Virtual Water as an Economic Tool to Alleviate Water Stress

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Importing virtual water can be used as an economic tool to alleviate water stress. When countries import agricultural products, they are importing the water embedded in a product. The water savings between the exporters and the importers generates savings in both water and energy supplies. What transforms water into a global issue is trade in goods and services with a substantial water footprint either in the finished product or in its production (so-called virtual water). Countries with water shortages can import water-intensive food, goods and services, while water-abundant countries can take advantage of their bountiful water supplies through exports. For example, to produce a ton of grain requires 1000 cubic meters of water. If that ton of grain is imported, then that 1000 cubic meters of water per ton of grain can be saved. This spared water can be mobilized towards more productive uses such as higher-value agricultural crops, for supporting ecosystems or other environmental services, or to serve domestic drinking or industrial needs. Virtual water is, therefore, an interesting concept especially when water is chronically in short supply. Energy costs too are equally linked to the production of goods and services. As energy sources become scarce as well, virtual water can serve as a tool in alleviating pressures on a nation’s water and energy supplies. In this way, these countries are able to alter their trade and development policies by recognizing the value of water and using water as a tool to gain a competitive advantage through their trade policies.

3 Answers

  1. At this year's Green Week ("The Water Challenge - Every Drop Counts" 22-25 May in Brussels) there will be a session on international trade and the water footprint: http://www.greenweek-2012.eu/sessions/29-international-trade-and-water-footprint chaired by Arjen Hoekstra and Donna Jefferies. There will also be a session on Water pricing - economic tools for water policy: http://www.greenweek-2012.eu/sessions/24-water-pricing-economic-tools-water-policy and a session on water and energy: http://www.greenweek-2012.eu/sessions/31-water-and-energy-qualitative-and-quantitative-linkages-between-essential-resources The director of the Water Footprint Network, Ruth Mathews, will be speaking during the opening session. Hence the subject of virtual water and water footprint will get quite some attention.

  3. Free international trade in water-intensive products, which enables regions that are water-abundant to specialise in the production of water-intensive products and regions that are short of water to specialise in other things and import water-intensive products is an important topic when it comes to alleviating water stress. However, water is generally grossly underpriced, so that international trade will not be influenced much by comparative advantages and disadvantages in water. Instead, increased international trade may simply mean an increasing distance between place of consumption (where benefits accrue) and place of production (where external costs accrue). Free trade without putting sustainable product and sustainable water use agreements in place may lead to imbalance in trade and create serious risk. Certainly, from a national perspective, virtual water import can be regarded as a source of water, which provides the opportunity for water-scarce countries to solve their water shortage problem. However, increased virtual water import increases the dependency on foreign water resources. Particularly countries where the people remember times of hunger, self-sufficiency is often high on the political agenda - for a good reason. Theoretically, consumers can change the world by changing their consumption behaviour towards products that have a lower water footprint. However, consumers lack important information due to insufficient product transparency, which makes it very difficult for consumers to make conscious choices. Further questions to contemplate in this context are: How can free international trade contribute to water footprint reduction? What specific types of trade rules/regulations need to be implemented to promote sustainable water use.