The Global Water Squeeze: Why Water Availability and Quality Are Now Constraints on Economic Growth

Lauren Oehme
2 days ago
8 min read

Population growth, urbanisation, expanding agricultural production and industrial development are increasing demand for fresh water, at the same time climate change is making water supply less predictable. In parallel, pollution, salinity and deteriorating freshwater ecosystems are reducing the proportion of available water that is actually suitable for use.

The result is a global water squeeze: more people and more economic activity competing for a resource that is becoming less reliable in both quantity and quality.

Climate change is changing when and where water is available

Climate change does not simply mean that every region becomes drier. More importantly, it is intensifying the global water cycle. Fluctuations between extremes of drought and flood is increasing, and the timing and reliability of rainfall, snowmelt and river flows is changing.

The World Meteorological Organization reported that only around one-third of the world’s river basins experienced normal conditions in 2024. Severe drought affected areas including the Amazon Basin, other parts of South America and southern Africa, while other regions experienced unusually high rainfall and flooding. The WMO describes the global water cycle as becoming increasingly “erratic and extreme.”

Long-term water storage is also changing. UN-Water notes that terrestrial water storage (including soil moisture, snow and ice) has declined over recent decades, while rising sea levels are contributing to the salinisation of groundwater in vulnerable coastal regions.

The consequences are particularly significant for regions that are already operating close to the limits of their renewable water supply. World Resources Institute’s Aqueduct analysis identifies 25 countries containing around one-quarter of the world’s population as experiencing extremely high water stress each year. The Middle East and North Africa is the most exposed region, with 83% of its population living under extremely high water stress, followed by South Asia at 74%.

At the same time, demand keeps increasing

Concurrently, demographic and economic growth puts demand-side pressure on water resources.

The global population increased to approximately 8.2 billion people in 2024 and is projected to reach around 9.7 billion by 2050, before continuing towards a peak of approximately 10.3 billion in the mid-2080s. Much of that future growth will occur in regions where water systems are already stretched.

More people require more drinking water, more sanitation infrastructure, more housing, more electricity and, above all, more food.

Worldwide freshwater demand has been increasing by just under 1% per year since the 1980s, and global water demand is projected to be around 20–30% higher by 2050. Urban water demand is also increasing as populations become increasingly concentrated in cities.

This means water scarcity is increasingly a competition between legitimate uses: water for households, food production, industry, energy generation and the environment.

And no sector is more exposed than agriculture.

Agriculture sits at the centre of the problem

Agriculture accounts for approximately 72% of global freshwater withdrawals, making it by far the world’s largest water-using sector. Around 1.2 billion people already live in agricultural areas facing severe water constraints.

That creates a difficult equation.

The world’s agricultural system needs to produce substantially more food, feed and fibre over coming decades, while the water available to do so is becoming more contested and, in some important production regions, less reliable.

Water stress is already concentrated in some of the world’s major food-producing areas. WRI estimates that around 60% of the world’s irrigated agriculture is exposed to extremely high water stress, including significant production of globally important crops such as wheat, rice, maize and sugarcane.

As a result, water efficiency has moved from being primarily an environmental objective, to an issue of farm productivity and profitability, economic resilience and ultimately food security.

The question increasingly confronting growers around the world is not simply “How much water do I have?” but “How much production can I generate from each unit of water available to me?”

Water quality is shrinking the usable resource further

Quantity is only half of the challenge.

A litre of water may physically exist but have limited economic value if its salinity, nutrient load, pathogens, suspended solids, metals or other contaminants make it unsuitable for its intended use without treatment.

UNEP reported in 2024 that one or more types of freshwater ecosystem are degraded in approximately half of the world’s countries, with falling river flows, shrinking surface-water bodies and increasing pollution among the problems identified.

Of the water bodies assessed through the UN’s global monitoring programme, only 56% were classified as having “good” ambient water quality in 2023. UN-Water estimates that, without improvements in water quality and monitoring, the health and livelihoods of as many as 4.8 billion people could be at risk by 2030.

Wastewater is another challenge. In 2024, UN reporting estimated that only 56% of global domestic wastewater was safely treated. Agricultural runoff, nutrients, industrial discharges and inadequately treated municipal wastewater can all reduce downstream water quality, creating additional treatment costs or restricting how water can subsequently be reused.

So the global water challenge is not simply about securing more water. It is increasingly about maintaining enough usable water.

The Colorado River: when physical limits meet historic allocations

These pressures are playing out in real time for the Colorado River.

The river supports more than 40 million people, 30 Tribal Nations, major metropolitan areas and approximately 5.5 million acres of farmland across seven US states, as well as providing water to Mexico.

*The Colorado River winds through Horseshoe Bend in Arizona, USA*

But the river’s allocation framework developed during a wetter climatic period has increasingly collided with today’s hydrological reality.

The US Department of the Interior says the Colorado River Basin has now experienced an unprecedented 26-year multidecadal drought, with historically low runoff and reservoir levels. Conditions deteriorated further in 2026 following the lowest observed winter snowpack on record, and combined storage in Lake Powell and Lake Mead recently fell to levels not seen since before Lake Powell began filling in the 1960s.

Policy-makers have now been forced to move from discussion to regulation.

In August 2026, the US Department of the Interior finalised new operating guidelines requiring deliveries to the Lower Basin states to be reduced by 1.25 million acre-feet per year in both 2027 and 2028. Under the states’ proposed sharing arrangement, Arizona would absorb 760,000 acre-feet of the reduction, California 440,000 acre-feet and Nevada 50,000 acre-feet. The framework also calls for at least another 700,000 acre-feet of voluntary conservation over the two-year period.

For the Colorado River system, because demand consistently exceeded what the water system could sustainably supply, policy had to reconcile the two.

That has major implications for agricultural and industrial users within that system; existing water users cannot assume that historical access will remain unchanged, and now must build business resilience around new or changing allocations.

Australia’s Murray–Darling Basin: a different system, a similar challenge

On the other side of the Pacific, Australia’s Murray–Darling Basin is an interesting parallel.

The circumstances, legal frameworks and hydrology are different, but the underlying problem is the same: how do you divide a finite and variable water resource between irrigated agriculture, communities and the environment when the historical level of extraction is no longer considered sustainable?

Australia’s Basin Plan introduced Sustainable Diversion Limits, which place limits on the amount of surface water and groundwater that can be taken for consumptive purposes while seeking to maintain the ecological health of the river system.

The Australian Government’s original “Bridging the Gap” programme required a substantial quantity of water to be recovered from consumptive use to meet those sustainable limits.

Following subsequent adjustments, the principal surface-water recovery target became 2,075 GL per year, alongside other measures intended to achieve certain environmental outcomes. As of March 2026, approximately 2,062 GL per year had been recovered or contracted against that 2,075 GL target.

A further 450 GL per year of environmental water is also being recovered under the Restoring Our Rivers programme. By June 2026, the Australian Government reported that approximately 380 GL had been recovered or contracted towards this additional target, which is intended to help protect the river system in the face of a drying climate.

The mechanics are very different from the Colorado River. But the signal to water users is the same:

Water allocations are not fixed assumptions around which production can indefinitely expand. Increasingly, allocation itself is being revisited as governments attempt to bring demand back within the long-term (and now highly variable) capacity of the underlying resource.

From water allocation to water productivity

The Colorado and Murray–Darling examples matter far beyond those two river systems.

They are evidence of a global shift, where population growth, agricultural production and economic development progressively consume the spare capacity within a water resource, and climate variability then reduces that capacity further.

For governments, the response is likely to involve some combination of tighter allocation, water markets, efficiency incentives, environmental water recovery, recycling, new infrastructure and stricter regulation.

For water users, however, the implication is more straightforward.

The value of water is increasing.

That does not necessarily mean its financial price will increase everywhere. It means the economic value created by avoiding the use of an additional litre (or extracting more productivity from the same litre) becomes greater as water availability tightens.

For agriculture, that can mean more efficient irrigation, better soil and root-zone management, reduced losses and technologies that improve the productivity of irrigation water.

For municipalities, it means treating wastewater more efficiently and increasing water recycling and reuse.

For industry, it means reducing process-water demand, improving treatment and using water multiple times before discharge.

And across every sector it means changing the mindset from water supply to water productivity.

Doing more with the water we already have

There is no single technology capable of solving global water scarcity.

New reservoirs, desalination, recycling, wastewater treatment, improved catchment management, irrigation efficiency, groundwater management and changes in agricultural practice will all have roles to play, with different solutions appropriate in different regions.

But there is a fundamental limit to relying on supply alone.

In many of the world’s most productive agricultural regions, the easiest water sources have already been allocated. In others, groundwater is being extracted faster than it can be replenished. And climate change is increasing uncertainty around the surface-water systems on which communities have historically relied.

The opportunity, therefore, is not simply to find more water. It is to make the water already available work harder.

As water scarcity moves from an environmental concern to a constraint on production, infrastructure and economic growth, technologies that improve water-use efficiency, treatment performance and resource productivity will become increasingly valuable.

The future of water management will be defined not only by who can secure access to water, but by who can achieve the greatest productive value from every litre available to them.

References

Keen to learn more? Check out the following resources for a more detailed picture of the challenge of water availability and allocation the world is facing: