The water-energy-food nexus: an essential tool for sustainable investment

Development Policy26 Oct 2015Rimma Dankova, Giovanni Munoz, Lucie Pluschke

Agriculture uses large amounts of water and energy to produce food. Sustainable food production requires greater attention to the interrelated nature of our global resource system. In support of food security and sustainable agriculture, the Food and Agriculture Organization of the United Nations (FAO) has adopted an approach based on the water-energy-food nexus. This article focuses on the role of this nexus approach in designing and implementing sustainable investments. It is part of a series of articles by The Broker on the water, food and energy nexus approach. The first article stressed the importance of this approach to optimize multi-purpose water infrastructure to supply water to cities and industry. The second focused on the application of this approach to the Millennium Development Goals. 

Population growth, rapid urbanization, changing diets, economic development − these are just some of the factors driving increased demand for water, energy and food. Agriculture is the largest consumer of the world’s freshwater resources, while more than a quarter of the energy used globally goes toward the food production and supply chain. If we are to feed a global population expected to reach 9 billion by 2050, we will have to increase current levels of food production by 60% over the same period.

The challenge is to invest in boosting production, while also safeguarding the natural environment for future generations. And it is a big challenge, as competition over limited natural resources will continue to intensify in the coming years, with the impact of climate change further complicating the situation. That is why understanding and analysing the complex and dynamic links between water, energy and food is so important and should be considered through the lens of the inter-sectoral and inter-disciplinary food-water-energy approach. This approach enables analysis of how a decision in one sector can have an impact on another and how to anticipate trade-offs, while also building synergies among different natural resource users in order to achieve sustainable food security.

Informing policy-making

Government policies, strategies and regulations should create an enabling environment for public and private investment in agriculture. The importance of adopting a holistic approach to issues related to water, energy and food security needs to be understood by policy-makers. The interrelationship between water, energy and food manifests itself at different scales and national governments have a key role to play in integrating the nexus approach into national policies and investment development plans, as well as in policies related to regional and border relations. Failure to do so could lead to tensions and suboptimal investment decisions. It could also lead to financial and economic losses when, for example, infrastructure development does not cater for multiple purposes. Well-designed public policies that take the water, energy and food nexus into account can provide incentives, like prices and subsidies, for a better allocation of resources and more environment-friendly decisions.

Adopting the nexus approach at the regional level allows for the benefits of transboundary cooperation strategies to be identified. For example, about a third of the water consumed by downstream countries in the Aral Sea basin, particularly in Uzbekistan and Turkmenistan, is used to irrigate wheat. This region is very arid, but northern Kazakhstan has good soil and a climate suitable for growing rainfed wheat, which is exported in large quantities. If countries in the region could agree on having a regional market for wheat, it would reduce irrigation requirements in downstream countries. By securing wheat imports from the regional market, downstream countries could focus on more high-value crops that require less water, reducing pressure on the system.

Translating the nexus ideas into policy-making requires an inter-sectoral response involving a broad range of stakeholders – sector ministries, NGOs, academia, civil society and the private sector. These stakeholders need to understand the importance of discussing and reaching a consensus on food, water and energy issues.

Making nexus-proof investments

At the planning and design stage, an analysis of nexus interactions will help investment decision-makers understand the long-term impact of investments across different sectors and users. Such an analysis would encourage greater coordination across sectors and has implications for investment design at different scales – from farms to watersheds. The nexus approach is applicable at the regional level where investments in one country could positively or negatively affect economic development in others. This approach allows not only the identification of possible trade-offs, such as the risk of unsustainable water pumping to irrigate crops, but also synergies, whereby an investment in one sector benefits the others.

The nexus approach can be useful in ensuring that investments are responsible and sustainable. For example, in western and southern India water is scarce and electricity subsidies are high. These subsidies provided people with virtually free energy, making groundwater extraction for irrigation attractive. Such subsidies are now almost a political necessity, regardless of the heavy financial burden they pose, and taking them away would have serious political repercussions.

In response, the state government of Karnataka came up with the idea of using solar power to pump groundwater, which has much lower operation and maintenance costs. But with free energy for pumping, there is a great risk that groundwater resources are being overexploited and water is becoming scarcer. Karnataka had to rethink how it could regulate the use of solar pumps, while also ensuring that farmers use the water they pump efficiently. It decided to issue a new policy to promote solar irrigation, while at the same time providing an incentive for farmers to conserve water and energy. The idea is to allow farmers to sell their surplus solar energy to the grid. Therefore, instead of using the energy to pump water, they can exchange it for cash.

Joint infrastructure ventures between countries can also provide good options for investment decisions over shared resources. Upstream and downstream countries could build infrastructure together, allowing the water used to produce energy in the winter to flow to another nearby dam downstream where it could be stored until the summer for irrigation in downstream countries. This would require countries to invest jointly in infrastructure and its management to maximize the total benefits of investment in terms of energy and water use, producing mutually beneficial results.

Looking at the entire food supply chain from the nexus perspective, about 80% of energy use happens after the farm gate, whereas, for water, about 70% is used at the farm gate and only 30% after. If the goal is to waste less energy and water, investing along the whole supply chain − including in transport, storage, food processing, marketing − makes better sense economically. It allows us to maximize the total benefits of investment in terms of energy and water use.

Hence, there are two dimensions in which the nexus approach can be useful in designing and appraising investments involving a broad range of stakeholders. First, by focusing on optimizing resource use, the approach enhances understanding, for example, of how investment in a multi-purpose water supply system can meet the different water, food and energy needs of local communities. Second, in policy dialogue, the nexus perspective ensures that investment decisions avoid conflict and support a common vision for shared resource use and management.