resource. This chapter discusses several mechanisms by which trade may facilitate coordination: trade may provide opportunities for linkage between environmental and trade concessions, facilitate implicit side payments, grant countries direct leverage over other countries’ production, and instill a perception of shared goals between countries. An empirical section reports a test of the effects of globalization (interpreted in the regression equations as overall trade) and trade specifically between countries sharing a natural resource. The United Nation’s Global Environmental Monitoring System (GEMS) provides data on water quality at river monitoring stations around the world. We have coded these stations to indicate whether the rivers cross international borders, and if so, which countries share the river. We then merged these data with information on bilateral trade between upstream and downstream countries and characteristics of these countries such as their income levels and trade openness. The results suggest that water pollution is lower in rivers shared between countries with more trade; supporting the hypothesis that trade promotes coordination of environmental policies.

The virtual water concept and argument have been used to analyze the linkage between trade, food security, and water resources. The concept comes from the idea that water should be treated as a production factor and virtual water is the volume of water needed to produce a commodity or service. The virtual water argument then states that the importation of agricultural products that need important amounts of water represents the importation of water into a water-scarce country. The objective of this paper is to test the virtual water argument and to present some possible explanations why the theorem does not hold true. The paper suggests that the main reason for the failure of the argument resides in the strong assumption of price equalization, as well as other factors that distort trading patterns such as government programs and subsidies. Using Mexico as a case study, the paper shows that the water price equalization hypothesis does not hold true, and that various factors, such as the level of agricultural trade liberalization, influence virtual water flows rather than water endowments. Trade liberalization via the North American Free Trade Agreement (NAFTA) significantly influenced the level of virtual water flows between Mexico and the United States.

Global market integration has accelerated in recent decades, and with it the supply of exported fish has shifted from developed to developing countries. Fish is also important for the diets and livelihoods of the poor in developing countries. Hence, concerns have been raised about the impact of export-oriented fisheries on the poor. The first concern is that, on the demand side, export-oriented fisheries are diverting domestic production from meeting domestic food requirements. We examine this objection from the viewpoint of the nine top fish producers in developing Asia, based on supply and demand projections from a multi-market equilibrium model of the fish sector. Over the next 15 years, fish consumption per capita is projected to rise in most of these countries, even as export prices are expected to climb. On the other hand, a decline in export price growth may cause a minor to dramatic fall in net export growth, with only a minimal increase in domestic consumption growth. Hence, imposing disincentives or restrictions on exports may forfeit large gains on the supply side, with negligible gains in domestic consumption. The second concern is that, on the supply-side, benefits from export-oriented fisheries are reaped mostly by big, commercial producers. It is true that poor fishers, fish farmers, and traditional processors are marginalized in the export chain, due to the technical and financial requirements of meeting modern quality and food safety standards. However, rather than restrict globalization, the response should be to make the export chain more inclusive, by rationalizing regulatory standards in developed countries, as well as by organizing and enabling small-scale enterprises in developing countries to compete against large-scale farms or vertically integrated processors.

The water sector is broad and diverse, and the principle of Integrated Water Resource Management requires that all its components should be properly financed if they are to be mutually reinforcing. The scale of current water financing and its main sources are presented, prior to a discussion of basic financing principles. Moreover, trends in water financing are outlined, focusing specifically on the current interest in sub-sovereign entities. Future needs, opportunities and prospects are then discussed specifically in relation to four sectors: water resource management, hydropower, household water services, and agriculture. The chapter concludes by examining three potential impacts of globalization on water financing, namely: water footprints, virtual water and international trade; the globalization of water services; and international and local capital markets.

This chapter explores the experience of private-sector participation (PSP) in the provision of water and sanitation services since the late 1980s. In particular, it examines the various justifications for PSP, including that PSP would be inherently more efficient than public water utilities, contribute to reduce the public sector’s deficit by providing fresh private investment, help to extend coverage of services to the poor, and improve social equity. The chapter finds that these claims are not supported by the evidence emerging from cases in Africa, Europe, and Latin America where PSP was strongly promoted. Not only have the promises of overall improvements in efficiency, fresh private investment, public sector relief, and extended service to the poor not materialized, but there are also good reasons to link the expansion of PSP with rising levels of social inequality and the weakening of democratic governance and substantive citizenship in the management of water and water services. The chapter also argues that achieving the Millennium Development Goals will require a radical change in policy options and a stronger commitment from OECD governments, international financial institutions, donors, and other key actors to strengthen public utilities, in particular at the regional and municipal level.

Globalization and trade can bear the potential for economic growth, modernization and new technologies for some of the poorest regions of the world. At the same time, they can be a force for harm if not managed effectively, by affecting sensitive ecological areas and by straining water security for local populations. Opening up trade in a previously closed area tends to have a great and diverse impact. As economic activity grows, populations tend to migrate to the new areas of opportunity, and this puts stress on water supply chains. New developments tend to spring up in haphazard fashion as businesses open up and housing is built around the workplace. Generally, infrastructure in place is inadequate to handle the influx of people and the change of socioeconomic dynamics. This chapter discusses the impact of trade on water supply services for the US-Mexican border, as a result of the North American Free Trade Agreement (NAFTA). The chapter shows the roles of local communities, federal governments, international agencies and the private sector to create an environment that is conducive to investments in infrastructure. Globalization and trade have the potential to expose weak water systems and bring them to a crisis point if local economic growth is not coupled with proportionate institutional strengthening of water utilities and the fiscal environment in which they operate. On the other hand, beneficial impacts from globalization and trade can be expected for local communities when water supply systems function well and are well financed.

Globalization has increased the volume of Foreign Direct Investment (FDI) in developing countries. It also has promoted “global constitutionalism,” a process involving the incorporation of international norms into constitutional principles developed at the national level. When conflicts arise between foreign investors and national governments then arbitration tribunals created under international investment agreements are often called upon by the private investor. The objectives of this chapter are to examine whether protection of investment agreements by international tribunals has had negative impacts on water and its services and what can be done to remediate any negative impacts of these agreements. The chapter finds that criteria and procedures used by these tribunals tend to simplify very complex situations, and are often contrary to local and national laws created through centuries of trial and error; and argues that arbitration tribunals should make greater use of principles of law accepted by civilized nations when dealing with cases related to international investment agreements. Otherwise, these courts risk reductionism and, in the long term, irrelevancy.

This chapter summarizes the main messages discussed in this volume on global changes affecting water and food security, draws conclusions, and identifies areas for future research and policy reform to help ensure water and food security now and in the future. The chapter attempts to provide partial answers to the key questions posed at the beginning of the volume. It examines, on the one hand, the impacts of key factors driving water and food security and the livelihoods of the poor and, on the other hand, how these processes of change can be used so as to improve water and food security for the poor. Key factors include population and economic growth, market integration, technological change, climate change and energy policy. Important processes to redress rising inequalities under global change include investments in pro-poor agricultural research, support of increased trade liberalization, while reducing non-tariff barriers for smallholder farmers and fishermen and women; payment for environmental services to help farmers internalize environmental externalities such as carbon or water pollution; and mechanisms to enhance knowledge transfers across borders, including enhanced South-to-South transfer. Moreover, support to local capital markets to support local financing of key water-for-food investments and multilateral investments in storage and water control facilities will also be important. Virtual water trade, while not a panacea to resolve the water crisis does move the cost of financing water to the exporter - generally developed countries - that are better placed to bear these costs. Finally, securing water access requires analysis and management of water resources taking into account policies within and outside of the water sector.

IMPACT (International Model for Policy Analysis of Agricultural Commodities and Trade) is a global agricultural sector partial equilibrium model developed in the early 1990s at the International Food Policy Research Institute in response to the lack of a long-term vision and consensus about the actions that are necessary to feed the world in the future, reduce poverty, and protect the natural resource base. IMPACT models crop and livestock commodities, including cereals, soybeans, roots and tubers, meats, milk, eggs, oilseeds, oilcakes/meals, sugar/sweeteners, and fruits and vegetables. It is specified as a set of 115 country and regional sub-­models, within each of which supply, demand, and prices for agricultural commodities are determined. The model links the various countries and regions through international trade using a series of linear and nonlinear equations to approximate the underlying production and demand functions. World agricultural commodity prices are determined annually at levels that clear international markets. Growth in crop production in each country is determined by crop and input prices, the rate of productivity growth, investment in irrigation, and water availability. Demand is a function of prices, income, and population growth. IMPACT generates projections for crop area, yield, production, demand for food, feed and other uses, prices, and trade; and for livestock numbers, yield, production, demand, prices, and trade.