|Environmental Technologies Industries
|Need for a Global Water Initiative|
Environmental Technologies Trade Advisory Committee (ETTAC)
Nature of the Problem
The worldwide challenge of assuring adequate supplies of water to all who need it is becoming increasingly urgent:
Why is this issue important to the U.S.?
The worldwide water problem is of vital interest to the United States for several reasons:
Of special concern to the private sector is the sizable need and significant opportunity for U.S. participation in the water sector overseas. The investment needed for water supply and sanitation is substantial, about $600 billion or more over the next decade, according to the World Bank. The countries of the developing world do not have resources approaching what they need, nor can international donors, bilateral and multilateral, fill the gap.
There is considerable opportunity for U.S. manufacturers, suppliers, designers, builders, and financiers to be part of the solution to global water problems. Observers do question the real commercial opportunity for U.S. companies in some areas – as operators of large urban water systems, for instance – but in other areas U.S. expertise and technology give our firms an important edge as this market develops.
What is the U.S. doing about it?
The U.S. private sector faces significant "barriers to participation" in meeting the global water challenge and in benefiting from commercial opportunities.
How can we improve what we are doing?
Managing water resources wisely must be left to each country itself. Yet given the lack of financial and technical resources in many places, U.S. leadership is critical to catalyze action. Strong U.S. leadership is needed to mobilize the private sector and foster the use of innovative technologies by:
No estimate of the resources needed to facilitate private sector involvement and responses has been undertaken by ETTAC as part of this effort. The five themes discussed above, however, can be implemented effectively without placing undue burdens on federal resources.
Private Sector Role
The Global Water Initiative should benefit as much as possible from private sector expertise and experience. U.S. private sector resources extend and build on public resources in the following key areas:
ETTAC WATER SUBCOMMITTEE VIEWS
ABOUT THE NEED FOR A GLOBAL WATER INITIATIVE
September 15, 2000
Nature of the Problem
The worldwide challenge of assuring adequate supplies of water for its many purposes is becoming increasingly urgent. Its availability, quality, price, and volume directly affect every aspect of human life, and, indeed all life on the planet.
One primary impetus for better water is to improve public health throughout the world, and especially in developing countries where death rates due to water-borne disease are alarmingly high. Water-related diseases kill from 5 to 7 million people annually, including nearly 4 million children under the age of 5. An estimated 80 per cent of the diseases in the developing world are caused by contaminated water. The World Water Commission, the World Bank, the United Nations and other international bodies that have studied the matter all have concluded that about 1.5 billion people or more lack safe and reliable water supplies, and up to 3 billion people have no sanitation.
Water is also essential to support industry and economic growth, from industrial production to transportation to power generation to irrigation.
Water supply and treatment is more than a matter of economic and public health, however. Producing food for growing populations and the generation of power place substantial demands on water resources. And adequate supplies of decent quality water are also essential for the natural resources and ecological systems on which all life depends. An estimated 20 per cent of the world’s freshwater fish species, for example, have been pushed to the brink of extinction by contaminated water.
The interrelationships among people, wildlife, the environment, food production, the economy, and water are complex and make it particularly difficult to develop and carry out comprehensive programs that address the full range of needs. Notwithstanding this inherent complexity, the global water challenge might be summarized in five basic roles water plays in sustaining life on this planet. Each of these areas face serious issues and constraints in the coming decades:
Watershed management: assuring the supply of fresh water for all human uses and for maintenance of the biosphere; minimizing water-related risks to human and environmental health and well-being; and managing competition among alternative uses and users across sectors, nations, and regions.
Agricultural uses: maximizing the efficiency of water use for agriculture, particularly for irrigation, including efficient use of scarce water resources, maintenance of water quality, preservation of fisheries and spawning grounds, energy efficiency, and economic efficiency so that food production continues to meet the needs of a growing population.
Hydraulic uses: managing the availability of water for navigation and power generation.
Industrial and economic uses: providing for industrial and other economic purposes, both current and future needs. These uses include water as a raw material and water for heating, cooling, process, and power.
Urban, community and domestic uses: assuring an adequate supply of clean, safe water to the world’s growing cities and towns, as well as to often overlooked rural communities, and assuring adequate and clean water for downstream users, for recreation, esthetic and practical enjoyment, as well as efficient use in each of these areas.
The private sector perspective on these issues could be summarized as follows:
The economic growth and stability of the developing world is vital to the long-term prosperity of the United States and to the growth of U.S. companies’ export markets.
Growth is always constrained by whatever factor is most scarce: increasingly, throughout the developing world, clean water will become the scarce factor. A shortage of water – accompanied by high, scarcity-driven water prices; increasing local and international disputes over water, and endangered water quality – pose a risk to U.S. prosperity. Reduced economic growth, whatever its cause, limits future markets for U.S. goods and services, both directly and indirectly. U.S. trade and investment may be hindered directly by a lack of water, an essential element in production processes from foodstuffs to petrochemicals to microchips.
The ways in which the world manages its water will also greatly influence the market for U.S. environmental, agribusiness, industrial, and power technologies. U.S. private sector resources and technologies must be mobilized to ensure that water scarcity does not become a constraining factor on human welfare and economic well-being. The U.S. private sector can help ensure that the United States is part of the solution to this urgent world problem.
Why is this issue important to the U.S.?
There are several reasons why the growing worldwide water problem is of vital interest to the United States – national security, humanitarian, direct effects on Americans, and economic. The last of these is of particular concern to the private sector although the importance of the other factors is clearly recognized.
First, U.S. national security interests include reducing the likelihood of conflict arising from water scarcity, minimizing threat to water supplies by terrorists, and reducing the potential for disruptive migrations by people fleeing floods, drought or famine, or by those seeking better living conditions. To the extent that water is or may become a source of tension or conflict within many regions or among nations, lessening that potential threat will reduce the prospect that the U.S. military and other U.S. and multinational agencies might be called on to intervene, for disaster relief, peacekeeping, and other purposes.
Second, there is a humanitarian element in U.S. participation in meeting the global water challenge. The lack of safe, clean water, the growing absolute shortage in many places, and the pervasive threats from floods and droughts typically put the heaviest burden on the most vulnerable members of societies around the world, including children.
Third, water-related problems originating outside U.S. borders directly affect the health and well-being of U.S. citizens. This may involve the contamination of water resources from transboundary pollution, across the U.S.-Mexican border, for example, or from dumping wastes offshore. It may also involve the excessive exploitation of fisheries or the degradation of productive estuaries from maritime activity (oil spills, for instance), thus affecting the livelihoods of U.S. fishing fleets. It may entail the proliferation of invasive species deposited in U.S. waters when foreign ships empty their ballast waters, thus necessitating costly mitigation, as with the zebra mussel in the Midwest. Or it may involve other controversial proposals, for bulk water export from the Great Lakes by Canadian water operators, for example.
Fourth, U.S. companies have a large economic stake in the adequacy of water resources in general and water supplies in particular. At one level, with adequate water supply a requisite for economic growth and prosperity everywhere, more and more U.S. companies looking abroad for new and expanded markets may find their prospects severely limited. Consumer products dependent on water, for instance, may find few buyers if water supplies or water quality are inadequate. Similarly, without suitable water availability, companies seeking to open plants overseas may be severely constrained. Absent such foreign direct investment, the economies of water-scarce countries, including jobs and purchasing power, will not grow and standards of living for their people will not improve as quickly or as much as if water were available in sufficient amounts.
Another economic dimension is the sizable need and significant opportunity for U.S. participation in the water sector overseas. The investment needed in the water sector for supply and sanitation is substantial, about $600 billion or more over the next decade, according to the World Bank. The World Water Commission recently estimated that by 2025, to meet the full range of water needs – agriculture, environment, energy, and industry, as well as water supply and sanitation for growing populations and mushrooming urban areas – about $180 billion will be required each year in new investments. This figure does not include operations, maintenance, or repairs. It is up sharply from the $70 to $80 billion spent annually now. The countries of the developing world do not have resources approaching what they need for water. Nor do international donors, bilateral and multilateral.
There is considerable opportunity for U.S. manufacturers, suppliers, designers, builders, and financiers to be part of the solution to global water problems. The technologies offered by U.S. companies in the water sector are excellent, the engineering know-how in crafting cost-effective solutions is extensive, and the expertise in financing and packaging projects is broad. Although a number of observers do question the real commercial opportunity for U.S. companies in some areas – as operators of large urban water systems, for instance – there is broad agreement on the significant opportunities in “green” chemistry (pollution prevention), in information management, in water treatment for smaller communities and decentralized applications, and in other sectors.
The coming global water shortage poses a significant risk to the prosperity of the United States and U.S. trading partners. The resources of the U.S. private sector – in partnership with federal, state and local government, and the nonprofit sector – can turn this challenge into an opportunity for leadership. The U.S. environmental sector is strong, with some of the best technologies in the world. It employs more than 1.3 million workers in over 115,000 companies and revenue-generating public enterprises. Most of these are small businesses, yet they accounted for almost $200 billion in sales in 1999. Environmental technology exports, a sector in which the United States has a positive trade balance, generated $18.9 billion in export sales and supported 170,000 jobs in 1999. Yet, only 10 percent of U.S. environmental businesses export. These exports account for less than 10 percent of the U.S. environmental sector output; the market share outside the United States is only about 7 percent. By helping the world to solve this urgent problem, the United States will help to build new opportunities for thousands of small companies at home.
There is no single U.S. agency that has the lead on water and no interagency forum by which to integrate the variety of complex issues and interests. Various missions and responsibilities – technical assistance, for example – are scattered among agencies throughout the government. Each agency seeks to optimize its own performance rather than taking a broad view of how to meet the overall challenge. Each may fulfill its tasks admirably, yet the sum total misses important issues and priorities.
An example is military and disaster assistance, of which the United States is a large funder. There is no means by which the U.S. government helps U.S. companies involved in providing equipment and services used in disaster relief to capitalize on the early entry and good will created to participate in longer-term solutions. The U.S. Agency for International Development (USAID) is beginning to consider how to ensure that short-term disaster assistance contributes to progress over the longer term; the assistance provided in the aftermath of Hurricane Mitch in Central America is an example of a new emphasis.
At one level, providing water and managing wisely a nation’s water resources falls to each country itself. Yet given the lack of resources, financial and technical in many of these places, U.S. leadership can catalyze action. The United States can also pressure international and other multilateral development agencies to provide needed resources.
For its part, the U.S. private sector – including both service and technology providers and major companies operating around the world that need clean, reliable supplies of water for their business activities and their employees – has specialized knowledge and expertise in each of the five roles cited in the opening section. In some, such as irrigation, this expertise is shared with public sector agencies such as the Corps of Engineers and the Department of Agriculture. In other areas, such as watershed management, the private sector has highly technical and applied knowledge, which complements that of the public sector. In still other areas, such as project finance for urban and industrial water projects, most of the capability resides in the private sector. State and local governments, as well, have considerable experience in managing water resources and water supply and treatment projects. These resources and more will be critical to meeting needs for clean water worldwide.
Strengthen in-country regulatory capacity and remove trade barriers
Nothing so constrains the U.S. private sector from responding to the developing world’s need for new investment, improved technology, and dynamic management than the lack of an effective environmental regulatory capacity. Private investment, in particular, and the commitment of private technology, resources, and skills requires a legal and regulatory framework that creates a level playing field, defines clearly and even-handedly the rules of the game, and provides for swift and fair dispute resolution. The market for water technologies is further hampered by the lack of strong and effective enforcement. The need for stronger regulatory capacity is not limited to the water sector, per se; it applies equally to the regulatory bodies charged with oversight of the water sector and to the broader legal and regulatory framework for private investment, technology sales, professional and financial services, and environmental activities.
An effective program in this area would:
Mobilize financial markets and institutions
Whether the issue is irrigation efficiency in Egypt, safe drinking water for low-income urban residents in Brazil, or treatment of industrial effluents in Thailand, the sheer scale of the investments needed in the water sector is truly daunting. Donors and local governments are an important part of the solution, particularly in assuring access to the poor, but these resources will not be enough. With needed investments estimated to reach $180 billion annually over the next 25 years, the problem cannot be solved without massive private investment.
The United States is the acknowledged world leader in finance. U.S. financial institutions are among the world’s largest. Equally important, U.S. financiers rival the nation’s water engineers in creativity, technical proficiency, and professionalism. Financial markets, and the institutions that support them, must therefore be central to any effective global water strategy. The United States is in an unequalled position to provide leadership.
The water sector poses difficult financial challenges. An effective response must recognize the special nature of water and the need to ensure, first and foremost, that every person has access to safe drinking water regardless of income. Meeting this basic human need, while ensuring the financial soundness of the investments that this goal requires, will demand leadership, creativity and determination. Such a response would:
Promote efficient private sector responses to opportunities
An efficient response to the needs of the water sector is inhibited by the fragmentation of the water industry in the industrialized countries, including the United States, and by the limited development of both water services and financial services in developing countries. Municipalities, rather than private firms, play the lead role in several nations (including Germany and Japan, as well as the United States) and a very small group of companies dominate the market in several others (France, the United Kingdom, Spain). Consequently, the international market for privately funded water projects and concessions is limited to fewer than ten major companies worldwide, with the result that only a handful of new projects are privately financed in the developing world each year. Almost all these go to one of several European firms. The U.S. environmental industry, made up overwhelmingly of small, specialized firms, is not a player in these markets, reducing choice for the developing world’s cities, limiting access to U.S. technology and financial backing, and limiting U.S. export markets.
An effective response to this problem would recognize the contribution that U.S. leadership can make to broadening participation in the water industry would:
Develop internet-based initiatives to improve information dissemination and communication within the sector
Whereas the scale and urgency of the developing world’s water challenges demand boldness, the developing world reality – many weak local governments, a conservative water industry, limited financial capacity, and complex decision making processes – is hardly conducive to the task at hand. A lack of information about alternatives and an absence of ways to share experiences and innovations contribute greatly to this problem. The internet has dramatically reduced the cost of overcoming these barriers, however, and offers a powerful way to energize creativity and dynamic problem-solving in the water sector.
An effective response to this opportunity would:
Two examples of such experiments are the Global Environment Technology Foundation (GETF) and the Global Technology Network (GTN).
Foster broader and earlier full-scale testing and adoption of new technologies, innovative approaches, and responsive local institutions for water
Information is only part of the solution to encouraging new, innovative, potentially cost-saving solutions. Greater support to the development, testing, and commercialization of both engineering and institutional solutions can also make a significant and cost-effective contribution to meeting the water challenge.
Previous studies have shown that federal investments in technology are among the most cost-effective expenditures, and, from monitoring to irrigation, to urban and industrial applications, water technology is urgently in need of an expanded and solution-focused investment program, direct or indirect through such mechanisms as tax credits.
Effective programming in this area would:
What are the resources required?
No estimate of the resources needed to facilitate private sector involvement and responses has been undertaken as part of this paper. It should be noted, however, that the five themes discussed above are not likely to place undue burdens on federal resources. Leadership, initiative, convening private parties – that is, a catalytic federal role – will not cost an excessive amount. Yet such initiative could greatly facilitate the process and trigger expenditures of private funds and the involvement of state and local government and academic experts. The cost of expanding technical assistance programs is also unlikely to prove onerous. It may be that water project development does require a new pool of funding, which might be something the U.S. government could adopt or develop in concert with appropriate multilateral development agencies.
What are the benefits of doing something?
Besides the obvious humanitarian benefits, including improvements to public health in the developing world, U.S. leadership could make a large difference in addressing this major challenge to the world’s peace and prosperity. From the standpoint of national security, the threat and intensity of conflict could be lessened. The potential for mass migrations of poor people could be reduced by seeking to provide resources and opportunities where they now live.
Assuring adequate water supplies can help foster greater prosperity and standards of living in developing and emerging markets, thereby alleviating poverty.
The economic opportunity also is substantial for U.S. companies and the U.S. economy in general. Taking advantage of these opportunities means more good jobs at home, with all the attendant economic benefits in reducing unemployment, providing new opportunities, bolstering tax revenues, and raising standards of living in the U.S.
Another benefit is the deployment of more new, innovative energy efficient, environmentally friendly technologies abroad, where they are needed most, if economic aspirations are to be realized and environmental values protected. There may well be synergy among those institutions supporting new approaches to energy efficiency and to clean-water strategies that could benefit the environment and the economy.
Private Sector Role
The Global Water Initiative should benefit as much as possible from private sector expertise and experience. The U.S. private sector has much to contribute to this initiative, as well as great potential to benefit from it through new trade and investment opportunities. The potential contributions of the U.S. private sector to this initiative make it imperative that private sector expertise be tapped to supplement and complement U.S. government interagency expertise. Among these contributions are the technologies that U.S. companies, large and small, can bring to the table; the expertise in project finance and mobilization of private capital without which the daunting investments required cannot be made; detailed knowledge by U.S. companies of conditions on the ground in a large number of countries; and the experience in implementing measures to strengthen water management.
Establishing a public-private dialogue to keep the Global Water Initiative moving forward
The problems that must be addressed by a federal Global Water Initiative are daunting in scale and complexity. While the urgency of the problem demands that an initiative be brought forward on an accelerated timetable, it is important to recognize the diversity of capabilities, perspectives, and resources available across the United States. There is clearly tremendous value to be gained by drawing these resources into the initiative as it moves forward, even while continuing to develop and implement a program.
To meet this need, the Global Water Initiative might draw on the experience of the National Environmental Strategy, which mounted a nationwide series of dialogues and consultations as a way to tap the depth and breadth of U.S. expertise. The dialogue proved a source of insights and suggestions to strengthen the program, and mobilized support. Such a dialogue could prove equally effective in developing ideas and mobilizing support for the water initiative. Talk is no substitute for action yet once the first set of initiatives is launched, it may be useful to broaden the discussion and build support for a major commitment of resources in a multi-year, public-private partnership.
There is a great deal at stake in the water sector, much to lose by failing to show leadership, much to gain by getting it right. To pull this off, that is, to show leadership internationally, the American people and their representatives – local, state, and federal – must understand the urgency of the problem, the U.S. national interest in addressing it, and the level of resources needed to ensure water security.