Water and the Economy
There is a direct link between water security and the performance of the economy.
“Water is crucial for the economy. Virtually every industry from agriculture, electric power and industrial manufacturing to beverage, apparel, and tourism relies on it to grow and ultimately sustain their business.” Pacific Institute, Water Scarcity & Climate Change: Growing Risks for Businesses & Investors
According to New York-based Lux Research, the revenues of the world's water-related businesses will rise from $522 billion in 2007 to nearly $1 trillion by 2020, and global water shortages will drive the need for innovative water technology and efficiency of use. In Canada, we cannot afford to ignore the linkages between water and the economy.
The significance of water to the Canadian economy is in fact, comparable to the gross figures for agricultural production and other major economic components. Estimates of water’s measurable contribution to the Canadian economy range from $7.5 to $23 billion annually (Environment Canada, Threats to Water Availability).
Water is vital to the economic security of many of the nation's industrial activities. Water is a critical input in many goods and services produced here. For instance, most of our energy production processes require vast quantities of water, which is used to extract and process oil, for cooling in thermal power generation and to produce hydropower. Sustainable water supplies are vital to farmers for agricultural production and to those in the fishing industry. Our tourism and recreational industries are heavily dependent on Canada's rivers and lakes and huge quantities of water are consumed by the food and beverage industry.
The following sections highlight the importance of water to the Canadian economy:
- In 2005, over 82,000 people were employed in the commercial fishing industry - valued at $2.1 billion. At the same time, more than 3.2 million people participated in recreational fishing, contributing $7.5 billion to the Canadian economy (2009 Spring Report of the Commissioner of the Environment and Sustainable Development).
- In 2007, the Brookings Institute, a U.S. think tank, found that investing $26 billion in restoring Great Lakes ecosystems would create economic benefits in excess of $50 billion (Health Waters, Strong Economy: The Benefits of Restoring the Great Lakes Ecosystem)
Risks of undervaluing water
Many Canadians underestimate the value of water until they experience a water-related natural disaster and the financial repercussions of poor resource management.
- “Six of the top ten costliest disasters in Canadian history have been droughts, and their effects spread far beyond the agricultural sector. It can take decades for the land to fully recover” (CBC News, Parched Prairies: Latest drought a sign of things to come?).
- The total GDP loss due to the 2001-2002 drought amounted to $5.8 billion, making it one of Canada's largest natural disasters (E. Wheaton et al. 2005. Lessons Learned from the Canadian Drought Years 2001 and 2002).
- The Insurance bureau of Canada (IBC) estimates that insurance companies pay more in claims for flood damages than for fire and theft combined. It points to antiquated municipal infrastructure as the major cause of those damages. Storms in August 2005 in Toronto, for instance, cost the insurance industry $472 million in damages. (Daily Commercial News, Insurance Bureau of Canada calls for national action plan on infrastructure)