Policy and governance responses to the water-energy nexus challengeKathleen Dominique, Environmental Economist, OECD

Water and energy scenarios

Water demand to increase by 55% by 2050

Global water demand, baseline 2000 and 2050

Rapidly growing

water demand from

cities, industry and

energy suppliers

will challenge water

for irrigation to

2050.

Source: OECD (2012), OECD Environmental Outlook to 2050; output from IMAGE

Change in annual temperature from 1990-2050

Human and economic costs of a changing climate: uncertain future for freshwater

Source: OECD (2012), OECD Environmental Outlook to 2050; output from IMAGE

Almost 40%

of people in 2050

(3.9 billion) will live

in severely water-

stressed regions

Outlook for water requirements for energy production

Global water use for energy production by scenario

In the period 2010-

2035, water

withdrawal for

energy increases by

20% and water

consumption for

energy increases by

85%.

Source: IEA (2012), IEA World Energy Outlook, Chapter 17 “Water for Energy”.

Outlook for water requirements for energy productionGlobal water use for energy production in the New Policies Scenario by

fuel and power generation type

Global electricity

generation grows by

some 70% over 2010-

2035, more than

water withdrawal or

consumption for

power generation.Source: IEA (2012), IEA World Energy Outlook, Chapter 17 “Water for Energy”.

Projected shifts in water-intensity of energy production

Withdrawal-intensity

falls by 23%, while

consumption-intensity

increases by almost

18%.

Source: IEA (2012), IEA World Energy Outlook, Chapter 17 “Water for Energy”.

Regional stress points: the example of ChinaRenewable water resources per capita and distribution of water-intensive energy

production by type in China

Source: IEA (2012), IEA World Energy Outlook, Chapter 17 “Water for Energy”.

Policy and governance responses

Improving coherence between water and energy policies

Strong water-energy linkages, yet often incoherent policies settings

Improved coherence requires meeting multiple policy objectives for water and energy

• Improving water security (managing risks of “too little”, “too much”, “too polluted” water and ensuring resilience of freshwater ecosystems)

• Increasing energy security

• Mitigating and adapting to climate change

Pursuing policy objectives independently often leads to incoherence (“water-blind” energy policies, “energy-blind” water policies)

Various technological options impact water and energy policy objectives in different ways

• Help achievement objective(s) • Hinder achievement of objective(s)• Require trade-offs among objective(s)• No appreciable impact on objective(s)

“Win-win” technological options for both water and energy• E.g. low-flow fixtures, energy efficient appliances

Trade-offs required for water and energy• E.g. irrigated biofuels, groundwater pumping

Improving coherence between water and energy

Approaches to enhancing policy coherence

Exploiting win-wins• Pursuing multiple policy objectives at the same time • Examples: increasing water and energy efficiency; lowering water consumption through

conservation, labelling of water-efficient appliances, etc. (Singapore)

Avoiding conflicts• Pursuing one policy objective without undermining others• Examples: Requiring solar hot water systems on new buildings (Israel); use of waste heat

from thermoelectric power plants to desalinate seawater to produce reliable drinking water (Middle East)

Managing trade-offs• Minimising negative impacts on other policies• Examples: Recycling effluent from biorefineries to reduce negative impacts on freshwater

ecosystems (Brazil); Co-ordination between policies for water allocation and energy explicitly (Israel).

Robust water resource allocation • To promote efficient, flexible, equitable risk sharing among water users

Remove environmentally-harmful subsidies • For example, subsidies for energy use that exacerbate groundwater pumping

Make better use of economic instruments

• E.g. water pricing, abstraction charges, pollution charges

Generate better data to inform policy decisions

Policy options to improve incentives and information

Governance challenges for water-energy coherence

Multiple institutional gaps • Lack of institutional incentives

• Lack of platforms/ governance mechanisms to manage trade-offs

• Interference of lobbies

• Absence of strategic planning and sequencing decisions

• Asymmetry of information and resources among institutions

• Intense competition between different ministries and public agencies

Improving governance and partnerships

Efforts to better co-ordinate water and energy policies, examples of good practice:

• Brazil: to limit negative impact on freshwater ecosystems, legal framework requires previous authorisation from ANA for concessions to exploit hydropower potential.

• Spain: the National Water Council includes representatives from the energy sector.

• England and Wales: Environment Agency working with the Energy Saving Trust to develop policy to reduce hot water use in the home.

• Australia: researchers have created the Climate-Energy-Water Links project to add the energy dimension to water resources planning and policies.

Thank you. Questions?

References OECD (2012) Environmental Outlook to 2050: The consequences of inaction. IEA (2012) World Energy Outlook, Chapter 17 “Water for energy”. IEA (2012) Golden Rules for a Golden Age of Gas. OECD (2013) Water Security for Better Lives. OECD (2013) Water and Climate Change Adaptation: Policies to Navigate

Uncharted Waters. OECD (2011) Water Governance in OECD Countries: A Multilevel Approach OECD work on water: www.oecd.org/water

ContactsKathleen.Dominique@oecd.org (OECD, Water allocation; water and climate change) Matthew.Frank@iea.org (IEA, Water for energy), Aziza.Akhmouch@oecd.org (OECD, Water governance)