Strategies for water and renewables

US and China; a zero sum water challenge?

5th February 2015, 10:19

An article I penned a few years back talked about water scarcity and pollution being a constraint on Chinese economic gowth and even political stability. While nothing's happened since then to alter that view, one looming event in the west has made me think that China may not be alone in facing this threat, and that water stresses in any country can have implications way beyond its frontiers.

In Spring 2016 the newly extended Panama Canal will open for business. At a capital cost of $6bn, the deeper, longer and altogether more awe-inspiring engineering feat will permit a significant increase in trade, mostly from the west to Asia, and mostly in grain, oil, and LNG.   West-East grain exports through the Isthmus doubled between 2013 and 2014, and the extended Canal, offering bigger vessels and cheaper transport costs, will assist that trend.  Great news for China, which either lacks domestic resources of these commodities or the water reserves to develop them.

Good news too for US farmers and frackers alike. And for those US politicans who want to see a bigger international gas market and falling gas prices to weaken the economies of their old friends Russia, Iran and Venezuela.  But will the Canal just allow China to export its water headache to the US?  The US Govt. data for 2014 shows that the 50 year trend of warming and drying in the country continues unabated.  Texas, a centre of water-intensive oil and gas extraction is getting hotter, and the mid west grain belt (along with the coutry as a whole) is getting drier.  Abstraction from the aquifers underlying the mid west is above replenishment rates.   Ross Perot in 1992 famously referred to "the giant sucking sound" as US jobs went to Mexico. Will that sound now be that of China at the other end of a giant straw?

This may not be escaping policymakers' attention, and the signs are that tentative steps are being taken to address the matter.  In November 2014, in announcing a lengthening and broadening of the mandate of the US-China joint Clean Energy Research Council (CERC), Presidents Obama and Xi Jinping said that it would also henceforth address water scarcity and efficiency.  Coincidence, or do they see the potential for water scarcity to become a zero-sum game between the World's two largest economies?