Guillaume GRUÈRE

Senior Policy Analyst, leads OECD work on agriculture and water.

Agriculture and water: a major conundrum

Agriculture, the largest user and a major polluter of water, is also highly water dependent and increasingly subject to water risks. Despite the complexity of the challenges, emerging solutions exist.

Water security has gained prominence in policy and economic circles recent years. Water crises have been listed among the top future risks by the World Economic Forum for successive years. Studies have also shown the importance of water security for economic development and growth 1. Investing in water security is increasingly believed to be necessary to build a better future, especially with uncertainties related to climate change.

Water security first relies on the sustainable management of water resources. A closer look at the components of global water demand points to the central role of agriculture. Agriculture accounts for approximately 70% of the world’s water withdrawals. In particular, agricultural irrigation occupies a major share of water use in semi-arid countries, where water is scarce. Groundwater irrigation also contributes significantly to the depletion of major aquifers.

Preserving water quality is another key component of water security. Here again, agriculture appears to play a very important role, especially in OECD countries. Agriculture production is a major source of pollution, a leading cause of eutrophication, and an important source of groundwater contamination. Furthermore, much of its pollution is diffuse (non-point source), thereby difficult to control and eliminate.

Yet, agriculture also depends critically on freshwater supply and faces increasing water risks. Key agricultural regions of Asia, North America, and the Mediterranean region already face major water stresses 2 and are expected to be facing more severe water constraints in the future. Agriculture will need sufficient usable water to produce the required additional food to feed a growing population. Irrigated agriculture, which is more productive than rainfed agriculture, will have to continue playing its important role. But this will need to be done under stiffer water competition from other sectors and increased risk and uncertainties of water availability due to climate change.

The counteracting challenges create a conundrum between agriculture and water priorities. It reflects a broader policy question on the future of agriculture, currently discussed at the OECD and within the G20: how can agriculture produce more with fewer resources and drastically reduce its environmental impacts?

Agriculture, water use and misuse

Agriculture is essentially a rain-fed activity; roughly, 80% of cultivated land across the globe is rain-fed, accounting for 60% of the world’s crop production. The remaining 20% land obtains water from irrigation systems, contributing to 40% of global crop production, but representing large amounts of water use in many regions. If irrigation withdrawals have decreased over the 2000s, they still represent over 40% of total withdrawals for nearly half of OECD countries.

Agriculture water use is particularly problematic because of its relative inefficiency compared to that of other sectors, due to ageing infrastructures, inadequate irrigation technologies, and the under-pricing of water resources. In many regions, water is over used and irrigation infrastructures are subject to high leakage rates. Flood irrigation leads to losses and excessive evaporation, with low production per water drop compared to more efficient pressurised irrigation systems that use sprinklers and drip. Persistent inefficiency is driven by the fact that irrigating farmers in most countries do not pay for the full cost of water use. In South Korea, one of the top water-stressed OECD countries, farmer do not pay for irrigation water. In many other OECD countries, water prices do not cover the cost of water delivery; ideally they should reflect the full cost of water, covering the operations and maintenance, and the costs of scarcity and environmental externalities. The result is losses of water, water intensive crops being planted under inefficient irrigation systems.

Intensive groundwater pumping in semi-arid areas is another example of agriculture water “misuse”. Groundwater does play a major role to support agricultural productivity in many regions, notably by increasing its resilience to long term droughts. Yet, intensive groundwater pumping for irrigation in certain regions depletes aquifers beyond natural recharge, and can generate significant negative environmental externalities, with large economic impact on the sector and beyond. Groundwater-based irrigation in California clearly contributed to mitigate the impacts of a 4 year drought on agriculture. But its continued use has led to rapid drops in water tables, and major environmental effects, including coastal salinity intrusion and land subsidence. 3

Agriculture also remains a major source of water pollution, particularly in OECD countries. Agricultural nutrient run-off, pesticides, soil sediments, livestock effluents and a growing number of emerging contaminants all contribute to the pollution of waterways and groundwater. For instance, agriculture accounted for 58% of phosphorus and 42% of nitrate emissions in surface water in the Netherlands in 2009. Agriculture’s contribution of nitrogen loadings into estuarine and coastal water is above 40% for many OECD countries, and often reported as the main cause of eutrophication. The presence of pesticides in surface water and groundwater is widespread, with some OECD countries having over 60% of monitored sites found to have one or more pesticide present in surface water and groundwater. Additionally, over 20% of the agricultural land area is affected by moderate to severe soil erosion from water in almost a third of OECD member countries. In the United States alone, agriculture was estimated to account for around 60% of river pollution, 30% of lake pollution, and 15% of estuarine and costal pollution in 2010. 4

The overall costs of water pollution caused by agriculture across OECD countries are likely to exceed billions of euros annually. In 2007, the annual cost of agriculture damages on water systems in the United Kingdom was around EUR 340 million representing 24% of total agriculture expenditures that year 5. In France, the impacts of agricultural nitrate emissions and pesticides on water amount to an estimated annual cost of EUR 610 and 1070 million 6. Agricultural nitrate pollution is also responsible for France’s multi-year violation of the 1991 European directive on nitrate emissions.

But agriculture is also subject to increasing water risks, threatening its productivity objectives

Recent trends and projections suggest that the overall objective of producing at least 60% more food to feed a much larger population by 2050 will need to be fulfilled with much less and/or more volatile usable freshwater supplies. First, agriculture is projected to face increased competition for water in multiple regions of the world, under urban density increases and requirements for the energy and industry sectors 7. As a result, agriculture’s share of total water use may actually decline in the future.

Second, climate change is also expected to increase the variability of surface water supplies, decline snow packs and glaciers, thus requiring more groundwater with additional depletion risks. Rainfed and irrigated agriculture will face changes in precipitation patterns and increased water requirements associated with temperature increase. Extreme events, like storms, floods and drought are expected to be more frequent with potential risks for crop and livestock production. Progressive groundwater depletion in some semi-arid areas may affect the productivity potential of major cropping systems and consequently their resilience to climate change. Rising sea levels will affect coastal crop land.

Water quality is also likely to be deteriorating in multiple regions in the future due to increased polluting activities and water supply changes associated with climate change, affecting freshwater availability for agriculture. Larger discharge of nitrogen and phosphorus is expected in countries with increased agricultural and industrial development. Climate change-induced sea level rise will increase the risk of saline intrusion in coastal aquifers, affecting groundwater quality in multiple regions, including in Japan, Mexico or the Netherlands. Dryland salinity is also expected to expand in the next few decades in Australia because of changes in precipitation patterns.

Addressing the agriculture and water challenges will require multiple policy responses at different levels

The presented challenges are complex and locally widely diversified. Still, addressing them together will necessarily require the agriculture sector to (a) increase its overall water use efficiency, (b) reduce its impact on freshwater resources, and (c) improve its resilience to water risks.

Public policies have the leading role to play, notably to realign incentives for farmers to better manage water. Past work conducted at the OECD shows that multiple policy responses are needed at different levels, each adapted to specific water resource systems and issues, as presented in Box 1.

Box 1. What policies can help address the water and agriculture challenges?

At the farm level, policymakers should:

  • Establish farm-level information systems on water resources, water quality and risks,
  • Encourage farmers’ uptake of water efficient and water risk resilient technologies and practices,
  • Foster better farm management practices against water pollution that internalise environmental costs through implementing the polluter-payer principle

At the watershed level, governments should:

  • Improve information systems on surface and groundwater resources quality and flows, helping to assess risks and implement programs tailored to the specific challenges
  • Define property rights attached to water withdrawals, water discharges and ecosystem provision and ensuring that water rights reflect water availability within sustainable limits
  • Develop flexible and robust systems of water allocation that allow both price and quantity to fluctuate in response to shocks, for instance via market mechanisms
  • Use regulatory, economic, and collective measures to control intensive agricultural groundwater use
  • Use a mix of policy instruments- economic, regulatory, information based- to address agricultural water pollution

At the national level, policies should be designed to provide an enabling environment by:

  • Enforcing existing regulatory provisions on water use and water pollution, ensuring that sanctions and penalties are effectively imposed in the event of non-compliance
  • Ensuring charges for water supplied to agriculture at least reflect full supply costs, and ideally cover the opportunity cost of water withdrawals; use social policies to compensate the poorest farmers
  • Designing risk management instruments that effectively increase the resilience of farmers to uncertainties associated with weather events and climate change
  • Removing non-water related price distorting policy measures, such agriculture and energy subsidies and import tariffs that favour water intensive crops
  • Fostering transparent and open markets, allowing food to be produced where it is economically efficient and environmentally sustainable to do so, and pooling the risks so that yield losses in a given region can be offset through imports

Source: OECD (2010; 2012b; 2014; 2015a and 2016).

Recent examples show that policy reforms can lead to significant agriculture and water security improvements. The reform of water allocation in the Murray-Darling Basin of Australia, notably introducing a water market, increased the resilience of farmers to dry conditions and ensured that a share of freshwater is left for ecosystems. Israel significantly increased agriculture water use efficiency by gradually raising agriculture water prices and using treated wastewater for irrigation. Several policy initiatives in the European Union and New Zealand have also helped reduce diffuse water pollution from agriculture.

Other actors can also contribute to local solutions, by acting in complement with government policies. Cities are increasingly interacting with farming communities in their surroundings to manage water shortages, water quality issues, or flood risks 8. For instance, several cities in the western United States deliver treated wastewater for irrigation to encouraged farmers to conserve groundwater. The cities of Munich, Rennes and New York, have paid farmers to adopt better farming practices, thereby reducing their water treatment costs. Several agro-food companies have also started to engage into water conservation, generally focusing on their supply chains. Realising that water risks can threaten their future economic viability, they have taken action to reduce their water footprint and preserve freshwater sources, either by setting private standards or by initiating water stewardship programs. Lastly, farm groups and co-operatives have taken voluntarily actions to resolve their water challenges, collaborating with civil society groups, sometimes supported by green marketing schemes.


Disclaimer

The opinions and interpretations expressed in this article do not necessarily reflect the official views of the OECD or its member countries.


Bibliography


  1. In particular, diminishing water runoffs, and water-related hazards, such as droughts and floods, have been shown to negatively impact economic growth (Sadoff et al. ,2015).
  2. Constraints on available water quantity (scarcity).
  3. Gruere (2015)
  4. OECD (2012b and 2013)
  5. OECD (2012b)
  6. Marcus and Simon (2015)
  7. OECD (2012b)
  8. OECD (2015b)
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