A resource economist with 25 years of varied experience in the water industry, Steve Hoffmann has put out this deeply insightful treatise on variegated aspects of global water supply and demand, its unique character as a resource or commodity, technological and ecological challenges it faces, and vast investment opportunities the sector offers. The “story of water for the twenty-first century” is lucidly retold in the eminently readable volume, “a guide for investing in water as a thematic strategy”.
There is about 1.3 billion cubic kilometres (331 million cubic miles or some 3.26 x 1020 gallons) of water on the planetary scale. With 97 per cent of saltwater contained in the oceans, freshwater is only about 3 per cent, of which only 1 per cent is surface freshwater . Again, only about 0.36 per cent of the planet’s water supply is found in rivers and lakes. While global water supply has remained constant, demand for it increased six-fold in the last century, increasing more than twice the growth rate of global population, now 6.7 billion. About three billion, or 40 per cent of the world’s population, live in water-scarce conditions, the number likely to increase to at least 60 per cent by 2025. In fact, 90 per cent of all available freshwater, it is estimated, will be used by 2025, if per capita consumption continues to rise at the current rate.
Water is varyingly viewed as a public good, commodity, or resource. While it amounts to no denial of water as a human right, the trend is toward incentive-based or market-based water regulations, which, for Hoffmann, implies no “ideological preoccupation with the process orientation of free markets.” As the cost of water rises, water becomes like other economic goods (as opposed to public goods). Since there is no “market” price for water, it is even more difficult to “build” an intrinsic value for water stocks.
The author believes that as wars are waged over oil, there will certainly be conflicts over water. Scarcity is often cited as a prominent similarity between oil, the commodity, and water, the resource. Because water can become scarce, it has economic value. Yet the way in which markets deal with scarcity is very different for oil than for water. Water, like oil, is a critical factor in global economic development and the source of potential competitive advantage and conflict, asserts Hoffmann. Its value will ultimately far exceed that of oil; “it is the world’s most valuable resource”.
Strongly maintaining that water is not scarce on Planet Earth, the author bemoans its “allocational and distributional mismanagement”. Lack of water is a major factor in poverty, food insecurity, human disease, economic development and, ultimately, geopolitical conflict. According to World Health Organisation estimates, 1.1 billion people worldwide have no access to proper drinking water; 2.6 billion people live with no proper means of sanitation; half of the world’s hospital beds are filled with people suffering from water-related diseases; 1.8 million deaths occur annually from diarrheal diseases alone, 90 per cent of them children under the age of five, mostly in developing countries. The health burden also includes the annual expenditure of over 10 million person-years (worth $63.5 billion per year), carrying water from different sources.
The penultimate chapter enlightens how climate changes can significantly affect the hydrologic cycle and therefore water resources. Technological, environmental, social, and regulatory changes in the water industry operate to influence the way in which water is provided.
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The “business of water” is succinctly discussed. The world’s third largest industry, behind oil and gas production and electricity generation, the water industry is “ill defined and ultra fragmented”, comprising companies ranging from cottage businesses to global behemoths. Taking into account the full attainment of the Millennium Development Goals target and utilising a WHO scenario above the base cost case, the magnitude of global water costs, from 2008 through 2025, is projected at $16 trillion, equivalent of $830 billion per year. Hoffmann advocates the advantage of investing in water as “water has intrinsic (i.e. inherent) value” “all along the continuum”. For him, any discussion of the merits of investing in water must necessarily address the regulatory institutions, including the role of NGOs, that touch every aspect of the industry.
Part three of the book visualises water being the “resource that defines the twenty-first century”. Pleading for the need to recognise that the existing approach to water must change, the author hopes that, “since our future depends on looking at the glass half full, that change necessarily equates to opportunity”.
PLANET WATER:
Investing in the World’s Most Valuable Resource
Steve Hoffmann
John Wiley & Sons, Inc.
Pages 352
Price $ 39.95
