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A New Crisis Looms in a Commodity 400 Times Larger Than Oil - Posthaste

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Freshwater Consumption and the Impending Crisis

A report by BofA Global Research warns that if our current rate of consumption continues, freshwater could run out by 2040. Despite 75% of the planet being covered in water, less than 1% is usable, and even this is depleting rapidly. The report highlights that water is the most traded commodity in the world, with virtual water trade being 400 times larger than the trade of oil. The demand for water has increased by 40% over the past 40 years and is expected to rise by another 25% by 2050. However, water supply has more than halved since 1970, posing a significant challenge.

Causes of the Crisis

The report attributes the impending water crisis to the era of hyper-consumption. Fast fashion, food production, and technology manufacturing are consuming vast amounts of water. Manufacturing a single T-shirt requires the equivalent of three weeks' worth of showers, while producing one steak requires 3.5 months of showers. Data centers, which require cooling, are among the top ten water consumers in the United States. The report also notes that water demand already exceeds population growth by 1.7 times, and by 2050, the world's population is expected to reach 10 billion.

Impacts and Economic Consequences

Shortages of water are already visible, with half of the world's population experiencing high water stress for at least one month each year. Droughts in Taiwan in 2021 disrupted semiconductor production, and water extraction for avocado farming in Mexico has resulted in earthquakes. The economic impact could be substantial, with approximately 31% of global gross domestic product (GDP), equivalent to US$70 trillion, exposed to high water stress by 2050. The World Bank predicts that some regions could experience a decline in GDP of up to 6% within the next 30 years.
Addressing the Crisis
To change the current trajectory, the report suggests a fourfold increase in investment to preserve the world's water supply. This investment would cost only 1% of GDP annually until 2030. The report outlines $200 billion in water solutions, starting with infrastructure improvements as the first line of defense. Upgrading aging water systems, reducing leakage, and implementing technologies like smart meters and AI for water management and irrigation can help reduce waste. Desalination, which already accounts for 90% of drinking water in some countries, is also predicted to play a significant role in the future. In conclusion, the looming freshwater crisis demands immediate attention. Increased investment, infrastructure improvements, and the adoption of innovative technologies are crucial to ensure the sustainable management and conservation of this vital resource. Without proactive measures, the world risks severe consequences for both the environment and the global economy.

The Impending Freshwater Crisis: A Wake-Up Call for New Businesses

The BofA Global Research report on the impending freshwater crisis presents a stark reality that new businesses cannot afford to ignore. With the prediction that freshwater could be depleted by 2040 if current consumption rates persist, there is an urgent need for businesses to reassess their water usage and implement sustainable practices.

The Role of Businesses in the Crisis

The report identifies hyper-consumption in industries such as fast fashion, food production, and technology manufacturing as significant contributors to the crisis. This underlines the responsibility of businesses, particularly new ones, to prioritize water conservation in their operations. By doing so, they can contribute to the solution rather than exacerbating the problem.

Anticipating Economic Consequences

The freshwater crisis is not just an environmental issue; it also has far-reaching economic implications. With a potential decline in GDP and disruptions in production due to water shortages, new businesses must be prepared to navigate these challenges. This could mean investing in water-efficient technologies or diversifying supply chains to mitigate risk.
Part of the Solution
The report suggests a fourfold increase in investment to preserve the world's water supply, highlighting the role of businesses as part of the solution. New businesses have the opportunity to lead the way in this initiative by incorporating sustainable water management practices from the outset. This could range from infrastructure improvements to adopting innovative technologies for water management. In conclusion, the freshwater crisis presents both a challenge and an opportunity for new businesses. By taking proactive measures, they can contribute to the sustainable management and conservation of this vital resource, ensuring their resilience and success in a world where water scarcity could become the norm.
Story First Published at: https://financialpost.com/news/freshwater-could-run-out-2040-report
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