SM Tharman Shanmugaratnam at the UN 2023 Water Conference Official Side Event

Turning the Tide – A Call to Collective Action by the Global Commission on the Economics of Water

Let me build on what my fellow co-chairs have said – and let me speak at the same pace as Ngozi, which means a little slower than Mariana and Johan.

We can actually solve the water crisis, but it requires a fundamental shift in thinking. There are two fundamental ideas, common in economics that we have to dispel in addressing the water crisis.

The global water crisis: turning the efficiency vs equity trade-off on its head

The first is the idea of a trade-off between efficiency and equity. For example, a major claim of the day is about ultra-efficient global supply chains, and how they disadvantage some domestic groups, some communities, some regions within countries.

Water turns this trade-off on it’s head, because the problem in global water is exactly the opposite. It is massive inefficiency in use of water that is fuelling inequity. And the worst part of this is that it's not just because of policy omission or neglect; it's about policies globally that actually encourage inefficiency in the use of water, in virtually every sector: agriculture, mining, manufacturing, and even the household sector.

So how does inefficiency lead to inequity?

First, when you've got a finite supply of freshwater, and you have water being used wastefully in some sectors or by some groups, someone else doesn't get enough water or only gets polluted water. Who is that someone else? It's in practice the poorer communities. And it’s the women in rural areas whose lives revolve around the scarcity of water in the way that Ngozi spoke about.

Second, we know about how water scarcity is now fuelling food insecurity. It's a new global crisis that's developing before us. It is not just about the Ukraine war. This is a secular trend. Food insecurity is a growing, and will be major challenge over the next three decades. Who suffers from food insecurity? It's not globally distributed hardship. It's again the poorer communities, and poorer countries.

The third inequity comes out of what Johan emphasised, the dangerous intertwining of the water crisis and the climate crisis. The loss of moisture in the soil, in the forests, in the wetlands is accelerating climate change. Who suffers most from climate change? It's the poor countries, and poor communities within countries, that suffer the most.

So this inefficiency in the use of water, encouraged by policy dispensations globally, is at the heart of the inequity. But it also means an opportunity to correct this. There is an opportunity for a paradigm shift in water use, that focuses on water efficiency in every sector, and that will also enable us to deliver equity.

Valuing water for efficiency, sustainability and equity

It starts with valuing water properly - pricing water closer to its true value, which very few countries do. My own country, Singapore, has been one that has been doing it for a long time. In fact, we’ve been pricing water above today’s costs of production, because we're pricing instead for a future of sustainable water.

And pricing works out to be good for the poor because it allows you to ration the use of water in a way that's more equitable. It gives you the revenues to expand water systems so as to give everyone access to water, and gives you the revenues to provide targeted subsidies for the poor. The countries that have been doing this have found they can provide universal access to water, affordable to the poor. We really have to get a move on pricing.

Managing the water cycle as a global common good

The second basic idea or misapprehension that we have to move beyond is the idea that treating the water cycle as a global common good, which the science tells us we must and which my fellow co-chairs spoke about, will be at odds with focusing on national priorities and national development strategies. It’s a tension that comes up frequently in discussions – the idea that treating water as a global issue will distract us from helping countries deal with local water challenges.

But what is the global common good, and how do we go about achieving it? The global common good - of a stable water cycle - will be achieved not through global intervention, but through global collaboration around local actions - local actions for both efficient and equitable water use.

It also means a shift in thinking on the part of the developed world, towards thinking of global collaboration on water not as a draw on aid budgets, but as an investment in the global common good that's going to benefit all countries, rich and poor.

We all have an interest in this. Apart from the intrinsic good in achieving water justice and equality around the world, there's plain self-interest that’s involved here. Every country has an interest in a sustainable global water cycle. Every country has an interest in other countries being able to invest in water conservation, in more efficient use of water, in agriculture, manufacturing, and in all of national development. And we've now got to collaborate in helping to finance this in the developing world. Because if you don't, the global common good is just words.

Mobilising finance and driving down the cost of capital

An important part of the strategy paper that we have released is around how we can organise this collaboration in finance.

There is in fact no lack of finance that can be deployed for sustainable water.

Domestically in most countries, very substantial resources are going towards subsidies for inefficient water use. We can reduce these subsidies and free up resources for use to incentivise more efficient water use. There's also a lot to be gained by eliminating water leakages or ‘non-revenue water’ in municipal systems. An average of 35 to 40% of water in municipal systems globally is lost this way.

But importantly, globally, we now have to bring public and private streams of finance together to lower the cost of capital for investments in the developing world.

We know about the Just Energy Transition Partnerships (that help countries to decarbonise their economies, including by phasing out coal). Off to a good start – a little slow, but off to a good start. But we also need partnerships for investment in sustainable water. We call for Just Water Partnerships, that take a whole-of-country rather than project-by-project approach towards water systems in the developing world – investing in distribution systems that provide access to everyone; investing in water treatment and recycling; investing in preserving the wetlands and preserving the natural ecosystems that are critical to a sustainable future, not just for the individual countries but globally.

There is no lack of global finance. Global capital markets are $250 trillion, and we're talking about channelling a very small fraction of that each year towards sustainable water. But we need to organise this flow of finance, by bringing together public and private streams of funding, concessional as well as commercial investments.

Integrating water and climate action

We've also got to do it in a way that's in sync with climate action. We can’t treat water and climate as two separate silos. If you treat them as separate silos, they can work at odds with each other, because some of the solutions for water can be extremely energy intensive, and some of the solutions for new energies can be extremely water intensive – nuclear energy and biofuels for example. We need solutions for climate and water that allow for the two together to be sustainable.

We must also get moving on voluntary market actions to promote finance for sustainable water. Just like we had the Task Force for Climate-related Financial Disclosure (TCFD) – it started with voluntary action before the official community began catching on five or six years after the TCFD was started.

We have to get going with voluntary action, while governments start working towards mandatory disclosure of water footprints by corporates and financial institutions, as countries had agreed to in the Global Biodiversity Framework adopted in December 2022.

We should treat water as an opportunity. We know what needs to be done. There's no lack of finance. Most of the technologies exist. But we are running out of time, and have to get moving and get moving together.