26 September 2017: A report published by the Organisation for Economic Co-operation and Development (OECD) provides projections for the biophysical and economic consequences of land-water-energy (LWE) nexus bottlenecks until 2060. It finds that while the LWE nexus is essentially local, there can be significant large-scale repercussions for resource scarcity in vulnerable regions, notably on forest cover and in terms of food and water security.

The central question addressed by the report is: “What would be the global and regional biophysical and economic consequences by 2060 of policy inaction regarding the limited availability of land, water and energy, given their interlinkages?” In addition to exploring implications for crop production and other biophysical factors, which are the most direct linkages in the nexus, the underlying study also examines the consequences of land, water and energy bottlenecks, individually and in combination, for different economic activities and policy objectives, including welfare, environmental quality, and food, water and energy security.

The report combines a gridded biophysical systems model with multi-regional, multi-sectoral dynamic general equilibrium modelling to assess how land, water and energy interact in biophysical and economic systems. The analysis builds on a set of scenarios designed to illustrate the key bottlenecks: one scenario for each resource bottleneck, plus two scenarios that combine all bottlenecks, with and without an overlay of climate change.

The study concludes that negative economic consequences of land-water-energy nexus bottlenecks tend to concentrate in hotspots.

One of the conclusions of the study is that the negative economic consequences of the nexus bottlenecks tend to concentrate in hotspots. The report notes that interactions among the individual bottlenecks are more pronounced in the most fragile regions, which suggests that “adding an overarching nexus vision to policy making has clear benefits.” For some regions, the study finds that exploitation of the least scarce resources can overcome the negative consequences of the other resource bottlenecks.

While the study finds only modest negative impact of the bottlenecks on GDP and consumption levels at the global level, it suggests that countries that rely heavily on scarce resources, such as India and China, could be more severely impacted, while some Association of Southeast Asian Nations (ASEAN) and Latin American economies “might benefit from the changes in international competitiveness of countries.”

According to the report, one impact that is reflected in all nexus scenarios is the deterioration of food and water security, which could disproportionately affect the poor as their share of income dedicated to LWE tends to be the largest. However, the report finds less conclusive evidence around implications for energy security, noting that “the large traded volumes of energy and the availability of alternative energy sources “imply that supply risks are fairly low.” However, the report cautions that while a bioenergy policy could improve energy security at the national level, this comes at a trade-off with the other nexus resources, especially land, and can thus threaten other policy objectives such as food security.”

The report is published under the auspices of the ‘Cost of Inaction and Resource scarcity: Consequences for Long-term Economic Growth’ (CIRCLE) project. [OECD Announcement] [Publication: The Land-Water-Energy Nexus: Biophysical and Economic Consequences