The cost of water scarcity – THE NEWS
Alarming data on water scarcity is being presented by a new report by the European Central Bank, especially for the European South, which includes Greece. Tooling the so -called « Nature Value At Risk » framework, the ECB recording a reality that already « shouts » from the agricultural sector and spreads to many sectors and ends in the economy and banking sector.
The report was made public by the ECB on its blog, in collaboration with the Resilient Planet Finance Lab of the University of Oxford. There are also referring to the environment and business risks and warnings about the impact of climate burden on the financial sector.
According to the findings, Greek agriculture is one of the most vulnerable in the eurozone, with up to 30% of its annual production threatened by a lack of surface water. The case is based on a scenario of intense drought that can occur once every 25 years. Significant risks are found in sectors: processing (20%), electricity production (20%), construction (20%), water supply and sewer (25%), mining activity (30%) and tourism services (20%). These are pilots of the Greek economy, while banks and insurance companies are threatened with the extent to the extent of exposure to these sectors (funding, insurance).
As the ECB’s study explains, water scarcity can also undermine financial stability. It can increase the likelihood that businesses are not able to repay their loans. This in turn reinforces the banks’ exposure on such loans.
The study analyzed loans of 2,500 euro area banks granted to non -financial companies. « We have found that more than 34% of their total outstanding nominal amount – that is, over 1.3 trillion euros – is currently granted in areas exposed to high risk of water scarcity. Within the portfolio of non -financial companies, manufacturing represents the largest share of the openings at risk, followed by wholesale and retail, real estate, construction and electricity production. «
In the long run, the effects of persistent water deficiency can spread to basic markets, increasing water and food prices and contributing to broader inflationary pressures.
Also, low water quality could affect the economic perspective, as Europe’s aquatic ecosystems are still severely affected by chemicals due to infection. Reductions in measured or perceived water quality have already led to a sharp reduction in tourist visits to the affected areas. This results in financial losses exceeding 100 billion euros a year, the ECB estimates.
Overall for Europe, as examined in the report, the agricultural sector and processing are the highest risk of droughts. Watering, natural flood protection and water quality are the most critical points that threaten natural ecosystems, slowing growth and leading to economic instability. Drought alone is at risk of almost 15% of the euro area economic production.
Chain effects
The lack of water can have a chain impact on multiple economic activities, the ECB notes, citing as a key example that dry soils reduce agricultural returns. Drought also affects industry by disrupting its functions and increasing costs. Reduction of river levels reduces hydroelectricity production, reduces electricity production and prevents the transports that are made in this way.
The greatest pressure due to drought is being accepted by southern Europe, but with the danger of the countries of Central and Northern Europe growing there. « Of all areas, agriculture is the most exposed, existing major proportionate production losses. Up to 30% of agricultural sectoral production is at risk in southern European countries, with the risk of further decreasing north – to about 12% in Finland, ”the reports show.
Industry, mining, utility utility businesses, construction and housing and catering services also have significant impacts. Over 20% of their production is at risk in Southern Europe and more than 10% elsewhere, the ECB warns.
