Chapter 01

Introduction: Transforming the World's Understanding of the Economics of Water

Water moves around the globe in a complex and often invisible manner known as the hydrological cycle. Life, as we know it, relies on this cycle and impacts it at the same time. As this report explains, the world faces unprecedented changes to precipitation – the source of freshwater – with consequences for local and global well-being, today and for all generations to come.

A narrow view of the scale and scope of water, its connection across livelihoods and with each of the Earth’s ecosystems, has resulted in economic systems and incentives that misalign with the true and multiple values of water, which cultures and societies around the world have held for generations. The failure to acknowledge the economic, environmental, and societal contributions of water remains a significant obstacle to local and global progress, including realising the United Nations (UN) Sustainable Development Goals (SDGs) and ambitions to mitigate climate change.

The Global Commission on the Economics of Water (GCEW) calls for bolder thinking and more integrated policy frameworks locally and globally. We seek in this report to advance a new economics of water:

One that recognises the hydrological cycle as a global common good, understanding that it connects countries and regions through both the water that we see and atmospheric moisture flows; that it is deeply interconnected with climate change and the loss of biodiversity with each rebounding on the other; and that impacts virtually all the SDGs.

One that transforms water governance at every scale, from local to river basin to global, to ensure it is managed more efficiently, delivers access and justice for all, and sustains the Earth’s ecosystems.

One that brings together fundamental economic concepts and tools, most critically to value water properly to reflect its scarcity and the multiple benefits it provides as the Earth’s most precious resource.

One that tackles externalities caused by the misuse and pollution of water but shifts from fixing them after the fact to shaping economies so that water is used efficiently, equitably, and sustainably from the start.

One that spurs a wave of innovations, capacity-building and investments, evaluating them not in terms of short-run costs and benefits but for how they can catalyse long-run, economy wide benefits and hence dynamic efficiency gains through learning, scale economies and cost reductions.

One that recognises that the costs entailed in these actions are very small in comparison to the harm that continued inaction will inflict on economies and humanity.

Introduction: Transforming the World's Understanding of the Economics of Water

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