A thirstier world

A rising tide of demand for water is putting increasing pressure on water resources in many countr-ies. The global stock of freshwa-ter available for human use is limited and unevenly distribu-ted; more than 60 percent of it is found in just 10 countries. On a per capita basis, freshwater avai-lable in the Middle East and Nor-th Africa region is only a tiny fra-ction of that in Latin America. Even in countries with an abuda-nt supply of water overall, parti-cular regions could face severe water shortages. And water avai-lability in any given location can also vary significantly through-out the year as a result of intera-nnual climate variation, seasonal variation, droughts, and floods.

As the cases of southeast Brazil and California illustrate, many parts of the world are already experiencing water shortages, and millions of people have diffi-culty fulfilling their basic water needs. The World Resources Inst-itute found that 36 countries face high water stress, defined as wit-hdrawing more than 40 percent of the annual available supply (Gassert and others, 2013). This level of use can cause shortages in specific localities and result in environmental damage.

Furthermore, the demand for water is set to continue rising with population growth, urbani-zation, and economic expansion. Although there is some evidence of water use leveling off as count-ries grow wealthier, long-term scenarios forecast large increases in water use that, for many coun-tries, cannot be met by existing supplies. Technological advances such as desalination and recyc-ling have helped easw water supply constraints in some adva-nced economies but are expensi-ve and require substantial up-front investment. Climate change and underinvestment in water infrastructure are expected to exacerbate this water demand-supply imbalance.

Assigning a price to water is co-mplicated because of its unique features and the social, environ-mental, and political considerat-ions surrounding it. Water is a heterogeneous commodity that can be uses sequentially; it can be a private good (for example, when purchased in a bottle or delivered to a house via a pipe-line) or a public good (for exam-ple, accessible to anyone from lakes, rivers, and underground aquifers). Because water is bulky and costly to move, its transport and storage frequently require considerable initial investment and ongoing maintenance costs that can be difficult to accurately reflect in a price charged to users.

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