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The concept of virtual water

It was invented by Tony Allan, who explains how much water is used to produce non-food consumer goods, including energy.

by Tony Allan
20 March 2020
17 min read
byTony Allan
20 March 2020
17 min read

This article is taken from World Energy (WE) number 46 – Water stories

The concept of virtual water is important because it enables us to understand why we enjoy the illusion of water and food security despite strong evidence that the water resources available to sustain our national economies are inadequate.
What is virtual water? Virtual water is the water embodied in the production of food and fiber and non-food commodities, including energy. For example, it requires about 1300 tons (cubic meters) of water to produce a ton of wheat and 16000 tons (cubic meters) of water to produce a ton of beef. Thus, someone who eats a lot of beef can consume as much as five cubic meters of embodied water daily, whereas a vegetarian will consume only about 2.5 cubic meters. Production of a cotton T-shirt weighing about 250 grams requires about 2.7 cubic meters of water.  

Hoekstra and Mekonnen estimated that the global annual average water footprint of humanity was about 9,087 billion m3/year. This is a tiny proportion of global blue and green water and approximates the blue water flow of the Amazon, the world’s largest river. But it is the volume of water our rainfed farmers and irrigators have been able to use in the farmland they have converted from natural vegetation. Agricultural production accounts for about 92 percent of global water consumption, industry accounts for about 4.4 percent and household water consumption about 3.6 percent. They also estimated that the total volume of international virtual water “flows” related to trade in agricultural and industrial products was 2,320 billion m3/year. 

The concept of virtual water—the water embodied in food and non-food commodities—helps explain why our unsustainable political economies of food-water resources exist. More importantly the concept explains why the existence of the dysfunctional food system can be so effectively backgrounded politically. 

Types of water and competition to water

This is a food-water story rather than a non-food-water story because much more water is consumed in producing food than in any other economic or social activity. The world population is currently over 7.5 billion and predicted to rise to over 11.5 billion by the end of the century. Levels of competition for water are in most places unsustainable, and the current dysfunctional food and water consumption systems are retained at the expense of the health of the planet’s natural water. 

Society and its legislators are poorly informed on the emotional issue of water security, although there is general awareness that access to essential volumes of water is fundamental to the existence of a secure food system and a stable society. There are occasional food-water crises, but they come and thus far go away. It has proved politically feasible to background the fact that our water systems are economically and environmentally unsustainable, but the increasingly intense climate change debate has exposed the need to improve the health of Nature’s water ecosystems. Unfortunately, the policy agenda is congested, and water allocation and management tend to be crowded out by other critical issues.

There are the two major types of natural water. First, blue water exists in flows and storages of freshwater that exist at the land surface and in groundwater systems. Blue water can be easily pumped and engineered and can, with difficulty, be valued.  The demands for blue water are diverse, as it can be consumed in all economic activities including the generation of energy. It is normally over-used because blue water cannot look after itself and is vulnerable to over-consumption. Unregulated farmers, energy generators and industrial and household consumers can pump last year’s water if it is in a reservoir. They can, unfortunately, also consume the water that might be in a reservoir next year.

Second, green water, known as effective rainfall by some water scientist, exists as flows and storage in the soil profiles of farmland and natural landscapes. It cannot be pumped or moved, except as virtual water embedded in food supply chains. Farmers access green water on behalf of society. They can do this because they work with the biggest pumps in the world:  vegetation and crops have the capacity to pump green water upwards. This water can in turn be moved as virtual water to food consumers. Engineers and shippers can only dream of pipelines and transportation systems that could move the equivalent volumes of real water. The world’s food supply chains move water invisibly at negligible cost as the virtual water in food supply chains.

Green water consumption is limited to sustaining natural vegetation and producing local crops. The competition for green water is between irrigators and nature. Green water is extremely difficult to value as it is associated with low value outputs. Unfortunately, the costs of mobilizing or protecting green water are not taken into account in our food systems. However, green water can to some extent look after itself as farmers can only use the green water actually available for the current season. The important thing to know is that a ton (cubic meter) of green water can produce as much food as a ton of blue water. Ignoring this fact will lead to bad water policy. 

There are also two main types of water consumption. Food-water consumption and non-food-water consumption. Food-water can be blue or green. Non-food-water is always blue.  The difference between water use and water consumption is also very important as high rates of blue water re-use can be achieved in non-food systems. In highly developed economies, in California and Israel for example, levels of re-use as high as 80 percent have been achieved in non-food-water uses. 

The main purpose of this introduction has been to foreground the idea that the water resources consumed by society are not just the 30 percent which are blue water resources. Green water resources produce most of society’s food and fiber needs and green water accounts for 80 percent of the virtual water embodied in the 20 percent of food that is traded internationally. 

Virtual water and international trade

It is the idea of international ‘trade’ in virtual water that has the biggest explanatory power. Figure 2 conveys the global reach and scale of virtual water ‘trade’. It also shows the extreme asymmetry of this ‘trade’ in terms of the small number of major virtual water ‘exporters’—Canada, USA, Brazil, Argentina, Australia and India and the very large number—over 160—of virtual water ‘importers.’ Russia and Ukraine have joined the group of major virtual water ‘exporters’ since 2000 after the fall of communism and the integration of their grain exports into the 150 year old global food trading system dominated by US and French food commodity traders.  These four ABCD corporates are the commodity traders ADM, Bunge, Cargill and Dreyfus, and they have been joined by Glencore (Switzerland) and COFCO (China).

Figure 3 trends in the past half century in the export and import of food and its virtual water content. On the left of the diagram there are seven economies well endowed with green and blue water resources as well as with farmland that enables them to be net virtual water ‘exporters.’ Australia is in this category because it has a small population. The net virtual water importers—there are in excess of 160  of them—are shown on the right of the diagram. 

The idea that water can be embodied in goods and services is very powerful when it is deployed in the analysis of international trade and food security. An economy that imports food and manufactured commodities is apparently weak. But for the past 150 years, food importers have been beneficiaries of an economically and environmentally irrational system. Importers have not had to endure the daunting economic and political stress of mobilizing water resources from within their own water scarce economies. Food and virtual water were available at low or no cost on the world market. Nor do they have to seriously damage their own biodiverse environments in producing food. It is estimated that food and fiber production accounts for 92 percent of society’s water consumption and for 66 percent of society’s negative impacts on the world’s biodiverse environment. Since farmers provide food production services and ecosystem stewardship services, farming is the economic activity that most negatively impacts our water resources and other natural ecosystems. We should, but don't yet, value the stewardship services provided by farmers. It should be noted that many farmers across the world have grasped the importance of what is called regenerative agriculture. It involves the adoption of no till practices, cover cropping and rotational cropping. The establishment of the system has usually been farmer led. Farmers have often shown that they are more responsible than scientists and governments.

The most important characteristic of virtual water ‘trade’ is that it is effective in meeting society’s vital needs and at the same time is economically invisible and politically silent. It enables those water scarce to enjoy an affordable version of food and water security. Politicians dream of such stress-free solutions to what otherwise would be terminal disorder.

How virtual water was identified

The progressive increase in the demand for food commodities and for industrial goods and services in the second half of the 20th century progressively forced more and more economies into the category of net food importers.  (Allan 2011) These countries did not have the water resources for them to be food and water self-sufficient. By the 1960s, there were many influential voices, especially in the water scarce Middle East and North Africa (MENA), predicting water wars.  I followed this debate closely from the mid-1960s, and by the mid-1980s the population of the region had almost doubled as had food demand. For two decades, water wars discourse had raged but no one was explaining the absence of armed conflict. National leaders did not need to explain the contradiction, and apparently they were handling difficult water resource issues effectively. There were no international water wars and street violence over occasional volatile food prices was rare. 

As a water scientist, however, I needed to explain the absence of water wars. I was searching for economic processes that enabled economies such as Egypt to transition from water self-sufficiency into water deficit without apparent economic or political stress.  

In the late 1980s, when investigating Egypt’s food commodity trade, I noticed that in 1972 its wheat and flour imports started to rise from a very low level to a high level. Here was the answer to the absence of water wars. If you had to import food because you had run out of water, it was not a problem. Food importers were in a very privileged position.  Food exporting economies charge neither for water consumed in food production nor for the costs of damaging their water ecosystems and their natural biodiversity. The biggest attraction, however, of importing food staples such as wheat has been that the food commodity prices enjoyed by importers of staple grains did not even reflect the full costs of farm production. Prices were subsidized by the exporters, and they remain subsidized.  Importing underpriced food is a no brainer for those managing low income and water scarce economies. 

Figure 1 highlights the exceptional 1970s. There were two oil price spikes and associated food commodity price spikes in 1974 and 1979 and frightening rates of inflation. International food prices soared briefly and the former Soviet Union withdrew from the MENA region. It was an extraordinary decade of global oil and food politics. (Woertz 2013) which cannot be analyzed fully here. Suffice it to say the decade showed that politicians everywhere were very keen to align to ensure that the regime of under priced food returned as soon as possible. The global food system was and remains a dysfunctional political economy that does not operate according to the assumptions of economists. The economically invisible and politically silent ‘trade’ in virtual water operated throughout to make it possible to keep in place the social contract between politicians and people that food prices would fall rather than rise. 

In the late 1980s, I called the water embodied in international food commodity trade embedded water.  I decided to adopt the term virtual water in about 1992 when it was used during a weekly seminar in the University of London. I and many water scientists did not like the term, but it was evident that it had immediate popular appeal. Many water scientists still do not like the term but it is now widely used by water resource professionals in water science and policy.

Why is virtual water vital but economically invisible

Secure access to water and affordable food are very emotional issues and they can easily incite destabilizing politics. Politicians have long made social contracts with their underpaid people to provide under priced food and free virtual water.  This necessary but awkward contract needs to be handled carefully. When economies run out of water, they have to resort to ‘importing’ virtual water embodied in food. Governments in both high-income and low-income economies need to ensure that low cost food is available for those on low incomes. The United States provides food welfare for about 40 million people, or 14 percent of its own population, and it also provides high levels of food welfare for scores of the world’s economies. Most important it determines levels of international food prices. It has become normal for most economies in the world to enjoy the benefits of underpriced food and free virtual water. But these food prices do not capture the costs of the food system and the result is a system that damages both the environments of food exporters and the long term food security of future global populations.   This remarkable political economy can only exist if it is economically invisible and politically silent, but it is self-harming for the United States and other food exporters. 

US economic and environmental policies

The so-called dust bowl of the 1930s was a tragic rain-fed and green water mismanaging experiment that seriously harmed US farmland. The US lost vast volumes of soil as a consequence of deep ploughing soils vulnerable to wind erosion. Conservation measures were introduced and belatedly, 80 years later, soil and soil health are being valued as environmental capital. However, by the 1980s, farmers in the same plains of the Midwest were imposing an even worse version of irreversible degradation. This time it is the natural capital of blue water in the vast Ogallala aquifers that has suffered, and US groundwater systems have paid the price. The United States has operated self-harming land and water managing policies for over a century. Despite the clear need to steward as well as consume precious groundwater, US agricultural policy has been misallocating water to unsustainable farming systems. These systems include cereal production to keep in place an unsustainable first-generation bio-energy project, an environmentally unsustainable feedlot beef project and the production of rice and cotton in sub-optimum conditions. The US is able to continue to operate its self-harming policies because it does not internalize their real costs. These policies are currently being strongly endorsed by President Trump and his secretary of agriculture. US farmers are currently being urged to export more food without charging the full cost of production or accounting for the negative impacts on US ecosystems. 

In the arcane prioritization that takes place in the political economy of international food supply chains, there are a number of politically feasible outcomes. One of them is that US farm livelihoods will continue to receive the support of public funds and the US, and the world’s, underpaid will have access to under priced food.  This system enables the US to continue to exert a measure of control over global food security. It operates a global food welfare system which tends to lower international food commodity prices. It is a system to which the world has become accustomed and one that stabilizes a critical element of the global political economy—namely food production and consumption. 

We are left to question whether the US can afford to keep this system in place.  Or should it instead start to reverse the policies that are degrading its environmental capital in ‘exports’ of food and virtual water. Adopting this approach is not yet politically feasible, but it could guarantee the global water and food security of the human population in the second half of the twenty-first century.

 

The author: Tony Allan

A scientist and professor, Allan is recognized as a world authority on water-related issues and a prominent voice for sustainable water development. Professor of Geography at King's College, University of London and Emeritus Professor at the University of London's School of Oriental and African Studies, in 2008 he received the prestigious Stockholm Water Prize for his pioneering contributions to understanding and communicating water problems. In 1993 he introduced the concept of “virtual water”.