Water risk factor now 'closing in' on global coal industry
Businesses need to urgently address unmanaged water risks as new research highlights that more than half of the world's largest coal-producing and consuming countries are now facing high levels of water stress.
A study from the World Resources Institute (WRI) points out that five of the world's top coal producing/consuming countries - India, Japan, Indonesia, Kazakhstan and South Korea - are located on the Asian continent, a region which is particularly vulnerable to water stress.
Water is essential for energy production and regional water concerns are creating significant financial risks, largely due to advanced global commodity trading and energy industries' high dependence on water.
The WRI warns this trend is poised to worsen - BP has projected a 36% increase in global energy consumption by 2030 while the Water Resources Group predicts that in the same amount of time, freshwater supplies will fall 40% short of total demand globally.
If water risks are left unmanaged, this could have serious financial consequences for both national and international companies. The WRI is calling for the coal industry hold itself accountable by assessing water risks more deliberately and broadly, and taking action to respond to the challenges.
Mitigation measures could include developing innovative technology solutions and undertaking public policy engagement to collectively reduce shared water risks as a form of advanced water stewardship. This approach is backed by the likes of Nestlé, whose chairman Peter Brabeck-Letmathe has been particularly vocal on such issues.
Furthermore, WRI argues that governments should protect water resources and encourage energy projects that face fewer risks from water stress and limits on greenhouse gas emissions. Those cautionary measures will better align policymaking with water and energy planning, and balance resource constraints with economic growth.
In a paper for Cornerstone, the World Coal Association journal, WRI researchers refer to case studies in China and India where lessons could be learned. For instance, recent guidelines from China's Ministry of Water Resources are set to limit coal expansion based on regional water capacity, and may slow down coal-project approvals.
The guidelines will also push companies to pay for wastewater recycling and wastewater treatment systems. That large capital investment, combined with higher annual operating costs, means that companies must take a long-term view, the paper points out.
Infrastructure investments, including backup supply reservoirs and desalination plants, will also better secure long-term business growth, but this requires up-front investment. The Energy & Resources Institute in India recommends third-party, regular water audits, as well as standards for water consumption in the power sector.