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The first three parts of this report have demonstrated how water and energy are highly interdependent, and that choices made in one domain have impacts on the other − direct and indirect, positive and negative. These choices also collectively impact upon, and are affected by, other water- and energy- dependent sectors. Water and energy are both drivers and inhibitors of economic growth and improvement of human health. They are enablers for widespread poverty reduction and job creation, and are generators of well-being. Many internationally agreed development goals, including nearly all the MDGs, depend on major progress in access to safe water, adequate sanitation and reliable sources of energy. Decisions about water and energy sharing, allocation, production and distribution between different users and uses have important social and gender equality implications, as they ultimately determine the resources and services that can be made available at the household and community levels. Growing demand for finite water resources is leading to increased competition between the energy sector and other water-using sectors of the economy, principally agriculture and industry. Climate change creates additional pressures. All around the world, droughts, heatwaves and local water shortages in the past decade have interrupted electricity generation, with serious economic consequences. At the same time, limitations on energy availability constrain the delivery of water services. Because of their similarities, and despite their differences, the water and energy domains face common challenges. Water is a major, and generally inefficient, user of energy; while energy is a major, and generally inefficient, user of water. However, the respective incentives facing the two domains are asymmetrical: energy users have little or no incentive to conserve water due to zero or low prices, but water users normally do pay for energy, though prices are often subsidized.32 Water and energy prices are strongly affected by political decisions and subsidies that support major sectors such as agriculture and industry, and these subsidies often distort the true economic relationship between water and energy. Particularly for water, price is rarely a true reflection of cost – it is often even less than the cost of supply. Historically, the price of water has been so low that there has been little or no incentive to save it in many places around the world. Finally, a crucial aspect of burgeoning global demand for water and energy is the resulting pressure on water resources and degradation of ecosystems. Ecosystems provide the natural enabling environment for energy provision and water flows. They also deliver energy, often depending on water to do so. Recognition of this interconnectedness has led some observers to call for a greater level of integration of the two domains. Although this may be possible and beneficial under certain circumstances, an increased level of collaboration and coordination would create favourable outcomes in nearly all situations. How should policy-makers and decision-makers respond to the dilemmas, risks and opportunities presented in this report? Various solutions have been explored. Their most common theme is improving the efficiency and sustainability with which water and energy are used, and finding win–win options that create savings of both, which can become mutually reinforcing (creating synergy). Not every situation offers such opportunities. Where competition between different resource domains are likely to increase, the requirement to make deliberate trade-offs arise. These trade-offs will need to be managed and contained, preferably through collaboration in a coordinated manner. To do this, better and sometimes new data will be required. 32 The energy bills of water utilities often go unpaid, as well as vice versa (Hussey et al., 2013). In South Asia and elsewhere, farmers pay highly subsidized rates for publicly supplied electrical power (Molle and Berkoff, 2008, ch. 9). Globally, ‘underpricing power costs the sector at least $2.2 billion a year in foregone revenues... [in Africa] neither commercial nor residential customers [of power] are close to paying full cost recovery prices’ (AICD, 2012, pp. 191–192). 102 RESPONSES: FOSTERING SYNERGIES AND MANAGING TRADE-OFFSPDF Image | Water and Energy
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