Water, the new green worry

China’s woes on water have highlighted a another threat for business to solve
Danny Fortson

Bo Gang, an energetic executive with rimless glasses and a Clark Kent haircut, gestured towards a valley shrouded in fog. “There’s the river,” he said, pointing to the grey murk on the outskirts of the city of Chongqing. “Five years ago it was bad. Now it is much better, you can tell by the colour of the water. The government has made big efforts.”
Bo runs the most advanced sewage treatment plant in China and is proud of it. His wall is adorned with pictures of Wen Jiabao, the prime minister, surveying the sludge tanks. He dotes on the gardens, irrigated with reclaimed waste water.
The plant, however, is only a small victory. Every year more than 53 billion tonnes of untreated industrial and household sewage pour into China’s watercourses, according to the World Bank.
Besides the catastrophic environmental effects, toxic water threatens public health and economic growth. That has caught the government’s attention. In its 11th five-year plan it has pledged 1.35% of Chinese GDP, about £125 billion, to environmental investment.

In Chongqing, a city of 28m people that sits astride the Yangtze river, the problems are acute. They are also instructive, say industry experts, who predict that what the authorities are grappling with — water quality, scarcity, competition for access between industry and the public — are a glimpse of a disaster that is silently gathering momentum.
In a recent report McKinsey, the consultant, predicted a serious shortfall of fresh water by 2030 unless drastic action is taken now.
“The tragedy of water is that for too long we have taken it for granted,” said Piet Klop, head of capital markets at the World Resources Institute, a Washington DC think tank.
“People ask me if water is the next oil. If only it were. At least then if would have a price that reflects its true value. There is no way out of this pickle unless we put a real price on water. The business world is just starting to wake up to this.”
Indeed. In New Mexico the state government has begun paying farmers not to irrigate their land because the level of the Rio Grande fell to the point that the silvery minnow, a fish the size of a little finger, was in danger of extinction.
The Pennsylvania state government recently launched a scheme that awards factories and power plants with water-use “reduction credits” as part of its efforts to clean up the damaged Chesapeake Bay.
Last month the Carbon Disclosure Project, one of the pioneers of the movement to get big companies to calculate and publish their carbon footprints, launched a similar effort on water. Marcus Norton, director of the project, said: “This was very much investor-led. More and more were coming to us saying that this was becoming an issue for them.”
Totting up water footprints is one thing. For China, ensuring safe and plentiful supplies is an economic necessity.
“They are where Europe was 30 years ago, but they will catch up much faster,” said Jean-Marc Boursier, finance director of Suez Environement, the French water group that runs several concessions in the country, including the Chongqing sewage plant. “When the state decides to do something, things happen very quickly.”
China’s case may be more extreme than in other parts of the world but the challenges are the same. Urbanisation is one of these. Every day more than 275,000 Chinese leave the countryside to move to cities. Chongqing, a dreary jungle of tower blocks and nondescript factories, is growing faster than any other city.
The mass migration is a logistical nightmare, equivalent to a third of Britain relocating every year. Zhu Shucai, the plant manager of Chongqing’s Sino French Water, said demand has grown by an average of 14% a year. Demand in most cities in Europe, by contrast, doesn’t change much because we have water conservation schemes.
Chongqing draws its drinking water from a tributary of the Yangtze. Cleaning up the river is critical. It snakes 6,300km from the Tibetan plateau, feeding other big population centres such as Nanjing and Shanghai. Since the giant Three Gorges dam was finished last year, water flow upstream has slowed, which allows pollutants to gather.
The government has forced wholesale relocations of polluting industries away from the banks of the Yangtze. “Many of the big plants, like ones producing pesticides, have disappeared,” said Zhu. “We don’t know where they went, but it has helped with water quality.”
There is still much to do. Today more than half of China’s 1.3 billion people don’t have access to quality drinking water. They use only a quarter of the water we do in Britain. What will happen to an infrastructure already overstretched as the country’s economic engine pulls millions more into the middle class?
“The Chinese are playing catch-up but they are taking it very seriously. It’s a big opportunity [for western companies],” said Boursier. Today Suez and its rival Veolia Environement are virtually the only foreign operators in water and waste treatment, though rivals from America and Europe are elbowing their way in.
They are all at the sharp end of a larger, fundamental reshaping of how water is used, treated and paid for.
Mike Walsh, executive vice-president of the Chicago Climate Exchange, the carbon trading market, said it was only a matter of time before water rights were traded like carbon and oil are today. “It has to,” he said. “Right now water has a price. It’s zero, so it’s a free for all. Take as much as you want, pollute as much as you want. That has to change — and it will.”