By Julian Wong Feb.17.2009
In: agriculture, energy efficiency, policy, water
5 comments

China's New Water Efficiency Targets (and Implications for Food and Energy)

China has set itself a target to reduce water consumption per unit GDP by 60% by the year 2020, according to Chen Lei, the Minister of Water Resourced and Management.  This pronouncement comes in the wake of extreme drought conditions currently afflicting central and northern China, and statistics released over the weekend that shows China experiences an annual deficit of 40 billion cubic meters of water, with almost two thirds of all cities experiencing varying degrees of water shortage and 200 million rural dwellers facing drinking water shortages. Such ambitions are lofty but not the first time water efficiency goals has been made official policy; in 2007, it set the target of reducing “water intensity” by 20% for the five year period ending 2010.

The water efficiency policies also bear the hallmark of the “intensity” approach applied to national energy efficiency policies.  By 2010, China is targeting a 20% reduction in energy consumption per unit of GDP compared to 2005 levels.  Such water intensity or energy intensity targets give planners, to the extent that water and energy use is genuinely coupled to GDP growth, the leeway to continue policies promoting GDPism.  Unabated pursuit of GDP growth is a contentious issue, but perhaps a discussion better addressed in future post.  In the interim, reductions in water and energy intensity is a step in the right direction.

Agriculture:  The Big Water Drain

So what strategies should be pursued to reduce water intensity?  A few facts on China’s water situation bear repeating:

  • There’s a huge north-south water allocation and demographic mismatch that is created the impetus for massive hydraulic projects to divert water from the water-plenty southern regions to water-scarce northern regions.
  • Per capita water resources of China are 2,200 cubic meters, a mere third of the global average.  In water-scarce northern regions, they are even lower, anywhere from 350 to 750 cubic meters, making inhabitants in these parts extremely vulnerable.
  • Agriculture accounts for 65% of China’s water use but just 15% of the nation’s GDP.
  • Water is a severely under-priced commodity in China, and especially so for the agricultural sector:  According to statistics in 2000 (see slide 6 of this slide presentation), water prices to urban and industrial customers were US$0.15 and $0.16 per cubic meter, respectively, while those to the agricultural customers were a mere $0.01.  This is in contrast to $0.35, $0.28 and $0.23 for the same sectors in the U.S.

Clearly, water situation is grave and reform is badly needed.  The above facts strongly suggest that any strategy to reduce overall water intensity must focus on making the agricultural sector more water-efficient, or shift water use from agricultural to non-agricultural sectors.  Water pricing seems to be a major issue and many water policy recommendations, such as these included in a recent World Bank report, call for a reform in water pricing and allocation.    One must be careful, however, in assuming that the best way to boost water efficiency in agricultural areas is merely boost water prices in those areas.  A recent study in three irrigation districts in China yielded startling conclusions:

The examination shows that farmers will reduce the rice area [GLF: and presumably switch to less water-intensive crops] as a response to the rising surface water prices. The changing cropping pattern will exert three-fold environmental impacts, including the dropping groundwater level resulting from the reduction of seepage and percolation of irrigated water and overexploitation of groundwater, the negative effect of non-point pollution from fertilizer and pesticide application, and the loss of field irrigation facilities. Water pricing is not a valid means of significantly reducing agricultural water consumption due to the substitution of groundwater for surface water, it will lead to negative environmental effect.

If such results are broadly applicable to the rest of the country, is vital that they capture the attention of policymakers.   Vaclav Smil, noted energy, water and agriculture scholar from the University of Manitoba, explains in this article why the water requirements of agriculture are so lopsided compared to industry, suggesting that the observed high water intensity witnessed in China’s agricultural sector may not simply a function of inefficient irrigation practices:

…virtual water for industry is a decidedly minor concern when compared with aggregate needs in agriculture. The reason is that photosynthesis involves an inherently, and extremely, lopsided trade-off between CO2 and H2O. The difference between the concentration of water vapor inside the leaves and in the ambient air is two orders of magnitude higher than the difference between external and internal CO2 levels. So as the stomata of leaves open take in the requisite CO2, water vapor streams out.

We’ll talk more about “virtual water” later, but Professor Smil’s observation does suggest then that a big part of agriculture’s water needs are bounded by the laws of nature.  The complex interactions of water and food production (and energy as we have discussed before and will again below) must be fully grasped or can result in disastrous, unintended side-effects.  Instead, such non-linear relationships call for integrated water, agricultural and energy policies that  address system-to-system trade-offs.

Watergy

An excellent paper that examines China’s water-energy nexus (or watergy, as some call it), particularly from angle of the energy implications of water use, is (the energy-intensity of water use and, conversely, the water-intensity of energy use), monetary (the interactions of energy and water prices as a result of the physical relationship), and distributive (the energy implications of water allocation, i.e. how much energy will be needed to divert water from water-rich to water-scarce regions or from water-intensive to water-efficient sectors). With these relationships in mind, the Berekeley researchers crunched the numbers, analyzed the trends, and concluded:

  1. The direct and indirect (embodied) energy use for non-agricultural sectors accounts for a very small fraction of China’s total energy consumption.  This observation, however, does not take into account steady increases in water treatment capacity in urban areas and massive hydraulic infrastructure projects such as Three Gorges Dam and the South-North Water Diversion Project.  The embodied energy requirements (think about all that glass, steel and cement needed) for these infrastructure build outs is likely to be significant.
  2. Because of low water prices, the energy-water price interactions are of little interest to policymakers at present (“As we demonstrate, final demand sectors are an order of magnitude more vulnerable to changes in electricity prices than non-agricultural water prices and two orders of magnitude more vulnerable to changes in direct electricity prices than the electricity costs embodied in these water prices”). This conclusion changes, however, to the extent planners undertake water price reform, which may be spurred, amongst other drivers, by the increased energy intensity of water treatment and hydraulic infrastructure mentioned in #1 above.
  3. The migration of water use from agriculture (which has the highest water-intensity of any economic sector) to non-agricultural sectors will pose important energy-water use trade-off implications for policymakers to consider.  For instance, a shift of water use from the agricultural sector to manufacturing sector may reduce water intensity, but also increase energy-intensity.  On the other hand, a shift from agriculture to services (instead of to manufacturing), while reducing energy-intensity vis-a-vis manufacturing, results in higher water-intensity compared to manufacturing.

Eventually, we should expect to see water resources being discussed along similar lines as energy.  Thus, we might see water allocation mechanisms not unlike carbon cap-and-trade systems.  We will certainly see water price reform at some point in the same way that we are seeing energy price reform today.  When the price of water begins reflecting its scarcity value, water service companies (WSCOs) that are modeled after energy service companies (ESCOs) will emerge as a new business sector to help customers seal up those leaky pipes.  And we will also be talking about embodied water, water footprints, or virtual water, as much as we are talking about embodied energy or carbon, or carbon footprints.  In fact, what the Berkeley report does well is talk about water in holistic life-cycle terms, i.e. what is the total amount of water used in the life-cycle of the good or service in its production.  This is a great segue to the concept of virtual water, which opens up some international trade dimensions to the discussion.

Virtual water

Professor Tony Allen of University of London–Kings College is credited coming up with the virtual water concept in the early 1990s.  An analysis of virtual water–which is essentially the total amount of water consumed as throughout the life-cycle of a good in question–is interesting because it presents certain trade policy options.  One study suggests that international trade has led to a 28% in virtual water savings by importers of agricultural products taking advantage of lower virtual water footprints of exporting countries.  Accordingly, one might wonder if is possible for China to trade its way out of its water and food scarcity problems via the import of grain (and the virtual water so implicated).  As the diagram below shows, China is already a heavy net importer of virtual water.

Regional virtual water balances and net interregional virtual water flows related to the trade in agricultural products.Period: 1997-2001. Only the biggest net flows (>10 Gm3/yr) are shown.  Source:  Water Footprint Network

Yet, Professor Smil of the University of Manitoba explains that imports alone will be unable to keep up with the demographic shifts implicated in China’s growth, namely population growth, increasing meat-based diets (and hence increased demand for water-intensive grain), and increased urbanization at the expense of arable land.  Moreover, relying foreign sources for food would be a losing proposition for the simple fact that it will terrify China’s national security planners who have touted the philosophy of self-sufficiency.  Indeed, China has been so uncompromising on this principle of self-sufficiency, notes Paul Roberts in The End of Food, that it refused imports for decades despite bouts of mass famines, and led the government to embark one of the most drastic and most controversial socio-economic programs–the one-child policy.

(For more on international trade and virtual water, consult the website of the Water Footprint Network, or this authoritative 244-page collection of papers edited by A.Y. Hoekstra, which was the precursor of one of the seminal papers in the field by A.K. Chapagain and A.Y. Hoekstra in 2004, “The Water Footprints of Nations“)

So, unfortunately, there seem to be no easy solutions, of which sensible carnivory will have to play a part of, according to Professor Smil.  Taken together, the above discussion points to a highly complex and nuanced relationship governing the food-water-energy trilemma.  We need policymakers who can adeptly navigate the technical and policy implications of these three systems, and who can then take this understanding to craft integrated, sound policies.  Nothing short of China’s national security depends on this, as this blog and China Green Space have explained.

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  1. The Green Leap Forward 绿跃进 » China’s Green Predicament: Glass Half Empty of Half Full? Apr.25.2009@2:55 pm Reply

    [...] of this blog will be familiar with programs like China’s national energy and water intensity targets and the Top-1000 Energy Consuming Enterprises [...]

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