Water scarcity – an economic threat for Asia

Water scarcity is recognised as a critical influential aspect of the broader climate crisis. Researchers predict that large Asian economies, such as India, will be the most severely impacted by water shortages.

Projections indicate that global demand for fresh water is expected to exceed supply by 40% to 50% by 2030. That means water scarcity should not be viewed as an isolated issue affecting only specific sectors but as a challenge that affects the entire economy. Over the past four decades, water usage has risen by approximately 1% annually, a trend primarily fuelled by population growth and shifting consumption habits. By 2050, the number of urban residents fighting with water scarcity is estimated to nearly double, increasing from 930 million people in 2016 to potentially as many as 2.4 billion. Furthermore, urban water demand is projected to surge by 80% by the year 2050.

Asia, being a hub of industrialisation experiencing rapid rates of urbanisation, has an immense demand for water. This demand is not limited to traditional industries like steel production but extends to emerging sectors such as semiconductor manufacturing and the transition to clean energy, all of which rely heavily on water. Asia, often considered the engine of global economic growth, is increasingly reliant on these industries for its development.

Climate scientists urged Asian economies to recognise water as a shared regional resource and to work collectively to mitigate the risks associated with severe water scarcity. India, with its large population and limited water resources, is particularly vulnerable and has been declared the most water-stressed country in the world by the World Bank. The country heavily relies on its monsoon season to meet its water needs, but climate change has led to increased occurrences of both floods and droughts, exacerbating the water shortage.

China faces a similar situation, with a substantial portion of its groundwater and river water deemed unfit for consumption, industrial use, or agriculture. China’s power generation still depends on coal, which requires a significant amount of water. Water scarcity could severely disrupt coal power plants and, in turn, the country’s power supply. Other countries in the region, like the Philippines, may face even greater challenges in addressing their water crises due to their limited resources and resilience.

Even Western countries are not immune to the risks posed by water scarcity. Europe is expected to face worsening water shortages due to the ongoing climate emergency and due to longer heat waves.

Specific industries are particularly vulnerable to water scarcity. Taiwan, home to a significant semiconductor industry, has struggled with water shortages, which can impact chip production. Although many manufacturing industries require water, some of it can be recycled, and the current crisis presents an opportunity for businesses to adopt more sustainable practices.

Economies heavily reliant on agriculture may also see reduced output and increased food security risks. For example, Australia anticipates a 14% decrease in agricultural production due to drier conditions, reducing crop yields.