The Summer a Global Water Crisis Arrived

Hey, What's News listeners. It's Sunday, August 30th. I'm Luke Vargas for The Wall Street Journal, and this is What's News Sunday, the show where we tackle the big questions about the biggest stories in the news. And this week, summer is drawing to a close across the Northern Hemisphere, and for a number of Americans and Europeans, water scarcity has never been a more pressing or visible issue. Much of the West is experiencing drought. The same goes for most of Europe, where major rivers are running dangerously low, and even typically rainy England has seen its green and pleasant land muted to yellow. So what can be done to keep the taps running, fields productive, and industry humming if things carry on like they have been? Let's get right to it. Well, without further ado, let me introduce reporter Ed Ballard, who covers climate change and energy for The Journal, and he's also the author of our Climate and Energy newsletter, which comes out every Thursday. We've left a link to subscribe to that in our show notes. Ed, has this summer, in fact, been different in terms of the conditions we've seen on either side of the Atlantic, or I suppose in how readers are responding to our coverage about what's going on? I definitely think in Europe this summer has been different, both in the sheer number of heat records that have been broken, the success of heat waves we've seen, and also I think people are starting to see this as climate change having an impact on their own lives in perhaps a way they weren't a few years ago. People's lives are being disrupted in new and sort of startling ways. Like, everybody is getting an air condition if they didn't already have one. We're just figuring out all the different ways in which our homes, our infrastructure is just not equipped for the kind of conditions that we're seeing now. I mean, and just in general, it feels like the future has arrived, and we were expecting it to arrive at a more convenient moment. We'll talk more about that. We'll talk about Europe. But let's shift to the US West, where the Colorado River water crisis is really coming into focus. We saw federal officials this month in the US announce sharp water crisis. We saw federal officials this month in the US announce sharp water cuts for the next two years that will cover California, Nevada, Arizona, and in the process sparked a lawsuit by Nevada, where officials described this issue as one of a matter of survival. The Bureau of Reclamation's plan forces big cuts on the lower basin states of Nevada, Arizona, and California. It's an attempt to prop up the nation's two largest reservoirs, which both hit record low levels earlier this month. The plan does not require restrictions for the upper basin states of Colorado, Utah, Wyoming, and New Mexico. Nevada is suing the federal government over its Colorado River plan. In their decision to take such action, Nevada says it's doing so to protect its citizens. Ed, this is no longer a future risk for the West. The very process meant to sort of see these states share their resources, you know, deal with the disputes seems to be breaking down here. And now even the emergency measures brought in to kind of rectify things are being fought over. Yeah, that's right. This problem was sort of there right from the start on the Colorado River. Even at the beginning, there was more water accounted for on the plan than the Colorado regularly supplied. And that situation has become more and more acute, basically because snowfall over the Rockies has diminished. And of course, water consumption has gone up, especially in these fast-growing cities of the Southwest. And now we're coming to the all-at-once part, where the two huge reservoirs that three lower basin states depend on, Lake Mead and Lake Powell, they're not so far above the level where they would be able to generate hydropower. And below that level, where they won't be able to actually discharge water on demand at all. And that's why it's these lower basin states, which are Arizona, California, and Nevada, they're the states that can have cuts imposed on them by a federal authority in a way that doesn't apply to the upper basin states. And now we're seeing all of these sort of long-term structural challenges are reaching an acute point where it's quite possible that we'll get to a point where those dams won't be able to discharge water on demand in this whole area. Intricate system that's been run for decades for apportioning this sort of priceless reserve of water from the Colorado Rockies just won't exist anymore. You won't be able to have water on demand. And then the scary prospect is there'll be some sort of chaotic process for deciding who gets water. And needing to steer it away from other interests of agriculture. Exactly. So I guess the whole idea behind these negotiations is that they'll be possible to have a deliberative process for deciding whose priorities sit well. Yeah, as you said, these difficult future moments we thought would just come around at a time we could choose are now arriving on our doorstep. And meanwhile, across the Atlantic, Ed, several major rivers are also running dry, as our correspondent Tom Fairless described to us. So the Rhine is actually a real competitive edge, usually for Germany. It's a really cheap way to transport things the length of the country. But because of the lack of rainfall and the early disappearance of the snowmass in the Swiss Alps, it's hitting record low levels this year. And that means that the ability to transport these bulk goods is severely constricted, which reduces industrial output. That's one issue. And another is the sort of energy grid. And in Hungary, this nuclear plant was forced to shut down because it's usually cooled by the Danube River, and they didn't have enough water. It didn't have enough cooling water to keep it online. Ed, with just those two rivers there, we are taking off a lot of boxes, effects on industry, on trade, on energy. And if you look around Europe even further or beyond Europe, we can take off even more boxes, making this whole situation honestly quite hard to process. Yeah, there's certainly a lot to keep track of. We haven't even talked about the Po River in Italy, another of Europe's great rivers that's got perilously low water levels and threatening a major agricultural producing region. And this is a risk we're going to be hearing a lot more about. You may have heard that El Nino is back, this global weather phenomenon that's associated with both droughts and floods around the world. India's monsoon, for example, is 13% below usual levels, and that's bad news for agricultural production. A recent report from Bloomberg said that droughts due to El Nino can cause up to two percentage points of food price inflation in some countries, especially in Asia. So we're just going to see more and more in the coming months how the temperatures and the weather conditions that are becoming normal, how they play out and ripple through the economy. It does seem like this is a year in which we're going to see a lot of uncertainty. We are starting to see some responses, whether or not they're concrete enough from politicians or businesses for the moment, maybe is the open question, but action is starting to occur. Of course. And it's maybe taking the form of emergency responses, like in France, they promised to buy more water bombing planes of the kind they didn't have enough of when forests around Bordeaux were on fire. Or in the UK, we've also had some wildfires. There's been a temporary ban on disposable barbecues, but perhaps not the kind of deep, far-reaching infrastructure. change that would allow countries to get ahead of these risks. Yeah, some political leaders sort of starting to come around on this. Particularly, I would note, as it seems like businesses are talking about how weather conditions are starting to hit their bottom lines. The US government has warned that drought, which we should note is currently being experienced across 95% of the Intermountain West, could lead to significant negative direct and indirect economic impacts for agriculture. There was a report earlier this month by Triodos Bank over here in Europe. And they're saying that they're not going to be able to do that. And they're saying that they're not going to do that. side interventions, I think we have to start with what uses up the most water, and that's agriculture. And to learn more about that, I spoke to Ram Lisai, the director of global agronomy at Orbia Netafim. This is a company that makes precision irrigation products. And he told me 70% of all water globally goes into agriculture and that the majority of farmers are still flooding their fields around the world compared to just 15% of whom are using either sprinklers or drip lines to get water exactly where it needs to be. And this is a number, that low one, 15%, he forecast, basically has to and will change. If you're not paying for this resource that's called water, and if you have abandoned it, why change the way that you behave? But now the reality is changing, and we need to find a way to actually make this change. When you switch from any other kind of irrigation into precision irrigation, the numbers are not a fraction of a percent. We are talking about sometimes savings between cities of 60% to 40% of the amount of the water. Ed, Ram also added that the ROI, the return on investment for precision irrigation, is pretty quick, so people will see benefits if they're willing to pony up the money to make those changes. That seems like something we should start to see getting rolled out pretty quickly, no? Yeah, it's hard to think of someone with a bigger incentive to save water than a farmer in a water-stressed region. And it's going to get more and more important to do this as the climate changes because it's not like there's less water now. It's just sort of behaving. We're getting more intense downpours, which can run off the soil and go to waste, combined with these more protracted droughts, which are obviously a massive headache for farmers. So there's going to be more and more need to carefully make the use of the rainfall when it comes. At the same time, again, a lot of farmers will struggle just to come up with the capital to pay for expensive interventions like precision agriculture, especially in poorer parts of the world. So, again, it's going to be more and more important to do this as the climate changes. So I guess the challenge will be financing it. There's a host of other technologies we could spend a whole episode talking about, but we have to just give brief mention to leak detection. By some estimates, more than a third of drinking water is lost before it even reaches people's taps. So sensors, proactive repairs over an industry, things like data centers, chip makers. We're hearing about them moving to closed-loop water systems that aren't hogging water from municipal sources. And then there's capturing rainwater, making sure, as you mentioned just a moment ago, that when it does rain, that's not all going straight back down into the ocean. But this is, again, requires a big retrofit of the built environment around us. And some of these interventions may not be hugely expensive. I don't think there's necessarily a huge price tag attached to fixing some sensors to pipes to tell you when water's getting lost. But that doesn't mean it'll be an easy thing to roll out necessarily. And, Ed, I think this brings us to desalination as we shift sort of from demand-side fixes to supply-side ones. Maybe a way to kind of. bring new water into the supply, a technology that, you know, has traditionally been a fixture in the Persian Gulf, now getting interest worldwide. This could turn into a really fascinating growth area for Middle Eastern economies. You've already talked to Netafim, an Israeli water technology company, and desalination is a huge deal in the Middle East. These areas just couldn't support the populations that they do without this technology. There are 5,000 operational plants in the Middle East, and it's starting to be deployed further afield on the ocean. And there's some really cool desalination technologies. The journal had a story last year about doing it underwater in the ocean itself to make the process more efficient. And that sort of gets at the problem with desalination, which is it's pretty expensive. If saving water is, like, at the easier end of this hierarchy of interventions, desalination's at the higher end, it kind of raises interesting questions about the value of water, because maybe it makes sense for that data center that we keep talking about to pay a higher price for water, because you're running a desalination plant. But again, if you're out in the sticks somewhere, you're working on a farm, there are fewer people around to collectively fund something like a desalination plant than there is in a town. So again, you get into these interesting questions about how much is water worth and to whom, and who is going to pay for things like those desal plants. Well, it's a question, actually, that we put to Martin Conroy, a senior portfolio manager at KBI Global Investors, which, going back to 2012, has maintained a water fund that's investing in companies addressing water challenges. Yeah, what I'd say is that water as a sector has been under-invested in for at least 25 to 30 years. Because water infrastructure tends to be out of sight, out of mind, it has always been lower priority than other more visible infrastructure investments, such as transportation. But we've reached a crisis point now in many geographies whereby we can't continue to under-invest in water infrastructure. And that's going to require broad-based funding. So it will be from equity investors, it will be from debt investors, and there will also be an element that needs to come from government funds, whether that be through PPPs or some other type of mechanism. Ed, do you see evidence of all of that coming together? Well, I think it's inevitable that we will see more investment in ensuring that water comes out of the taps and we have enough water to grow food. But I think it's going to involve a lot of tough choices. There are reasons why this has been a historically under-funded sector just because it's quite difficult to generate a return from even some of the water projects that would be most useful. You know, one of the useful interventions you can do to boost water security is something called sponge cities you might have heard of, which basically means having more vegetation in a town or on a street to soak up more water. And this can be a really effective way of preventing floods. But it's hard to see how spending money on that actually generates a return for the private sector. And this just shows up in the numbers, especially in the developing world where some of these problems are going to be most acute. Only 2% of funding for water related projects in the developing world comes from the private sector. And that's just the private sector. But when we look at the public sector, which is inevitably where a lot of this money is going to come from, all of these sort of essential sounding projects are going to have to compete for money with other essential sounding projects. So you know, maybe you have to decide whether to spend money on a new desalination plant or a new battleship. But these are not going to be easy decisions, and we're going to have to face up to a lot of them. Ed Ballard covers climate change and energy for us at the Journal. Ed, thanks so much for dropping by. Thanks so much, Luke. And that's it for What's News Sunday for August 30th. Today's show was produced by Daniel Bach with supervising producers Sandra Kilhoff and Melanie Roy, and deputy editor Chris Sinsley. I'm Luke Vargas, and we'll be back tomorrow morning with a brand new show. Until then, thanks for listening.