Climate Change

The Critical Face of
Climate Change—Water
The Critical Face of
Climate Change—Water
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Contents
Acknowledgments v
Abbreviations vi
Key Messages vii
1 Droughts, Storms, Floods, and Changing Water Supplies 1

Uneven Impacts Across Time and Space 2
More Frequent Natural Disasters 5
Impacts on Groundwater 6
An Uncertain Future 6
Notes7
2 A Brake on Prosperity and Progress? 9
Growing Populations, Growing Economies, and Growing Water Needs 9
Water Scarcity and Stress Under Climate Change 10
Economic Impacts of Extreme Events 14
The Thirsty Origins of Conflict 14
The Way Forward 15
Notes17
3 Changing Cities and Changing Climate 18
Impacts—Slow and Rapid 19
Hydrological Change Meets Urban Change 20
The Way Forward 21
Notes22
4 Taming the Tempestuous: Managing Transboundary Rivers 24
Cooperation—More Urgent and More Difficult 25
The Challenges of Reaching Agreements 27
The Way Forward 29
Notes32
5 Concluding Comments: Solving the Seemingly Insoluble 33
The Cost of Inaction Is Significant 33
Opportunities for Adaptation Exist but Require Action 34
The Way Forward 35
References 36
Boxes
1.1 Agriculture Climate Change and Water 3
1.2 Energy Needs Water—and Water Needs Energy 4
1.3 Decision Making Under Uncertainty 7
2.1 Climate Change and the Economic Effects of Water Deficits 11
3.1 Jakarta Faces Multiple Urban Water Challenges 20
3.2 Urban Adaptation Strategies Can Be Economically Beneficial 22
The Critical Face of Climate Change—Water iii

4.1 Information Sharing and Pakistan’s Planning Capacity
in the Indus River Basin 27
4.2 Cooperating Along the Niger River: An Economic Mainstay
for Tens of Millions 31
Figures
B1.2 Many of the Cleanest Energy Sources Are Highly Water-Intensive 4
B2.1 Global Water Withdrawals 11
2.1 Climate-Related Impacts on Gdp in 2050 13
Maps
K.1 The Estimated Effects of Water Scarcity on GDP in Year 2050,
Under Two Policy Regimes ix
1.1 The Spatial Distribution in Runoff Will Become More
Uneven to 2050 2
3.1 Yearly Urban Flood Damage by 2080, Billion USD 19
4.1 The World’s Largest River Basins and the Populations They Support 25
4.2 Change in Seasonal Variability of Flows, 2010 to 2040 26
iv The Critical Face of Climate Change—Water

Acknowledgments
This report was prepared by a World Bank team led by Richard Damania and
comprising Stephane Dahan, Lia Nitake, and Jason Russ. Bruce Ross-Larson
was the principal editor. The report has benefited greatly from the strategic
guidance and general direction of Junaid Ahmad (Senior Director, World
Bank). The advice of Laura Tuck (Vice President, Sustainable Development
Practice Group, World Bank) is also gratefully acknowledged.
The report draws on background papers and notes prepared by the follow-
ing: Global Change Assessment Model (GCAM) modelling and analysis was
provided by a team comprising Leon Clarke (JGCRI, Pacific Northwest
National Laboratory and University of Maryland),Kelly Gustafson, (Dept. of
Geographical Sciences, University of Maryland), Mohamad Hejazi (JGCRI,
Pacific Northwest National Laboratory and University of Maryland), Sonny
Kim (JGCRI, Pacific Northwest National Laboratory and University of
Maryland), Fernando Miralles-Wilhelm (ESSIC, University of Maryland)
and Raul Muñoz-Castillo (Dept. of Geographical Sciences, University of
Maryland); Computable General Equilibrium (CGE) modelling and analysis
was undertaken by Roberto Roson (Ca’Foscari University/Bocconi
University); A survey on the economics of water and climate change was
undertaken by Anil Markandya (Basque Centre for Climate Change);
Research on transboundary cooperation was provided by Anjali Basnet
(World Bank) and Jacqueline Tront (World Bank); An in-depth view of tran-
sboundary cooperation in the Niger River Basin was provided by Johan
Grijsen. A survey of urban water management and climate change was pro-
vided by Bernard Barraqué (CNRS-CIRED) and Bruno Tassin (Ecole
Nationale des Ponts et Chaussées); Research on urban water management
and climate change was undertaken by Meleesa Naughton (World Bank).
Christina Leb, Diego Juan Rodriguez, and Marcus Wijnen all from the World
Bank provided expert advice and inputs.
Incisive and helpful peer reviewer comments were received from: Marianne
Fay (Chief Economist, World Bank), Nathan Lee Engle (Climate Change
Specialist, World Bank), Sanjay Pahuja (Lead Water Resources Specialist),
Claudia Sadoff (Lead Water Economist, World Bank), Vijay Jagannathan
(World Resources Institute), Betsy Otto (World Resources Institute), Dominic
Waughray (World Economic Forum) and Louise Whiting (WaterAid).
Invaluable feedback was also received from: Jennifer Sara (Director, World
Bank), Dina Umali-Deininger (Practice Manager, World Bank) and Marie-
Chantal Uwanyiligira (Practice Manager, World Bank).
The Critical Face of Climate Change—Water v

Abbreviations
GDP Gross domestic product

IPCC Intergovernmental Panel on Climate Change
PPP Purchasing power parity
RCP Representative concentration pathway
SSP Shared socioeconomic pathway
vi The Critical Face of Climate Change—Water

Key Messages
Most of the impacts of climate change will be channeled primarily through

the water cycle, with consequences that could be large and uneven across
the globe. Water fuels the most vital sectors of the economy, including agri-
culture, energy, and burgeoning cities. Hence growth and development are
surprisingly thirsty businesses. Climate change, through its impact on water
availability and floods could significantly impede growth prospects. There is
little scientific dispute that many of the key climate risks are channeled
through risks to water resources. Clean energy is often more water-intensive
than more polluting alternatives, so achieving global mitigation goals will
require prudent water management policy.
This is why smart water policy is fundamental to smart climate change
policy. Building climate resilient economies that can develop and grow in an
ever warmer world will necessitate better water allocation—utilizing scarce
water for higher value uses. It will also call for better water proofing of the
economy to enhance resilience, in the more vulnerable sectors of the econ-
omy, especially for agriculture and in the burgeoning cities where large num-
bers of people and higher value assets are exposed to increasing climate risks
such as floods, water shortages and storm surges.
This report highlights these and other major water-related challenges and
the economic consequences that the world will face with climate change. The
focus is on two issues – cities where much of the future population growth is
expected to occur and managing water resources in transboundary basins
that account for about 60 percent of the world’s freshwater supplies. The
report shows that:
•• The impacts of climate change on water will be unequal across the
globe. While net global precipitation rates are not expected to change
significantly over the 21st century, some regions will see increases in fresh-
water runoff, while others will see decreases. Ironically, regions that are
already water-scarce are projected to experience further declines in run-
off. These also happen to be the poorest areas, where growth is the most
fragile. Diminishing water supplies create powerful headwinds that slow
growth and cloud economic prospects. Hydrological changes will have
significant impacts on agricultural productivity as well as broader ramifi-
cations across other sectors of the economy.
•• Conflict often has thirsty origins. Where economic growth is impacted
by rainfall, episodes of drought and floods are often followed by statistical
spikes in violence, civil war, and regime change. In a globalized and con-
nected world, such misfortune cannot be quarantined. Where large ineq-
uities prevail, people move from zones of poverty to regions of prosperity.
This would be a more benign process if it were driven by improving eco-
nomic conditions that gradually “pull” people, rather than by declining
conditions and periodic disasters that “push” them out. The “push” often
The Critical Face of Climate Change—Water vii

creates waves of migration that are difficult to absorb, and can lead to
increased tensions and, in some cases, conflict.
•• Bad water-management policies can exacerbate the effects of climate
change on water, while good policies can neutralize them. In many
water-scarce regions, water is currently being allocated to lower-value
uses. Changing the incentives through policies that allocate water effi-
ciently can redirect it toward higher-value sectors, thus making better use
of diminishing supplies and promoting economic growth.
•• The urban space, where most people and assets reside, is highly vul-
nerable to water stresses and extreme events. Urbanization is occurring
at unprecedented rates, especially in developing countries, and municipal
governments must make the right investments to avoid disasters. Rising
sea levels and storm surges will put large populations at risk, while also
contaminating coastal aquifers and threatening water supplies—if no
action is taken. The required responses are commonly acknowledged but
infrequently enforced. They call for climate- resilient and protective
infrastructure, a wider water resource perspective that includes non
-structural measures such as early warning systems, and incentives to
ensure that land-use regulations are enforced.
•• Climate change will make managing transboundary river basins more
difficult, but also more important. Nearly 40 percent of the world’s peo-
ple are served by transboundary river basins. Managing these basins is
already difficult, with neighboring countries competing for access to the
water they provide. The greater variability that climate change brings
increases the need for transboundary collaboration, but the resulting
uncertainty about likely outcomes also renders cooperation more diffi-
cult. Institutions that build consensus and investments in information
and infrastructure can build trust and convert climate risks to material
rewards.
Water is to adaptation what energy is to mitigation, and the challenges
the world will face in adapting to these issues are enormous. Prudent stew-
ardship of water resources pays high dividends, and the world need not pay
much to neutralize many of the undesirable consequences. If water were allo-
cated to its more valuable uses, growth in the affected economies could be
restored and in some cases even exceed projections.
Key Map 1 shows the difference between two futures—the lower one with
smart policies that incentivize efficient water use, and the upper one with
business-as-usual policies. Although this is merely a projection based on a
stylized model, the differences are striking—particularly in much of Africa
and Asia—and indicative of the power of informed decision-making.
Going forward, there are three overarching global priorities to build the
road to resilience and to achieve the Sustainable DevelopmentDevelopmemt
Goal targets for water.
•• Foster economic growth in water-stressed economies with systems,
institutions, and processes that allocate scarce water to higher-value
uses. The ensuing higher levels of development and wealth also build
viii The Critical Face of Climate Change—Water

key Map 1 The Estimated Effects of Water Scarcity on GDP in Year 2050, Under Two
Policy Regimes
Business
as usual
Efficient
water policies
+6%
+2%
+1%
–1%
–2%
–6%
Source: World Bank 2015a.

Note: The top map shows the estimated change in 2050 GDP due to water scarcity, under a business-as-usual policy regime.
The bottom map shows the same estimate, under a policy regime that incentivizes more efficient allocation and use of water.
greater resilience to climate shocks. Market-based solutions may be effec-

tive in some contexts, with strong safeguards for the poor and for the
environment.
•• Close the considerable infrastructure deficit in developing economies
and cities to build adaptive capacity and enhance resilience. Resilience
is a public good and the path to it requires not just funds but also the
capacity, knowledge, and resources to prepare the right kinds of projects.
This calls for a catalyzing fund, such as a project preparation facility.
The Critical Face of Climate Change—Water ix

•• Start a high-level conversation about policies and innovations at this
opportune time, since political will is necessary for change, to help
ensure water security throughout the 21st century for the entire planet.
Managing conflicting water demands under climate change will be an
unmatched global challenge. The hope is that the political and fiscal space
can be generated to build a more resilient future.
x The Critical Face of Climate Change—Water

© Andrea Borgarello/World Bank/TerrAfrica. Permission required for reuse.
Section 1
Droughts, Storms, Floods, and

Changing Water Supplies
Water is on the frontlines of climate change. It channels the main impacts of
climate change to all aspects of the economy, society, and environment—
through precipitation, storm surges, floods, droughts, rising seas, and
groundwater recharges. Harnessing the productive potential of water and
limiting its destructive impacts are important even in the most advanced
economies.
About 1.6 billion people—almost a quarter of humanity—live in countries
with physical water scarcity, and in just two decades this number may double.
Some regions of the world already suffer from significant water scarcity and
excessive variability. Climate change will only magnify the challenges of
managing such a complex natural resource. Indeed, in a recent survey of
almost 900 leading decision-makers from business, academia, and the public
sector, the World Economic Forum identified water crises and failures to
adapt to climate change as two of the greatest global risks to economic growth
and social stability.1
The Critical Face of Climate Change—Water 1

Uneven Impacts Across Time and Space
The consequences of climate change for the hydrological cycle could be strik-
ingly uneven across time and space. The projections used in this report come
from models that track 235 river basins and span the range of uncertainty—
wet, dry, and normal.2 The results are consistent with several other global
climate models and do not significantly change across emission scenarios.
On a global scale, the total volume of runoff will be relatively stable,
suggesting that the amount of surface water globally remains fairly fixed
throughout the next decades—a consequence of the global water cycle being
a closed dynamic system.3 But the spatial distribution of runoff will become
more uneven (map 1.1). Many regions already experiencing water stress will
experience even more scarcity, including much of the Middle East and North
Africa, Central Asia, and Central America, all of which exhibit a consistent
trend toward diminishing runoff. Other parts of Africa present a larger vari-
ation in runoff, with East Africa showing a significant decline by 2050, while
southern latitudes do not exhibit significant changes until the second half of
the century.
The declines matter most in areas with low baseline runoff and water
availability. For instance, a 100mm reduction in runoff is of less consequence
when average rainfall is 3,000mm a year, as in Colombia, than when it is about
300mm a year, as in Chad.
No major variations in runoff are projected through parts of North America,
the northern parts of Western Europe, and East Asia (excluding China).
Notably, much of the decline in runoff is projected in the least developed
countries, where access to water is most crucial for agriculture and energy
(boxes 1.1 and 1.2).
Map 1.1 The Spatial Distribution in Runoff Will Become More Uneven to 2050
Below –200
–200 to –100
–100 to 0
0 to 100
100 to 200
Above 200
No data
IBRD 41933 | OCTOBER 2015
Source: See World Bank (2015a) for other projections.
2 The Critical Face of Climate Change—Water

Box 1.1 Agriculture Climate Change and Water
Water plays a crucial role in food production, and agriculture accounts for 70 percent of global
water use. Half of the world’s total food supply comes from lands equipped with irrigation,
representing 18 percent of global agriculture land. Elsewhere, crop production is rainfed and
depends on sufficient precipitation to meet evaporative demand and the associated soil moisture
distribution.4
Climate change is projected to reduce agricultural yields and livestock productivity in many
regions, worsening the effect of climate shocks on the aggregate food system.5 Alterations of pre-
cipitation patterns will directly impact rainfed agriculture and in turn affect the availability of the
surface and groundwater on which irrigation systems rely. Impacts on yields in irrigated agricul-
ture are more uncertain. Without adaptation, Asia and Africa could endure particularly severe
yield declines by 2030 in important food-growing areas—wheat in South Asia, rice in Southeast
Asia, and maize in southern Africa. Yield declines of more than 7 percent are projected by 2030
in Africa’s Sahel region. Climate shocks will occur more frequently, and increasingly affect food
production. Though not necessarily attributable to climate change, recent events include the 2009
drought in Mexico, when almost 20 percent of maize production was lost, and the 2010 floods
in Colombia, when 380,000 hectares of crop lands and pastures were flooded and 30,000 head of
livestock died.6
With population growth and changing lifestyles and diets, global food demand is projected
to rise by at least 20 percent over the next 15 years, with the largest increases in Sub-Saharan
Africa, South Asia, and East Asia.7 Over the next several decades, socioeconomic pressure will
lead to increased competition between irrigation needs and demand from non-agricultural sec-
tors. Combined with the effects of climate change, this will reduce the availability and quality of
water resources for food production in many regions. The rural poor could be disproportionately
affected because of their greater dependence on agriculture, their lower ability to adapt, and the
high share of income they spend on food.
A growing diverse spectrum of practices shows that it is possible to simultaneously deliver

higher agricultural productivity and greater climate resilience alongside lower emissions—
the three pillars that form the basis of Climate Smart Agriculture.8 The potentially devas-
tating impacts of water extremes on crop production can be mitigated through appropriate
agricultural-planning schemes, increasing water efficiency at all levels coupled with pricing to
ensure that water use reflects its scarcity value, and managing watersheds to sustain adequate
water availability.
These approaches require strong institutions, technical competencies, and sustainable sector
financing.9 They also require reliable information on water resources and climate risks, along
with monitoring actual water use in agricultural processes. Mechanisms to regulate competing
demands, whether through pricing schemes, access rights, or other instruments, will become
increasingly important to manage water scarcity. Ultimately, trade with water-rich countries
can help to mitigate the local effects of water scarcity on food security, with mechanisms
in place to safeguard countries from food-price volatility (such as the Agricultural Market
Information System, which aims to provide timely, accurate, and transparent information on
global food markets).

Box 1.2 Energy Needs Water—and Water Needs Energy
The interdependence between water and energy exemplifies the critical role of water across
sectors. Cleaner sources of energy are often more water-intensive (such as geothermal, hydroelec-
tric, nuclear, and solar thermal; see figure B1.2), implying that difficult choices will be necessary,
especially where water is scarce.
Water is used in almost all energy generation processes, and energy is required to extract, treat,
and distribute water. Climate uncertainty and variability make the energy sector vulnerable to
limited water supplies. And energy consumption in 2035 is set to increase by 35 percent, requir-
ing 85 percent more water than today.10 True, cleaner energy sources may reduce emissions, but
hydro, solar, thermal, and nuclear power could increase the demand for water. Indeed, many
of the cleanest sources of energy are highly water-intensive. By contrast, investments in energy
efficiency can produce net positive benefits,11 reducing greenhouse gases and water consump-
tion, and these positive effects can be further amplified by dual water and energy-efficiency
investments.
Climate change could raise the costs of power generation. The efficiency, output, and reliability of
thermal power plants are expected to suffer under higher temperatures and less water, two factors
figure B1.2 Many of the Cleanest Energy Sources Are Highly Water-Intensive
1.2
Evaporation
Dry condenser recapture
Hybrid
1 cooling
Coal:
Open loop
closed loop
Blowdown
Carbon intensity (kg/kWh)
recycling
0.8 IGCC
Blowdown
0.6 recycling
Hybrid
Dry condenser cooling
Natural gas:
Open loop closed loop
0.4 Evaporation
Inlet cooling
recapture
High temperature
0.2 Geothermal
Nuclear: Solar Thermal:
closed loop closed loop Hydro-
Photovoltaic
electric
Wind Dry condenser Open loop
0 Gen IV
1.E-06 1.E-05 1.E-04 Dry condenser 1.E-03 Pond 1.E-02
Water footprint (m /kWh)

3
Non renewable sources Coal Natural gas PV Solar thermal
Renewable sources Nuclear Geothermal Wind Hydroelectric
Low current availability High current availability
Source: World Bank 2010.

Box 1.2 Energy Needs Water—and Water Needs Energy (continued)
crucial for cooling (alternative processes, such as dry cooling, typically consume more electricity
and require higher investment costs).
Water shortages can also impair the operation of hydropower plants.12 Low flow rates make it diffi-
cult to maintain current and proposed generation levels. Recent warm and dry summers in Europe
revealed the vulnerability of the power sector to lower water availability and higher river temper-
atures. By lowering the availability of water for hydropower and cooling water for thermoelectric
power, climate change is likely to raise the relative costs of alternative electricity supplies.
Finally, when water becomes scarce, the demand for energy often increases. When surface
flows become unavailable or insufficient, farmers often turn to groundwater extraction, using
energy-hungry water pumps. This can lead to a downward spiral, where water scarcity leads to
increased energy use, which in turn puts a larger burden on water resources.
Temperature changes are especially important in snow-dominated regions,

determining the timing of snowmelt and the seasonality of water availability.
Glaciers are expected to shrink and will store less water for release during
warm periods, making water supplies less dependable. The effects on snow-
fed rivers has been widely documented and publicized.
More Frequent Natural Disasters

Variable precipitation and extreme events are among the more disconcert-
ing aspects of the climate challenge. The toll of water-related extreme events
and natural disasters is high and growing in both frequency and intensity.13
With warmer surface temperatures, seas fuel more violent storms, increas-
ing the risks of floods and droughts. Severe storms, such as tropical and
extra-tropical cyclones, can generate storm surges over coastal seas and
extreme rainfall over land. The frequency of future tropical cyclones
remains uncertain, but most models project higher precipitation rates and
wind speeds.14
Flood hazards are projected to increase in more than half the world’s
regions, although this varies greatly for individual river basins. Disaster
hotspots are more frequent in developing countries, magnified by the
growth of coastal cities, where vulnerability to floods is high. While there is
agreement across models on the broad regional and global trends, there is
uncertainty about impacts at smaller spatial scales. Some models predict
increasing flood hazards in parts of South Asia, Southeast Asia, East Africa,
Central and West Africa, Northeast Eurasia, and South America.15 In con-
trast, floods are projected to be less frequent in parts of Northern and
Eastern Europe, Anatolia, Central Asia, Central North America, and
Southern South America.16,17

Impacts on Groundwater
The planet’s aquifers are a vast natural reservoir, containing about 30 percent
of the available freshwater. In contrast, rivers and lakes account for a meager
0.4 percent.18 Groundwater storage provides a natural buffer against climate
variability; it is thus vital not only for the economy but for a country’s
sustainability.
Climate change is expected to affect groundwater reservoirs, directly
through changes in recharge patterns, and indirectly through increased
demand, especially from irrigation, which today takes 67 percent of global
groundwater withdrawals.19 Groundwater recharge varies considerably,
depending on prevailing climatic conditions. In general, in regions where
total runoff is expected to decline (see map 1.1), groundwater resources will
also decrease.20 Similarly, reduced surface water flows in regions that suffer
from changes in snowmelt may be exacerbated by falling groundwater levels
due to a shorter recharge season.
Climate change also brings risks to the quality of water in aquifers. Regions
with higher temperatures may suffer from greater groundwater salinity as
more water evaporates before it can reach deeper levels. Rising sea levels push
seawater inland, and coastal aquifers shrink as rising demand drops ground-
water tables. Although difficult to quantify, these trends suggest that ground-
water reservoirs will be under the most pressure in regions with declining
runoff, where they will be needed the most.
The increased variability that comes with climate change will inevitably
raise reliance on underground freshwater supplies. If protected and managed
along with surface water, groundwater can do much in adapting to climate
change. Its widespread availability and typically large volumes—and thus long
retention time and slow response—make it more naturally buffered against
seasonal and inter-year variations in rainfall and temperature. Unlike surface
storage, aquifers lose negligible amounts of water through evaporation and
transpiration.
An Uncertain Future
There is considerable uncertainty about long-term climate projections. Global
circulation models have not been designed to project changes in the hydro-
logical cycle, which is treated as just one element of a larger climate system.
And this imprecision is compounded when models are extended to finer spa-
tial scales. Forecasts and projections of extreme events are even more chal-
lenging, reflecting the statistical complexities of projecting extreme events
and the limitations of the data.
Even so, there is broad agreement on the overall global trends across mod-
els. The primary challenge for decision makers is to plan for a more uncertain
and hazardous future, where general trends are known with greater certainty
than the precise nature and timing of the changes. Such circumstances put a
high premium on adaptable and flexible approaches that can respond to new
information and changing circumstances (box 1.3).

Box 1.3 Decision Making Under Uncertainty
Uncertainty is intrinsic to climate change: there is ample evidence that the climate is changing
but less confidence on precisely how fast or in what ways. Nor is there a full understanding of the
social and economic consequences of these changes. Furthermore, the uncertainty about these
issues is not always easily quantifiable in probabilistic terms: climate change brings deep uncer-
tainty rather than known risks.
Despite these challenges, a number of methods have evolved to assist in decision-making under
uncertainty. Uncertainty places a high premium on options that minimize regret across a range
of possible outcomes. The robust decision-making process is one such approach. Applications
begin with an existing or proposed project plan, explore vulnerabilities and sensitivities, and rank
options for their sensitivity to changing conditions. Another is a decision-tree approach that uses
judgments and sensitivity analysis to guide the process through various “decision nodes.” It begins
by assessing the relative performance and vulnerabilities of alternatives, using that information to
describe scenarios, and then applying the information to answer specific questions arising during
the decision-making process.
Other common approaches include “no-regret” measures that yield benefits even if forecasts are
proven to be wrong. For example, controlling leakages in water pipes is a sound policy, regardless
of how the climate changes. Another approach emphasizes reversible and flexible strategies. It is
prudent to keep options open when the future is unknown. Urban planning falls into this cate-
gory. A plan can adapt with the arrival of new information on risks. The option value technique
is one variant that provides a more formal and rigorous way of assuring greater flexibility in
decision-making.
In general, there is no universally accepted general methodology for assessing the significance of
climate risks, and choices are often guided by pragmatism and available resources and information.
Notes
1. World Economic Forum 2015.
2. The Global Change Assessment Model (GCAM) is used as a tool that can track
results from multiple GCMs. See World Bank 2015a for details.
3. Runoff is that part of the water cycle that flows over land as surface water instead
of being absorbed into groundwater or evaporating. The flow is usually attribut-
able to rainfall or snowmelt.
4. Food and Agriculture Organization (FAO), 2018.
5. IPCC 2007.
6. Townsend 2015.
7. Klytchnikova, Sadler, Townsend et al. 2015.
8. Townsend 2015.
9. High Level Panel of Experts (HLPE) 2015.
10. International Energy Agency (IEA) 2012.
11. See http://www.wri.org/sites/default/files/ghg-chinese-power-sector-issuebrief_1.pdf
for information on China’s power sector.
12. IPCC 2014.
13. Arndt et al. 2010.
14. Intergovernmental Panel on Climate Change (IPCC) 2012.

1 5. Jiménez Cisneros, Oki, Arnell, et al. 2014.
16. World Bank 2015a.
17. Jiménez Cisneros, Oki, Arnell, et al. 2014.
18. World Water Assessment Programme (WWAP) 2006.
19. WWDR 4.
20. Jiménez Cisneros, Oki, Arnell, et al. 2014.

Planting rice
© Thomas Sennett/World Bank. Permission required for reuse.
Section 2
A Brake on Prosperity
and Progress?
Growing Populations, Growing Economies,
and Growing Water Needs
In 50 years there may be two billion more people on this planet, and the
world’s population will exceed nine billion. And as countries grow more
prosperous, their thirst for water rises. In many basins, especially in arid
parts of the world, water is already over-allocated and the basins are effec-
tively closed to new users. Even where large water-storage facilities have
been built, demand is so great that storage seldom reaches the desired
capacity. Climate change is set to compound such challenges, intensifying
extremes and accentuating scarcity when runoff declines. So it is no sur-
prise that there are growing concerns about water’s availability in the
future.
The problem is not the adequacy of available water—it is the distribution
and stewardship of water. Much of the world’s water is used inefficiently by
industry, agriculture, and cities; and much of it is wasted without economic

benefit, often with negative environmental impacts. The world uses only
about 10 percent of its freshwater and groundwater, and climate change is not
expected to alter global supplies. Instead, the challenges are regional and eco-
nomic, with growing scarcity in some regions of the world and growing excess
in others.
Water scarcity has commonly been seen as a technical issue. If water is in
short supply in one region, the obvious solution is to obtain it from another
where it is more abundant. But what is obvious may not always be prudent,
and such supply-side solutions face economic and ecological limits. Water
has a low value-to-bulk ratio, which makes its transport across vast distances
expensive and economically wasteful. So with climate change increasing the
hydrological challenges, water management will require greater care and
efficiency, recognizing not only the local needs for water but also its multiple
values—as an economic resource, a human right, and the lifeblood of
ecosystems.
Water Scarcity and Stress Under Climate Change

Could a lack of water act as a brake on prosperity and economic progress
under climate change? A global economic model was developed for this
report to shed light on this issue.1 The model considers two scenarios that
correspond to the Shared Socioeconomic Pathways (SSPs) that have been
developed in the climate-change modeling literature (box 2.1). The SSPs are
highly-stylized depictions of alternative global futures for demography, pol-
icy, the economy, and emissions. One of the scenarios represents a world of
sustainability and optimism with low population growth rates, buoyant per
capita GDP, low emissions, and thus little need for adaptation (SSP1). This is
contrasted with a world of regional rivalry and high emissions that warrant
greater adaptation (SSP3).
The model developed here is not intended to provide forecasts of GDP
growth decades into the future—a seemingly impossible task. Instead, it
seeks to improve understanding of the role of water in the context of a
changing climate in a more populous world. It is based on a simplifying
framework designed to isolate the role of water as a productive input in the
economy (box 2.1).
Increasing water demands resulting from increases in population, coupled
with changes in the water supply, are projected to accentuate shortages in
regions already experiencing some scarcity and water stress. The largest
increases in water deficits are in the Middle East, North Africa, Central Asia,
and parts of South Asia.
With water in short supply, there will be changes in what is produced,
where it is produced, and the efficiency of production and water use. So, even
local changes can be transmitted across the globe.
The impacts will depend on the policy regime, and effects can either be
neutralized or exacerbated by policy responses. The analysis first considers
a business-as-usual scenario where water is managed and allocated as it is

Box 2.1 Climate Change and the Economic Effects of Water
Deficits
Projecting the economy even a month into the future is a complex and hazardous endeavor—
attempting to do so over decades might seem downright imprudent. Future changes in economic
structures, technological innovations, policies, political priorities, and consumer preferences can-
not be known. Nor can the future path of greenhouse gas emissions be predicted with accuracy.
Recognizing the prevailing uncertainties, climate change scientists have constructed highly styl-
ized development scenarios based on narratives termed Shared Socioeconomic Pathways (SSPs).2
The SSPs describe changes in demography, policy, institutions, technology, economy, and life-
styles. The narratives are intended to serve as a general description of alternative futures that
span a wide range of outcomes. The modeling described here considers two extreme scenar-
ios as points of comparison. SSP1, “Sustainability,” represents an optimistic outlook, and SSP3,
“Regional Rivalry,” embodies a rocky road in a world of high emissions, low adaptation, and
limited economic progress.
Climate change will have impacts that encompass all areas of development—ecosystems, human
health, agricultural yields, among others—all of which have been examined in the burgeoning
figure B2.1 Global Water Withdrawals

billion m 3/year
7,000 7,000
Global water withdrawal (billion m3/yr)
SSP3
SSP5
6,000 6,000
5,000 5,000
4,000 4,000
3,000 3,000
2,000 2,000
challenges for mitigation
1,000 1,000
0 7,000 0
08 3/yr)
SSP2
Socioeconomic
20 5
20 0
2015
20 0
20 5
2030
20 5
20 0
2045
20 0
20 5
2060
20 5
20 0
2075
20 0
20 5
2090
21 5
00
2005
20 0
20 5
2020
20 5
20 0
20 5
2040
20 5
20 0
2055
20 0
20 5
20 0
75
20 0
2085
20 0
21 5
00
Global water withdrawal (billion m
0
1
2
2
3
4
5
5
6
7
8
8
9
1
1
2
3
3
4
5
6
6
7
9
9
6,000
20
20
5,000
Municipal
4,000 Primary energy
3,000 Manufacturing
Electricity
2,000
Livestock
1,000 Irrigation
0
Global water withdrawal (billion m0 /yr)
7,000 7,000
20 5
20 0
15
20 0
20 5
2030
20 5
20 0
2045
50
20 5
2060
20 5
20 0
35
2080
20 5
20 0
21 5
00
SSP4
0
1
2
2
3
4
6
7
7
8
9
9
20
20
20
6,000 SSP1 6,000
5,000 5,000
4,000 4,000
3,000 3,000
2,000 2,000
1,000 1,000
0 0
20 5
20 0
2015
20 0
20 5
2030
20 5
20 0
2045
20 0
20 5
20 0
20 5
20 0
2075
20 0
2085
20 0
21 5
00
20 5
20 0
2015
20 0
20 5
20 0
20 5
20 0
2045
20 0
20 5
20 0
20 5
20 0
2075
20 0
20 5
2090
21 5
00
0
1
2
2
3
4
5
5
6
6
7
9
9
0
1
2
2
3
3
4
5
5
6
6
7
8
8
9
20
20
Socioeconomic challenges
for adaptation
Source: O’Neill and others 2015.

Box 2.1 Climate Change and the Economic Effects of Water
Deficits (continued)
modeling literature. The focus here is on the largely overlooked issue of the economic impacts of
climate change through changes in water supplies.
Since economic growth spurs water demand in rough proportion to the income it generates, there
are legitimate concerns that expanding water deficits in some regions could constrain growth. To
explore this issue, projections of water supply from a range of hydrological models underlying
the projections in map 1.1 are incorporated in a conventional Computable General Equilibrium
model for the SSP 1 and SSP 3 scenarios.
The analysis considers economic impacts under various broad policy regimes. The first is “busi-
ness as usual,” where water allocation policies remain largely unresponsive to changing levels of
scarcity, though there are exogenously driven improvements in water efficiency. This is modified
by allowing for increasing shifts in allocation within and between industries to reflect the implicit
value (shadow price) of water in the economy.
The models are not designed to forecast the future. As with all modeling exercises, the analysis
is based on a litany of assumptions, driven by data availability and computational constraints.
The results cannot be interpreted as forecasts of future changes in GDP. Instead, the exercise pro-
vides projections, not predictions and forecasts. Nevertheless, such modeling exercises serve to
improve understanding of the magnitude and direction of changes and to project whether alter-
native policies can either accentuate or mitigate the adverse impacts.
Regardless of which scenario is considered, the results demonstrate that a scarce water supply
remains a significant obstacle to growth and development in the context of a changing climate.
They also forcefully illustrates that prudent management of water resources is likely sufficient to
neutralize some of the undesirable growth impacts.
under current regimes. In this scenario, water allocation does not respond
to the growing shortages and changing comparative advantage of different
sectors across the globe. The resulting changes in GDP are shown in the
lower bounds of figure 2.1, which presents the worst projected outcome of
SSP1 and SSP3.3
The economic consequences are highly unequal with the worst effects in
the driest regions. The expected global damages are small relative to the
expected global GDP in 2050: about 0.37 (SSP1) to 0.49 (SSP3) percent of
global GDP in that year. But the global loss is a highly misleading estimate
because, as the lower bounds of figure 1 illustrate, significant variations exist
between regions. Western Europe and North America, where much global
GDP is produced, experience negligible damages in most scenarios. The bulk
of losses are in the Middle East, the Sahel, and Central and East Asia, and the
magnitude of losses is largely driven by the level of the water deficit. In the
most arid regions, the projected percentage losses are large and imply that
baseline growth projections cannot be met.

Figure 2.1 Climate-Related Impacts on Gdp in 2050
15
Range of variation in GDP (%)

11.5
10
5 3.32
1.46
0 –0.01 –0.82 0.38 0.09
0
–0.02 –0.02 –0.49
–1.98
–5 –6.02
–7.08 –7.05
–10
–11.7 –10.72
–15 –14
North Western Middle Sahel Central Central East Southeast World
America Europe East Africa Asia Asia Asia

Note: The figure shows the range that climate changes effects on water will have on GDP for selected
regions. It incorporates effects from different growth scenarios (SSP1 and SSP3) as well as different policy
scenarios (business-as-usual policies and policies that encourage better water allocation).
Other impacts are less visible, such as changes in trade patterns that cloud
economic prospects in subtle ways.4 The projections suggest that trade
becomes distorted when countries in arid areas continue to produce water-
intensive goods at ever-increasing financial and social cost, contrary to their
natural comparative advantage.
But there is a silver lining. When governments respond to water shortages
by boosting efficiency and allocating water to more highly-valued uses, losses
decline dramatically and may even vanish. This is illustrated in the upper
bounds of changes in figure 2.1 (note that the larger value between SSP1 and
SSP3 is displayed). The overarching message is that the outcomes are driven
by policy decisions, suggesting that prudent water-management policies can
do much to secure growth, making people richer and thus more resilient to
climate stresses. This often, but not n ecessarily, requires using market forces
and prices to guide water allocation decisions.
The implication is that the benefits to managing water resources as a valu-
able economic resource are considerable. Water pricing can do much in this
regard. Even if only a part of water use is allocated based on a price that brings
supply and demand into balance, many of the problems of climate and
socio-economic scarcity can be resolved.
Water that is provided free promotes and condones overuse and waste.
Countries that price water more cheaply also consume it more freely.
Often, the most inefficient users of water are found in countries with the
highest levels of water stress, where incentives are also lacking for prudent
water use. More efficient water pricing, coupled with policies that safe-
guard the most marginal members of society, can therefore ensure that
sufficient water is conserved and guarantee enough water to meet basic
needs. As the Australian experience has demonstrated, market-based solu-
tions, when complemented with policies that secure needed allocations for
the environment, can do much to assure greater efficiency of water use,
higher levels of equity in its allocation, and long-term sustainability of the
resource base.

Economic Impacts of Extreme Events
Variability and rainfall extremes are also hard to manage. Whatever the pro-
jected frequency and intensity of floods and droughts, their economic impacts
will almost certainly increase as more people and assets move to areas of
greater climate vulnerability, particularly to cities in coastal regions. In the
past, droughts have been the deadliest, claiming the most lives. But with bet-
ter disaster responses, the toll on human lives is declining. Floods, by con-
trast, are exacting a growing toll. Between 1960 and 1990, floods in Europe
destroyed assets worth about $7 billion. If the trend continues—and trends
may change—the damage under most climate scenarios is expected to double
in Europe by 2080.5
The relative economic cost of extreme events is highest in middle-income
countries. India and China are projected to have the largest urban flood dam-
age by 2080; the main driver is the huge increase in urban assets in vulnerable
areas exposed to hazards.6
Some extreme events directly linked to the hydrological cycle can have
economic effects that are much greater and persist longer than expected.
A recent study used meteorological data to reconstruct every country’s
exposure to tropical cyclones during 1950–2008.7 It finds that national
incomes decline after a disaster and do not recover within 20 years. This
conclusion holds for both developed and developing countries. Income
losses arise from a small but persistent suppression of annual growth
rates spread across the 15 years following a water-based disaster. The
results suggest that future cyclone activity would result in costs of about
$10 trillion larger than previous estimates (in discounted present value).
They also point to a path for actionable prescriptions that must be taken as
a priority.
The Thirsty Origins of Conflict

Throughout history, humans have waged war to gain access to natural
resources, including land, minerals, and even water. The first recorded water
war occurred more than 4,500 years ago in modern-day Iraq, near the conflu-
ence of the Tigris and Euphrates rivers. Fought between the neighboring
ancient city-states of Lagash and Umma, the conflict erupted when Lagash
diverted the water supplies of its neighbor. History records other instances of
violence over water. Drying events are thought to have fueled tranboundary
invasions in ancient China and political instability in historical Egypt.8
Colonial conquests were often driven as much by a quest for territory, as nat-
ural resources.
Though much has been conjectured about a future of resource wars, today
states rarely, if ever, fight over water alone. Arguably, this should come as no
surprise. Wars are a costly endeavor with uncertain consequences, which ren-
ders dialog and cooperation a more attractive way to resolve disputes. As a
result, cooperation and dialog over transboundary water resources is more

common today than Malthusian resource conflicts. This is not to deny that
water scarcity could act as a conflict risk multiplier in some cases. But more
typically when disputes arise, they are mediated in ways that facilitate peace-
ful resolution.
While resource wars between countries may be uncommon today, tensions
over water resources within countries are much more widespread. Episodes of
drought and floods are often followed by spikes in violence, civil war, and
regime change in developing countries. The strongest evidence is from Sub
Saharan Africa where civil wars tend to erupt following periods of low rain-
fall9. In rural Brazil land invasions are more common during drier years with
more intense conflict in areas where land ownership is more unequal.10 In
India property related violence increases by about 4 percent when there is
below average rainfall and communal riots become more frequent following
episodes of floods.11
There are sound economic reasons to expect rainfall anomalies to cascade
into violence. Droughts and floods typically generate poverty and accentuate
deprivation especially in countries where agriculture remains an important
source of employment. Poverty in turn alters the calculus of participating in
conflict. Combatants have less to lose when customary sources of livelihood
have been dwindled by droughts or floods, and they have more to gain by
participating in violence that might beget a better future. The conflict vulner-
ability of a country to rainfall shocks typically depends upon the rainfall sen-
sitivity of its income and its ability to provide protection and alternative
sources of employment.
Rainfall shocks ignite conflicts in other ways too. Evidence from Africa
suggests that by straining government budgets, their capacity and popularity
decline, making regime change more likely.12 Migration within and between
countries, which tends to increase in areas facing water shocks, remains a
potent and widely documented source of friction between locals and new
arrivals across much of the world. In some cases this has the potential to erupt
in conflict.
The increases in water variability and expanding water deficits that are pre-
dicted to occur due to climate change have the potential to increase the pro-
pensity for conflict. Building resilience to the more extreme precipitation
events of climate change will become a more urgent priority especially in
rainfall vulnerable areas.
The Way Forward

Water Allocation
Getting the distribution of water right will go a long way toward decoupling
water use from economic growth. In many regions, water resources have been
over-allocated, and climate change will compound the scarcity. If but a small
part of water use were allocated to bring supply and demand into balance,
many anticipated problems of climate and socio-economic scarcity could be

resolved. Today, the marginal value of water for different uses varies greatly
because the prices paid by industry, agriculture, and residential users are often
unrelated. For example, in Arizona, water prices vary from $27 an acre-foot for
agriculture to $3,200 an acre-foot for urban uses—so there is much suppressed
demand in the cities.13 While some of the gap could be explained by the differ-
ence in the nature and quality of the product delivered, most of it is a function
of institutions that do not allocate water on the basis of economic criteria.
The gains from addressing scarcity through markets, prices, or other eco-
nomic instruments would be immediate. But the task will not be easy. The
past weighs heavily on the present, and those who benefit from current sys-
tems naturally resist change. That calls for raising awareness about the costs
and benefits and about transparent and equitable systems for compensation.
A fundamental rethinking of water rights and appropriate governance
mechanisms is also needed. The focus could be on how water rights could be
used not as a declaration of inviolate ownership, but as a flexible instrument
to resolve water conflicts at the community, basin, regional, national, and
global levels, while still protecting the needs of the poor. Adequate manage-
ment and regulation—particularly of common groundwater aquifers—is
essential to ensure that there is a mechanism for efficient allocation across
water sources and uses. In this context, the emergence of sophisticated tech-
nologies to monitor, measure, and disclose water “performance” using objec-
tive metrics is an opportunity not yet realized.
Water Proofing Through Investment

Investments in adaptation are also essential, especially when mitigation is
limited. Adaptation will require both private and public action, with the
public initially at least as large as the private. In developing countries, the
infrastructure gap for water storage, flood control, and energy supply is
massive. Compounding the lack of infrastructure is inadequate investment in
maintaining costly assets. Short-term savings on operations and maintenance
are a false economy and can be counterproductive if they shorten the life of
the asset. This is especially important in the water sector, where assets are
expensive, capital-intensive, and long-lived (can last more than 100 years).
Policy Choices Under Uncertainty

But where uncertainty is high, as in projecting extreme events, it is wise to
leave options open (see box 1.3). Sinking all adaptation efforts into a single
and costly project can prove wasteful, if the anticipated climate future does
not eventuate. No-regret measures that provide benefits under a range of out-
comes increase flexibility, as do modular approaches that can tailor responses
to evolving circumstances. Soft approaches, such as economic instruments
and climate-informed plans, can be especially useful in such contexts. Some
studies suggest that if Australia had introduced adequate water tariffs, water
demand might have been managed to a level that no longer required the
investments in costly desalination plants that now risk lying idle due to the
expense of the water they produce.14

Notes
1. Details are in World Bank 2015a.
2. O’Neill et al. 2015.
3. In general the differences in outcomes between the two SSPs are negligible, with
the lower bound representing SSP1 in most but not all cases, as climate impacts
differ across regions (see World Bank 2015a for the full set of figures).
4. These are discussed in the technical volume that accompanies World Bank 2015a.
6. EM-DAT database.
7. Hsiang and Jina 2014.
8. Inter alia Bai, Ying, and James Kai-sing Kung 2011 and Chaney 2013.
9. Miguel et. al. 2004.
10. Hidalgo et. Al. 2010.
11. Inter alia Sarsons2015 and Blakeslee, David, and Ram Fishman2013.
12. Brückner, and Ciccone 2011.
13. Olmstead 2013.
14. Grafton and Kompas 2007; OECD 2013.

Rehabilitating Jakarta’s waterways to mitigate flood risk
© Farhana Asnap/World Bank. Permission required for reuse.
Section 3
Changing Cities
and Changing Climate
As the world continues to urbanize and the demand for water in cities increases,
urban residents—particularly the urban poor—become more vulnerable to
the effects of climate change. One in four cities worldwide already experiences
water insecurity.1 Climate change adds to demographic and supply-chain pres-
sures on cities, leading to fears of a perfect storm in which water shortages
combine with periodic climate disasters to produce major social and economic
disruptions.2 The social and economic consequences of climate shocks on cit-
ies can be particularly devastating in low- and middle-income countries.3 The
annual global costs of adaptation for 2010–50 are estimated to range between
$71.2 billion and $81.5 billion, depending on the climate scenario, and urban
areas could bear more than 80 percent of these costs.4
In cities, as elsewhere, the effects of climate change are mediated largely
through water. The increasingly common pattern of fixed water supplies and
rising demands is gripping cities across the world. Flooding events can

degrade the quality of surface and groundwater, cause the loss of human lives
and property, and disrupt the urban economy. Heat waves and variable pre-
cipitation reduce the availability and quality of water while increasing
demand. Rising seas reduce groundwater availability due to salt-water intru-
sion and can permanently damage urban infrastructure.5
Impacts—Slow and Rapid

The population affected by river floods is growing substantially, driven by
both climate change and socio-economic change.6 The additional urban flood
damages resulting from climate change are projected to reach between $0.7
and $1.8 trillion by 2080 (map 3.1).7
In 2005, about 40 million people and $3 trillion in assets were exposed to
risks of catastrophic damage from sea-level rise and urban floods. By 2070,
the risk-exposed population will grow to roughly 150 million, with
$35 trillion in assets at risk.8 That assumes a half-meter sea-level rise (the
current mid-range IPCC estimate) and accounts for urban population
growth and coastal subsidence. Sea-level rise can multiply the impacts of
storms by creating devastating tidal surges, often aggravated by land subsid-
ence caused by urban construction, groundwater extraction, and the altera-
tion of sedimentation dynamics.9 Jakarta shows what these threats could
mean for coastal city populations (box 3.1).
Cities are also vulnerable to slow-onset droughts, whose frequency and
intensity are expected to increase with climate change in many regions.10
Map 3.1 Yearly Urban Flood Damage by 2080, Billion USD
Above 100
10 to 100
1 to 10
0 to 1
–1 to 0
Below –1
No data
IBRD 41934 | OCTOBER 2015
Source: Based upon World Bank 2015a.

Note: Estimates are for RCP scenario 8.5; dollars are at 2005 PPP exchange rates.

Box 3.1 Jakarta Faces Multiple Urban Water Challenges11
The city of Jakarta in Indonesia suffers from many water-related issues, including chronic flood-
ing every year and extreme floods every few years. The 2007 flood, reaching 25 percent of the city,
caused financial losses of $900 million. Despite these severe challenges, it still attracts a quarter of
a million new residents every year.
Flooding has been blamed on deforestation in the nearby mountains, but the main causes lie
closer to home: wetlands and rice fields have been paved over in defiance of urban-planning
regulations. Drainage canals are blocked by garbage, the result of an ineffective disposal system.
And while the city confronts a sea-level rise of 60 cm or more over this century, unregulated and
unsustainable groundwater extraction has already sunk coastal areas of the city by up to 4.5 m
over the past 50 years. Northern parts of Jakarta are predicted to be 4 to 5m below sea level within
20 years, and floods would affect up to 5 million people. But Jakarta is not alone—this situation is
shared by Bangkok and many other coastal or growing cities.
Droughts may reduce the availability of water for municipal and industrial
use, energy (due to cooling water restrictions), and food (resulting in reduced
crop yields). They may also contribute to heightened urban migration pat-
terns and localized conflicts over scarce water. In California, the average
annual cost of urban water scarcity (in forgone benefits) is $1.6 billion a year.12
Hydrological Change Meets Urban Change

The world is urbanizing at a rapid pace, and the most dramatic transforma-
tions are in low- and middle-income countries. By 2050, the number of urban
dwellers is projected to grow by 2.5 billion people, with nearly 90 percent of
the increase in Asia and Africa. Almost 70 percent of the world’s population
is forecast to be urban, up from 30 percent in 1950.13
The combined effects of rapid urbanization and climate change pose
unprecedented challenges to water security. Without adequate urban planning,
regulation, and development capacity, cities often expand through informal
settlement into flood-prone areas, where dwellers are deprived of municipal
water, sanitation, and flood protection. Economically marginalized popula-
tions are the most directly exposed to extreme events, while health impacts
reverberate across entire cities as flooding contaminates water supplies, over-
whelms treatment facilities, and spreads pollution from sanitation facilities.
With population growth, and to less extent climate change, the number of
urban dwellers who live with seasonal water shortages is forecast to grow
from close to 500 million people in 2000 to 1.9 billion in 2050.14 This estimate
may be a lower bound, since increasing competition between agricultural,
industrial, and municipal water users will further strain cities. Urban popu-
lations are set to more than double by 2050 in the Middle East, North Africa,
and South Asia. But modeling for this study shows that reduced freshwater

availability and competition with other uses will reduce municipal water con-
sumption per capita between 31 percent and 66 percent compared with the
situation in 2015 under the SSP3 scenario (or 15 percent and 47 percent
under SSP1).15
The Way Forward

Building urban resilience to water stress requires a wider water-resource
perspective. Projected changes in water availability during the lifetime of
major infrastructure projects can no longer be based on historical trends.16
To improve the robustness of system design, cities need a clear grasp of the
available surface-water resources at basin level, the characteristics of local
aquifers, and the associated climate-related risks. They can manage uncer-
tainty and variability by diversifying water sources (if needed, with trans-
fers from adjacent basins) and improving water utilities’ emergency
preparedness. They should increase water-storage capacity and manage
groundwater not only as a substitute for surface water, but also as insurance
against droughts.17 They should reduce water demand through pricing,
reducing water losses, reusing stormwater and greywater, and heightening
awareness.
Adaptation to flood risks can reduce both the scale of events and their
impacts on the city. The former can be achieved through improved land plan-
ning within the city and at basin level, balancing densification and impervi-
ous areas. It can also rely on a combination of innovative techniques to
limit the intensity of runoff. These can include sustainable drainage systems
(retention basins, filter drains, porous pavement, rain gardens integrated with
the urban landscape) and green-roof practices.
To mitigate the impacts of flooding, early warning systems can comple-
ment structural measures, such as drainage systems and dikes, and more
restrictive enforcement of land use in flood-prone areas. Those structural
measures need to take into better account a range of climate uncertainty
in their design. Sustainable solid-waste management is essential to pre-
vent clogging of drainage systems and catastrophic consequences from
otherwise-benign rain events. When impacts are inevitable, insurance or
safety nets should be considered, such as the Pakistan Citizen Damage
Compensation Program.
To realize its full potential, climate-resilient urban water planning
requires a holistic approach combining interventions in physical infra-
structure, ecosystems, governance structures, and financial systems (see
box 3.2). As much as possible, planning for the water sector should be
undertaken jointly with other sectors, such as land use, housing, solid
waste, energy, and transportation—underpinned by a clear understanding
of the city-watershed nexus. This would be a deep shift from the tradition-
ally fragmented management of urban development and services.
Such an approach, referred to as integrated urban water management,
functions best when collaboration is strong among the state, local, and

Box 3.2 Urban Adaptation Strategies Can Be Economically
Beneficial
Few studies have rigorously analyzed the economics of urban resilience to water-related crises.
But whether in Casablanca,18 Copenhagen,19 or Bangkok,20 adaptation programs are less expen-
sive than the damages they avoid.
Inexpensive strategies with high benefit–cost ratios could be priorities. They include early warn-
ing systems and more generally measures to improve access to flood-risk information, which
can help urban planning, penalize investors supporting real estate development in unsafe areas,
and facilitate the development of insurance markets. While the costs and uncertain benefits of
adaptation may complicate the task of decision makers, many measures that contribute to climate
change mitigation are also highly relevant in a pro-poor sustainable urban policy agenda, regard-
less of climate issues.
The paradigm shift that climate change imposes on cities will require large-scale political, tech-
nical, and financial mobilization. Three factors will be instrumental to achieving long-term
water security objectives in cities. First is enhancing awareness among high-level policy mak-
ers about climate risks and the availability of economically sound adaptation options. Second
is developing knowledge sharing and collaboration platforms for stakeholders managing or
affecting the urban water cycle. And third is assuring adequate investment funding from mul-
tilateral development banks, governments, and the private sector. It will also be essential to
support decision-making and demonstrate project relevance with robust economic analysis
applicable to complex adaptation packages that include non-structural measures and cross-
sectoral approaches.
municipal governments in the metropolitan region, given their different

purviews over the necessary interventions. Its application can also be facil-
itated in institutional settings by integrating the administration of key
urban services (water supply, sewerage, drainage, wastewater treatment,
solid-waste management, and slum upgrading) and water-resource and
land-use planning (ecological zoning, protected areas, and public spaces).
This should be backed by sustained analytical work, data, and information
on the provision of urban services and hydrologic regimes to inform
decision-making and monitoring—underpinned by strong governance,
clear institutional mandates, and greater capacity in both the urban and
the water sectors.21
Notes
1. McDonald, R. I., K. Weber, J. Padowski, et al. 2014.
2. Beddington 2015; US Department of Defense 2014.
3. Revi, Satterthwaite, Aragón-Durand, et al. 2014.
5. IPCC 2007.

6. T. Luo et al. 2015.
7. Organisation for Economic Co-Operation and Development (OECD) 2015,
based on Winsemius and Ward 2015.
8. Nicholls et al. 2008.
9. Tessler, Vörösmarty, Grossberg, et al. 2015.
10. Revi, Satterthwaite, Aragón-Durand, et al. 2014.
11. World Bank 2015b.
12. Jenkins 2003.
13. United Nations Department of Economic and Social Affairs (UN DESA) 2014.
14. McDonald, Green, Balk et al. 2011.
15. Based on UN DESA 2014 and CGE model calculations in World Bank 2015a.
16. Milly, Betancourt, Falkenmark, et al. 2008.
17. Koundouri and Groom 2002.
19. City of Copenhagen 2011 and City of Copenhagen 2012.
20. Conable 2009.
21. SWITCH 2002.

Victoria Falls, between Zambia and Zimbabwe
© Vadim Petrakov/Shutterstock. Permission required for reuse.
Section 4
Taming the Tempestuous:

Managing Transboundary
Rivers
Almost 40 percent of the world’s people reside in 275 transboundary river
basins that span almost half of the Earth’s land surface (map 4.1).1 Accounting
for 60 percent of the world’s freshwater flows, transboundary rivers are
ubiquitous, though much of their potential remains untapped. By supplying
drinking water, irrigating crops to boost yields, supporting industrial
processes, and providing trade and transportation routes, rivers are essential
to economic development. A further 269 groundwater aquifers also are
shared, but their extent and contribution to global water supplies has not
been accurately estimated.
Shared water resources are best governed as an integrated whole. Planning
across an entire river basin yields greater flexibility in determining how ben-
efits can be captured and risks reduced. Hydrological risks such as floods and
droughts can be more cost-efficiently controlled by taking actions along the
river where they are most effective.

Map 4.1 The World’s Largest River Basins and the Populations They Support
Cooperation—More Urgent and More Difficult

Climate change will alter the calculus of cooperation, increasing the need for
transboundary collaboration but, paradoxically, also rendering cooperation
more difficult. With climate change comes greater uncertainty and seasonal
variation of flows (map 4.2). So, agreements will need to be effective and
robust across a range of climate possibilities far beyond what is currently in
place. This takes negotiations into the realm of conjecture and disagreement
about likely future outcomes, which makes negotiations and cooperation
more complex and difficult.
Under a changing climate, three main benefits would accrue from trans-
boundary agreements: enhanced resilience, greater opportunities for mitiga-
tion, and more effective management.
Enhanced Resilience
Basin-wide coordination is more effective in promoting resilience than a patch-
work of unilateral policies. Since climate impacts are typically shared within a
river basin, there are economies of scale in building regional approaches to
resilience. A large dam, for instance, is considerably cheaper to construct and
operate than several smaller dams of the same total capacity. Transboundary
cooperation enables countries to evaluate tradeoffs and optimize benefits, allow-
ing for better storage, regulation, and allocation of water resources to adjust to
climate shocks. Regional collaboration allows countries to choose the best loca-
tion for the desired infrastructure. This might include large dams for water stor-
age or transport and delivery infrastructure such as canals, dikes, and inter-basin
transfer schemes, which are essential to adapting to variable water flows. Also
possible are cost-sharing arrangements for large and expensive water infrastruc-
ture, allowing countries with greater solvency to finance these structures.2

Map 4.2 Change in Seasonal Variability of Flows, 2010 to 2040
Projected change in seasonal variability

1.3x or greater decrease
1.2x decrease
1.1x decrease
Near normal
1.1x increase
1.2x increase
1.3x or greater increase
No data
Source: World Resources Institute 2015.

Note: The image shows projected changes in renewable surface water seasonal variability under a business-as-usual scenario
using the World Resources Institute spatial tool (for RCP8.5 & SSP2).
Consider hydropower development in Bhutan, which is well endowed with

hydropower potential but lacks the finances to develop such infrastructure
over an extended period. Meanwhile, its downstream neighbor India endures
vast power deficits, especially during the drier months. Through a mutually
beneficial agreement, India finances and builds much of the hydropower
potential in Bhutan and purchases the electricity at predetermined prices.
Since India is both the lender and the buyer, this setup curbs its market power
and both parties gain—India receives power to meet its growing energy
demand and Bhutan earns revenue.
Greater Opportunities for Mitigation

International rivers could be pivotal in helping countries meet their global
mitigation goals. Water is the vital input in the supply of clean lower-carbon
energy. It is required most obviously for hydropower generation, but also
for other sources of low-carbon energy such as nuclear, thermal, solar, and
geothermal. Lower-carbon options typically require more water, which
determines where sources are located. Often this implies that power gener-
ation and other demands on water (such as irrigation) cannot be simultane-
ously satisfied. Building the clean-energy potential that resides in these
rivers requires cooperative action and compromise for the uses and benefits
sacrificed.

More Information for More Effective Management
It is difficult to manage what is not measured. Information on the sources and
uses of water is often sparse and of varying reliability.3 Information becomes
especially valuable when uncertainty and variability are high (box 4.1). Where
hydrological boundaries do not coincide with national boundaries, country
data can provide only a subset of the information to assess and mitigate cli-
mate risks, especially in downstream countries. Improved information
exchanges bring numerous benefits under climate change. Early warning
about disasters can save lives and property. Knowing how water flows are
changing can allow countries to adjust their use patterns. And understanding
the precursors of drought can minimize losses to farmers.
The Challenges of Reaching Agreements

Reaching a cooperative agreement over river governance is no easy task.
The greatest challenge lies in the incentives to cooperate—countries differ
in their priorities and will benefit from cooperation in differing ways, so the
willingness to collaborate will vary across a river basin, reflecting expected
economic and political gains and losses. This is further complicated by
Box 4.1 Information Sharing and Pakistan’s Planning Capacity in

the Indus River Basin
Pakistan is highly dependent on water from the Indus River, which derives approximately
18 percent of its flow from glaciers and snowmelt in the Himalayas cutting across India, China,
and Nepal. The rest of its flow is from monsoonal rainfall in India and Pakistan. As the climate
changes and the glaciers recede, the sources of water in the Indus system are expected to change in
ways that are difficult to predict. Simple information on glacier melt, flow patterns, and snowpack
would enhance Pakistan’s ability to operate and plan its hydropower, irrigated agriculture, and
municipal water supply systems.
Pakistan is vulnerable to the El Niño effect, so hydrological and meteorological data are critical
to its ability to predict and plan for the intensity of the El Niño cycle and to reduce the accompa-
nying humanitarian and economic risks. Without a formal agreement, the upper riparian coun-
tries have limited incentive to share such information. The agreement that governs water sharing
between India and Pakistan is the Indus Water Treaty, in place since 1960.
Strong institutions can promote cooperation among riparians and facilitate information sharing.
In the Indus Basin, the joint commission in the form of the Permanent Indus Commission has
played an invaluable role in the Indus Water Treaty’s implementation by managing questions and
issues that arise as the two countries continually develop their shared river and ensure compliance
with the treaty. In fact, it is in large part due to the commission’s overwhelming success to negoti-
ate, monitor, and manage that stable cooperation for water has existed despite two wars between
the two countries since its inception.

tradeoffs between countries and between sectors within countries. It also
requires overcoming legal differences, political obstacles, and boundary dis-
putes. Climate change only compounds such challenges as high transaction
costs, inadequate institutional structures, and enforcement and compliance
difficulties.
The geography of a river confers asymmetric bargaining power between
countries—often, the upstream riparian has an advantage, and its water use
affects the quantity and quality that flows to downstream users.4 Coordinating
among multiple countries—with different legal traditions, institutional struc-
tures, and economic priorities—increases the complexities and costs of nego-
tiation. That is why an overwhelming 86 percent of transboundary agreements
are bilateral, even when the rivers span more than two countries.5
Uncertainty and variability make the future benefits and costs of trans-
boundary agreements more unpredictable and agreements even harder to
achieve. While some uncertainty is common to all water-related investments,
climate change introduces “deep” uncertainty. In extreme cases when there is
uncertainty about whether precipitation will rise or fall, there is a risk of
investing in and building the wrong structures. For instance countries may
disagree on whether to sink funds into building protection against floods
(dikes) or droughts (storage).
Even when climate models converge on the direction of change, the magni-
tude of that change is never certain. There may be disagreement on the spec-
ifications of the structures that need to be built. And since rivers can change
their course, there are further risks of building a long-lived asset, such as a
dam, in the wrong place. The timing of construction matters as well—an
expensive structure built too soon creates a fiscal burden as funds are diverted
from other urgent needs, such as food, health, or education. If it is built too
late, the damage would have already occurred.
Variability causes further difficulties in enforcing transboundary agree-
ments. Water sharing is an intrinsically competitive zero-sum game—more
water allocated to one country usually implies less for another. An upstream
country that supplies headwaters has little natural incentive to participate in
water-sharing negotiations since it stands to lose supplies. And if a country
were to renege on an agreement—perhaps because water supplies are outside
the predicted range, as would occur with climate change—no overarching
authority could enforce the covenant or determine what might be a reason-
able deviation in the new circumstances.
Even when there are significant prospective benefits from cooperation, this
does not imply that the parties will submit to an agreement. Experience in
international trade and other realms of global agreements forcefully demon-
strates that the many impediments and transactions costs of agreements
must be addressed to garner sufficient support for an agreement. Agreements
are most likely to be reached when there are impartial monitoring s ystems, cred-
ible enforcement mechanisms, dispute-resolution systems, and verifiable sys-
tems to compensate those who do not benefit from the agreement.
International water law and treaty practices are at an early stage of
development and lack the authority and mandate to address these issues.

So agreements need to be structured in ways that are self-enforcing.
International systems have made some progress in recent years. The United
Nations Watercourses Convention entered into force in August 2014, 17 years
after its adoption by the UN General Assembly. This global framework for
transboundary cooperation attempts to standardize the criteria by which all
countries with international river basins are to abide.
The Way Forward

There is no simple blueprint for promoting cooperation. Future approaches
must align incentives for cooperation and address the constraints that pre-
clude agreements. Where information is deficient, investments in data collec-
tion and sharing may be required to reduce vulnerability and enable better
planning. Investments in hydrological infrastructure can reduce uncertainty
by providing a way to jointly manage increasingly variable water flows. And
institutional reform and development would be warranted when there is a
need for enforcement and the flexibility that a changing climate demands. But
nothing matters more than the underlying incentives that determine the
expected benefits and costs of participating.
Investing in Information, Infrastructure, and Institutions

Collecting and sharing information is a quick win and a useful first step for
building trust toward further collaboration. Access to climate data is key to
building climate resilience along the basin, making this shared objective a
useful point of entry for transboundary cooperation. Agreements could
begin with protocols for data sharing, synthesis, and dissemination.
Cooperation in warning systems and flood and drought protection exem-
plify engagements that bring shared benefits, with few political downside
risks.
For example, in the Guarani aquifer shared by Paraguay, Uruguay,
Argentina, and Brazil, increasing water withdrawals have been producing
hotspots of overexploitation and contamination, while recharge rates are pro-
jected to decline with climate change. Information sharing on water with-
drawals and water quality was one of the primary drivers for formalizing
cooperation through an agreement by the four countries to promote more
sustainable water use.
Institutions may need to be strengthened and where uncertainty is high,
robust options that remain effective under a wide range of circumstances
should be prioritized. Uncertain climate impacts are best managed with water
allocation mechanisms that provide flexibility around flow variability, and
one such approach is a water-sharing rule based on percentages of flow. Since
no allocation rule is perfect, a credible grievance-resolution mechanism is
essential. An example is the Permanent Indus Commission, which has
resolved disputes in ways acceptable to all parties since its formation in the
1960s, despite the differences between countries.6

Aligning Incentives
Building consensus when gains are unequal is a challenging task. Water allo-
cation is an intrinsically competitive process that requires some parties to
relinquish rights and resources to others, in return for some compensation.
Because the incentives to participate differ, they will need to be realigned to
make participation sufficiently attractive. Self-enforcing agreements that
yield reciprocal benefits can take a variety of forms. In some cases, direct
financial transfers such as loans or payments for service may be appropriate.
The India–Bhutan hydropower arrangement is an example of a lower riparian
country financing upstream infrastructure.
In other cases, benefit-sharing agreements have distributed the gains
from water use along a river basin according to an agreed formula that
makes participation attractive. For such an approach to be credible, the
benefits need to be predictable, observable, and verifiable. That is why
most agreements have involved benefit sharing from energy projects rather
than the more elusive gains from irrigation or industrialization. Such an
agreement for the Zambezi River Basin could increase energy supply by 23
percent over uncoordinated, standalone operations. Mitigation benefits
would come from greater reliance on clean energy, and adaptation benefits
across the basin would come from greater energy security in a region
dependent on hydropower.7 A similar approach is used in the design of
the Rusumo Falls hydropower project, where Burundi, Rwanda, and
Tanzania share benefits through power transfers to leverage complicated
agreements.
Connecting international agreements in ways that reinforce each other—
“issue linkage”—is a less common way of ensuring compliance. For instance,
linking an agreement on water with another on trade or transport can alter
the incentives to cooperate. A potential loss on one agreement can be com-
pensated for by a gain in the other, and a breach of one agreement can lead to
the dissolution of the other. The incentives to cooperate can thus be rein-
forced through judicious combinations.
The cooperative management of basin-wide water resources will be central
to resilience efforts. Coordinated reservoir operations will help to minimize
the impact of both droughts and floods, and treaty revisions will further
ensure that agreements are robust to periods of extreme water flows. Accessible
and reliable information allows for more informed planning and makes coor-
dinated investments into the protection of river banks, deltas, and water qual-
ity more likely.
Indeed, climate change necessitates transboundary cooperation, and
while this is no easy task, it presents an opportunity to create a more climate-
resilient future. In some river basins, this is already taking place. The Niger
River Basin serves as a noteworthy example of advanced transboundary
cooperation successfully developing information, infrastructure, and institu-
tions under a cooperative management framework to boost climate resilience
among the riparian countries (box 4.2).

Box 4.2 Cooperating Along the Niger River: An Economic
Mainstay for Tens of Millions
In the Niger River Basin, a fragile developing region in West Africa, water resources are essential
for sustainable growth and welfare. The average GDP in the Basin, excluding Nigeria, was $700 per
capita in 2012. The majority of the Basin’s inhabitants, spanning nine riparians,8 depend directly
on the Niger River for pastoralism and other natural resource–based livelihoods. The pressure on
already-scarce water resources is bound to increase, since the overall population in the Basin, now
estimated at around 130 million, is projected to increase to more than 180 million by 2025.9
The Niger Basin experiences extremes of precipitation and long droughts, with significant socio-
economic and environmental impacts. Extreme precipitation variability as well as a long-term
trend of increasing aridity and decreasing precipitation. Climate change will increase evapotran-
spiration and extreme weather events. In the 1970s and 1980s, the region had the most dramatic
climatic variability ever measured on the planet, causing widespread famines, migrations of rural
populations, heavy tolls on human lives, and huge losses of livestock. Inadequate storage in the
Upper Basin, poor hydromet systems to predict daily, seasonal, and annual rainfall, and weak insti-
tutional capacity hinder the ability of the Niger Basin’s peoples to adapt to this new climate reality.
The region faces four growing water-related development challenges. First, the lack of infrastruc-
ture to regulate flows in the Upper and Middle Niger threatens water security in large towns bor-
dering the river. Second, the significant expansion of cultivated areas in downstream Mali (from
the 90,000 ha cultivated today to potentially more than 300,000 ha in the long run), particularly
in the Office du Niger irrigation scheme, would require regulating the flow in the upper Niger
(Upper Niger River in Guinea) during the dry season.10 Third, considerable demand for energy
in the region is expected to increase significantly in coming years. In some areas, access to elec-
tricity remains among the lowest worldwide in absolute and relative terms. Access rates stand
at less than 25 percent, and almost 90 million people are still without electricity. Hydropower
remains an attractive source of energy in the Basin, with an estimated 6,000 MW hydropower
potential, but only around 35 percent has been developed, mostly in Nigeria. Fourth, minimum
“environmental flows” are seldom maintained due to over-abstractions for irrigation during the
dry season, reducing water quality and damaging the resource base and its productivity.
The perceived economic, environmental, and social benefits of cooperation have provided suffi-
cient incentive for voluntary transboundary cooperation. For instance, countries recognize that
large infrastructure projects are more difficult to develop and finance without transboundary
consultation and cooperation. This means that the potential of key sectors of the economy that
depend on water can be unlocked only through water infrastructure schemes of international
scale and impact.
The Niger Basin Authority (NBA), an intergovernmental organization, aims to promote, facilitate,
and coordinate integrated river-basin development. The NBA acts within a strong legal framework
to ensure integrated basin management and foster cooperation in developing water resources. It
was responsible for shepherding a Shared Vision process, a Sustainable Development Action Plan
(SDAP), and a follow-on Investment Plan—an $8 billion, 20-year investment framework—for the
integrated development of the Niger Basin. The plan focuses on protecting and restoring natural

Box 4.2 Cooperating Along the Niger River: An Economic
Mainstay for Tens of Millions (continued)
resources and ecosystems and developing multipurpose infrastructure for water storage, irriga-
tion development, and hydropower generation. It also supports capacity building and stakeholder
participation in integrated water-resource management.
The NBA’s legal and institutional foundations provide flexible planning instruments for water
allocations, water resource development, and environmental preservation. They also provide a
solid platform for decision-making and conflict resolution. The water storage facilities to be cre-
ated under the plan can help protect against the currently projected impacts of climate change on
sectors depending on the water of the Upper and Middle Niger River. Implementing the SDAP
will help the region achieve goals for food security, water security, and energy security.
The NBA plays an increasingly central role in promoting and participating in the coordinated
approach to transboundary infrastructure in the Basin. Although it has made significant prog-
ress toward operationalizing its mandate, rising pressures on water resources will require that
it become more robust. As hydrological variability and emerging climate risks persist, the NBA
must move from sharing information and jointly preparing development plans to financing and
implementing its well-defined and legally sound mandate. Improved information systems and
tools would enable the NBA to respond more effectively to the growing pressures that climate
change will bring to basin-wide coordination. The Basin states, supported by the NBA and the
World Bank, have endorsed an ambitious Climate Resilience Investment Plan based on the SDAP.
This initiative is also a means of harmonizing the adaptation programs planned in the Basin and
mobilizing sources of climate funding.
Notes
1. UN Water 2008.
2. Foster and Briceno-Garmendia 2010.
3. Karki et al. 2011.
4. Politics also plays a role, and in some cases it is the downstream riparian whose
actions can hinder water management and climate resilience efforts across the
basin.
5. Colley and Gleick 2011.
6. Zawahri 2009.
7. World Bank 2010b.
8. Benin, Burkina Faso, Cameroon, Chad, Côte d’Ivoire, Guinea, Mali, Niger, and
Nigeria.
9. United Nations Development Programme 2013; BRL Ingenierie, 2007.
10. World Bank 2015.

Section 5
Concluding Comments: Solving

the Seemingly Insoluble
The impacts of the climate challenge will be channeled mainly through water.
This report sheds light on the importance of proper water management and
begins to offer recommendations for addressing some of the water-related
problems the world will endure if the status quo persists.
The Cost of Inaction Is Significant

As the report has detailed, the coming decades will bring significant changes
in both the availability and distribution of water, as well as its demand.
Although predicting the future of climate and hydrology is fraught with
uncertainties, models converge on a world in which many of the driest and
poorest regions become drier still, where floods and droughts increase in fre-
quency and intensity, and where warmer and rising oceans lead to more dam-
aging tropical storms and storm surges. These hydrological changes will have
significant impacts on agricultural productivity as well as on cities where
people and economic activity are concentrated. Clean energy is water-

intensive, too. And as water scarcity increases, ever more energy is needed for
its extraction, treatment, and conveyance. Water security is thus pivotal to
climate security.
Compounding these environmental issues is a changing human landscape.
As populations continue to increase and economic growth pulls more of the
world out of poverty, the world becomes ever thirstier. Nearly a quarter of
humanity already resides in water-scarce countries, and if the status quo endures
and climate models prove correct, water scarcity will proliferate to regions
where it currently does not exist, and greatly worsen in regions where it does.
Economic growth is a surprisingly thirsty business. Diminishing water sup-
plies can slow growth and cloud economic prospects. Under a business-as-
usual water allocation policy, the greatest adverse impacts occur in the regions
with highest water deficits.
Unprecedented rates of urbanization, expanding slums, and inadequate
investments have accentuated climate vulnerabilities in cities. The number of
urban dwellers facing seasonal water shortages may reach nearly two billion by
2050, with per capita municipal water availability declining by up to two-thirds
in the worst-affected regions. At the same time, costs from extreme hydrolog-
ical events may multiply. Additional urban flooding damage from climate
change alone could approach as much as $1.8 trillion by 2080. Sea-level rise
and storm surges will put large populations at risk while also contaminating
coastal aquifers and threatening water supplies, if no action is taken.

Finally, the management of transboundary river basins, an already challeng-
ing task, will become ever more difficult. Transboundary river basins support
nearly 40 percent of the world’s people, and proper management is vital to
meeting the water needs of the future. Rainfall and runoff variability are all but
certain to increase due to climate change, and with that will come uncertain
river-flow variation. Unless agreements can be reached that are fair, efficient,
credible, and enforceable, water security will be largely dictated by the whim of
neighbors that share the resource, potentially putting development at risk.
Opportunities for Adaptation Exist but

Require Action
Although significant challenges exist, the right actions need not be costly.
Thoughtful policies and well-placed investments can pay very large dividends
in improved welfare and increased economic growth.
If water is allocated to its more valuable uses, growth in the affected econo-
mies can be restored and, in some cases, even exceed projections. This may
imply allowing markets to guide the allocation of water, with strong safe-
guards to protect the vulnerable and assure sustainability. Closing the water
infrastructure gap is necessary for adapting to the new water regime.
Infrastructure is particularly lacking in developing countries, where the com-
ing decades will see a great need for investments in water storage, water dis-
tribution, and flood and pollution control. A modest investment today in
early warning systems or a seawall, dam, levy, or reservoir could save, or pre-
vent the loss of, many times its cost in future assets.
But infrastructure investments are expensive and often irreversible. In the
face of a constantly changing and uncertain water environment, the most
prudent actions can also be costless. In many regions of the world, water scar-
city has arisen because of market failures. Water is a scarce public good and
should therefore be priced as such. Failure to price water according to its
scarcity value has led to inefficient and wasteful use, and experience has
shown that countries that price water cheaply consume it unsustainably.
Using market-based mechanisms to appropriately price water can go a long
way in ensuring its sustainable use.
Raising the price of water need not put a heavy burden on the poor. Water
pricing is a valuable policy instrument that is widely misunderstood and
feared because of anxieties that water supplies can be captured by powerful
economic interests, effectively denying the poor this basic human right. Much
depends upon how such policies are implemented and enforced. Efficient
pricing, coupled with income- sensitive policies such as quotas or subsidies,
can be effective ways to manage water supplies while also ensuring availability
to the most vulnerable. Experience has shown that when water is deemed to
be free, the poor are unserved or under-served and are compelled to pay a
much higher price than the rich for each drop of water. As a consequence, free
water has been both costly for the poor and harmful to the environment.

Cities must take a holistic approach to urban water management, building
resilience by collaborating with local, state, and national governments.
Planning should be done in a way that incorporates all relevant sectors—
including municipal water, land use, housing, transportation, and energy—to
ensure an integrated and efficient water-management nexus. Municipal gov-
ernments should also invest resources to help planners better understand the
water basins in their vicinity, to reduce uncertainty of future water supplies.
Opportunities and incentives must be found for cooperation between
nations that share river basins. There is no simple algorithm for establishing a
transboundary agreement, since all situations are unique and require thought-
ful negotiations by all parties. But this report has laid out several important
steps that can be taken to increase the probability of reaching a mutually ben-
eficial agreement. Investments should be made that increase the amount of
information available to all parties, to decrease uncertainty of river flows.
Opportunities that align incentives between all parties, as with the Bhutan–
India agreement, should be sought. Credible grievance-resolution mecha-
nisms must also be in place to increase trust and ensure the long-term viability
of any agreement.
The Way Forward

The recommendations advocated in this report, and summarized in the pre-
vious section, can be expressed in four overarching priorities.
First, fostering economic growth in water-stressed economies will
call for systems, institutions, and processes that allocate scarce water to
higher-value uses. This may require market-based solutions in some cases
and, as experience in many countries has demonstrated, such solutions
can be rendered equitable, protect the poor, and prove more environmen-
tally friendly than alternatives that promote profligacy, overuse, resource
capture, and wastage.
Second, public investments must be made to close what has become a very
large infrastructure gap in developing countries in order to increase adaptive
capacity and build resilience against a changing water regime. Simply con-
structing physical infrastructure, however, will not be sufficient. Investments
must increase capacity and build knowledge to ensure that decision makers
know which projects will be most effective. The creation of a small catalytic
fund that can be used to develop new ideas and solutions to build more
water-resilient economies would be a good starting point.
Third, it is time to start a high-level conversation about the policies and
innovations that could help to ensure water security throughout the 21st cen-
tury for the entire planet. A panel of world leaders could rally support for
these necessary policy shifts and herald a new discussion worldwide.
Managing conflicting water demands under climate change calls for com-
mensurate policy attention and investment nationally and globally for the
world to achieve its climate aspirations. It is a daunting challenge of
unmatched complexity.

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The Critical Face of

Rights and Permissions

1 Droughts, Storms, Floods, and Changing Water Supplies 1

The Critical Face of Climate Change—Water iii

iv The Critical Face of Climate Change—Water

The Critical Face of Climate Change—Water v

GDP Gross domestic product

vi The Critical Face of Climate Change—Water

Most of the impacts of climate change will be channeled primarily through

The Critical Face of Climate Change—Water vii

viii The Critical Face of Climate Change—Water

Source: World Bank 2015a.

greater resilience to climate shocks. Market-based solutions may be effec-

The Critical Face of Climate Change—Water ix

x The Critical Face of Climate Change—Water

Droughts, Storms, Floods, and

The Critical Face of Climate Change—Water 1

IBRD 41933 | OCTOBER 2015

Source: See World Bank (2015a) for other projections.

2 The Critical Face of Climate Change—Water

A growing diverse spectrum of practices shows that it is possible to simultaneously deliver

The Critical Face of Climate Change—Water 3

Water footprint (m /kWh)

Non renewable sources Coal Natural gas PV Solar thermal

Renewable sources Nuclear Geothermal Wind Hydroelectric

Low current availability High current availability

Source: World Bank 2010.

4 The Critical Face of Climate Change—Water

Temperature changes are especially important in snow-dominated regions,

More Frequent Natural Disasters

The Critical Face of Climate Change—Water 5

6 The Critical Face of Climate Change—Water

The Critical Face of Climate Change—Water 7

8 The Critical Face of Climate Change—Water

The Critical Face of Climate Change—Water 9

Water Scarcity and Stress Under Climate Change

10 The Critical Face of Climate Change—Water

figure B2.1 Global Water Withdrawals

6,000 SSP1 6,000

Source: O’Neill and others 2015.

The Critical Face of Climate Change—Water 11

12 The Critical Face of Climate Change—Water

Range of variation in GDP (%)

Source: World Bank 2015a.

The Critical Face of Climate Change—Water 13

The Thirsty Origins of Conflict

14 The Critical Face of Climate Change—Water

The Way Forward

The Critical Face of Climate Change—Water 15

Water Proofing Through Investment

Policy Choices Under Uncertainty

16 The Critical Face of Climate Change—Water

The Critical Face of Climate Change—Water 17

18 The Critical Face of Climate Change—Water

Impacts—Slow and Rapid

Map 3.1 Yearly Urban Flood Damage by 2080, Billion USD

IBRD 41934 | OCTOBER 2015

Source: Based upon World Bank 2015a.

The Critical Face of Climate Change—Water 19

Hydrological Change Meets Urban Change

20 The Critical Face of Climate Change—Water

The Way Forward

The Critical Face of Climate Change—Water 21

municipal governments in the metropolitan region, given their different