McKinsey Global Institute Report on Global Municipal Water Demands

The McKinsey Global Institute has published a new report entitled Urban world: Cities and the rise of the consuming class (2012) on increasing global urbanization and meeting the increased demands associated with urban consumption, including municipal water demands. The speed and scale of urbanization today is unprecedented in global history and, significantly, is distributed unevenly, with the majority of urban growth occurring in emerging regions.

McKinsey based its analysis on the CityScope 2.0 model, which includes data on 2,657 cities, including among other data their population, economic growth and municipal water demands. The model demonstrates that the center of gravity for global population is rapidly shifting toward the East and South, and particularly toward Asia, i.e., China and India.

As was highlighted in an earlier McKinsey report, Resource Revolution: Meeting the world’s energy, materials, food, and water needs (2011), as a result of global urbanization and increases in middle class consumption, during the decade of the 2000s, global prices for natural resources rose rapidly enough to annul the significant price declines accumulated during the twentieth century. It is expected that trend will continue, which will require greater resource productivity to support future economic growth and environmental protection. The experience for water matches that for other natural resources.

There are, of course, many positive aspects to increasing urbanization, including growth in incomes that promises to lift millions of global citizens out of poverty and into the emerging middle class. While cities are geographically intense users of natural resources such as food, energy and water, they are also more efficient users on a per capita basis than rural areas. For example, it is 30 to 50 percent less expensive to provide water to cities than more rural areas with the same population.

As a result of the trends set forth in the report, municipal water demands are expected to grow 40 percent by 2025, from approximately 190 billion cubic meters to 270 billion cubic meters, an increase of 80 billion cubic meters. (In the western United States, that equates to approximately 65 million acre-feet, or 2.25 times the capacity of Lake Mead.) In order to meet those demands, cities will need to invest $480 billion in water supply and sanitation infrastructure over that same period, or $40 billion per year, approximately 80 percent of which will be required in emerging regions. The chart below shows the relative contributions of several regions to the overall growth in municipal water demands.

The top 20 global cities for growth in municipal water demands are expected to be:

  1. Mumbai
  2. Delhi
  3. Shanghai
  4. Guangzhou
  5. Beijing
  6. Buenos Aires
  7. Kolkata
  8. Khartoum
  9. Dhaka
  10. Istanbul
  11. Dallas
  12. Pune
  13. Las Vegas
  14. Karachi
  15. Sao Paulo
  16. Hyderabad
  17. Lagos
  18. Moscow
  19. Wuhan
  20. Manila

As pointed out by McKinsey, cities will not just need to invest significant capital in their water and sanitation infrastructures, but they will need to do so in a manner that results in higher water productivity for the future. Emerging cities should build infrastructure that will allow them to lock in water efficiency at the outset, rather than becoming burdened by inefficient infrastructure that will limit future growth and create adverse environmental effects. While water management has essentially local aspects, expertise and technology are equally applicable worldwide, and cities should learn from their collective successes and failures. Each city will need effective planning, capable and accountable governance, and sustainable and responsible fiscal management to balance water supplies and demands.

Water solutions will be found in improving urban water use efficiency, expanding water reuse and desalination where protective of public health and the environment, and using water markets and transfers. McKinsey estimates that increasing resource productivity by such methods could address 60 percent of the growth in municipal water demands. In addition, cities should use realistic pricing to value water resources and infrastructure properly (while subsidizing water rates for their poorest residents), and deliver infrastructure efficiently through public-private partnerships and similar contractual arrangements. There is a healthy need for private sector participation to meet future urban water demands.

Our past experience shows that water management requires not only technical expertise, but also political will. All projects must be completed in a transparent and responsive manner to the public, although cities should not allow themselves to become controlled by an extreme, vocal minority who seek to disrupt water supplies. Cities that successfully implement these strategies will gain a competitive advantage to attract businesses that fuel further intelligent growth.

One Comment on “McKinsey Global Institute Report on Global Municipal Water Demands

  1. Reblogged this on Water in the Works and commented:
    “Understanding cities and their shifting demographics is critical to reaching urban consumers and to preparing for the challenges that will arise from increasing demand for natural resources (such as water and energy) and for capital to invest in new housing, office buildings, and port capacity.”

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