Watergy – The New Economy?

By Julian L. Wong 29 July, 2010

Julian Wong talks to China Water Risk about “watergy”, the trade-offs between food, energy and water for a sustainable economy and national security policy.

China has 20% of the world’s population but just 7% of the world’s freshwater resources.
Climate change exacerbates shortages in all three resources – water, food & energy.
Water price hike inevitable; potential farming subsidies.
Julian L. Wong
Author: Julian L. Wong
Julian L. Wong is the founder and author of The Green Leap Forward, a leading blog on China’s energy and environmental issues.  He is also the founder of the Beijing Energy Network, a grassroots professional network that promotes knowledge sharing and collaboration in the energy and environmental community in China. Until recently, Julian was a senior policy analyst at the Center for American Progress, a policy think tank in Washington, DC where he worked primarily on climate change, energy, and environmental policy issues relating to China.  Prior to joining CAP, Julian was a Fulbright scholar in Beijing researching China’s renewable energy policies, and a corporate lawyer at the international law firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP in New York and Hong Kong.  Julian has been a frequent commentator on Chinese energy policy in the media, and has testified before the U.S. Congress twice in the past year. Julian grew up in Singapore and received his J.D. and M.A. in environmental policy from DukeUniversity, and a B.A. in biology from Pomona College.
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All energy systems need water: extraction of coal, oil, natural gas, and uranium result in contamination of water tables and depletion of groundwater, thermal power requires water for steam generation or cooling, silicon solar panels use water in production, and perhaps the most obvious, water as feedstock for hydropower plants. Energy, on the other hand, is required to clean, purify, and distribute water as well as treat wastewater. Agriculture needs both energy and water to grow, process and distribute food. The links are obvious, the implications profound.

In a new report, The Food-Energy-Water Nexus: An Integrated Approach to Understanding China’s Resource Challenges, China and climate change analyst Julian Wong argues that in an increasingly resource constrained China, a holistic approach that recognizes trade-offs between food, energy and water is the future of natural resource management and the basis of a sustainable economy and national security policy.

China Water Risk asks Julian Wong to define watergy, the links between water and energy, the challenges that China faces in managing its already scarce resources and the new role of agriculture.

CWR: What is “watergy” or the water-energy nexus, and how is it relevant to China?

The water-energy nexus recognizes the inextricable link between two physical systems critical to our survival—water and energy.  Simply put, the way we manage and use one system has profound consequences for the other because many forms of energy resources we tap into require the use and consumption of water, while our continued use of water requires much energy for extracting, cleaning and delivering it to our homes, factories or fields.

We should care about this because of the very real limits to freshwater and traditional energy sources.  In China, these shortages are particularly acute. China has 20% of the world’s population but just 7% of the world’s freshwater resources.  At the same time, it imports most of its oil and gas, and even its supposed vast coal resources will eventually run out.

CWR: How does food fit into the picture?

There are two additional elements to be considered in the watergy paradigm– food and climate change.  Food has strong interlinkages with watergy, which means that it will be affected by whatever happens to our water and energy systems.

The real kicker is what climate change will do to all three systems. We are already seeing how increased warming is drying out many parts of China and reducing water availability, which in turn impacts agriculture. It gets even more complicated as China turns to building massive water diversion channels to move water from the south to the thirsty north. Such massive construction requires equally massive amounts of energy and also bulldozes over precious farmland.

As oil becomes an increasingly scarce resource, and also as an attempt to mitigate its carbon emissions, biofuels is explored as an alternative. The mass production of biofuels, if China reaches this stage, will compete with food (if not directly in terms of using corn for fuel instead of food, then indirectly in terms of using arable land) and water supply.

CWR: How does the Chinese government view “watergy”? Are there existing policies that integrate water, food and energy issues?

Julian: Well, this is tough. This is not just a problem in China, but in fact everywhere.  No government I know effectively looks at these interlinkages, although that said, there is a bill in the current U.S. Congress that seeks to begin to examine the water-energy nexus.  But in reality, no government is addressing this issue in planning decisions.  For China, given both the kind of constraints to all three systems and their particular vulnerability to climate change, which exacerbates shortages in all three resources, the need to incorporate integrated planning is particularly urgent.  This is something the government needs to be paying attention to quickly.

CWR: In your report, The Food-Energy-Water Nexus, you mention that raising water prices can have the unintended effect of farmers reducing crop output or overexploiting groundwater, which is already a serious issue in North China. Then there’s the fear of social unrest. How can China establish an appropriate value for water?

Julian: The biggest challenge is cushioning the social disruption that comes with raising water prices in the agricultural sector from essentially zero to something significant enough to influence behavior.  Increasing water tariffs has the potential to provoke unrest among farmers, something that the Chinese authorities will be careful to manage.  The rural agricultural sector, let’s not forget, is the traditional political base of the ruling Party.

So there is no easy way to do this other than to phase in price increases gradually, but this must also be complemented by increased support given to farmers in other areas to offset the impact of heightened water costs.

CWR: You mention that revitalizing the agricultural sector can offset the impacts of urbanization which is exacting huge pressures on water and energy resources. Can you talk more about how this could happen?

Julian: Well there first needs to be a proof of concept.  What I am suggesting is that we should not accept as a given that the only way to boost economic productivity is by urbanization, which is where the minds of China’s planners seem to be.  Urbanization inevitably creates a demand for all sorts of things, not least building materials, commodities to build infrastructure, power and energy, water, etc. However, the scale of urbanization, some 300 million people over the next two decades or so moving from rural to urban areas, is simply staggering.

It is hard to imagine any scenario in which China’s resource limits are not tested.  If that’s the case, it is worth re-examining how economic wealth can continue to be created in the countryside, and what role agriculture can play in that.  Are there ways to boost yields and extend the lifecycles of the land?  But in the back of my mind is the question of whether it is fair to prevent the rural farmer from seeking the comforts of an urban lifestyle.  This leads me to wonder if there is a useful role for agriculture in urban environments.  This is one area that deserves further work.

CWR: Another recently released report says subsistence farming will play a vital role in helping low income countries adapt to climate change. Would this be something China can embrace?

Julian: This will probably be the path that Chinese agricultural communities will have to embrace in order to sustain their agricultural activities. This is already taking shape in certain places such as the Loess Plateau.  Industrial farming, like operations in the West, are just not going to be sustainable in the long run for anyone in a resource-constrained world.  Smaller farms will be more sustainable.