FAO.org

By Ms Rimma Dankova, Senior Adviser, FAO Investment Centre

Population growth, rapid urbanization, changing diets, economic development − these are just some of the factors driving increased demand for water, energy and food.

Agriculture is the largest consumer of the world's freshwater resources, while more than a quarter of the energy used globally goes toward the food production and supply chain. If we are to feed a global population expected to reach 9 billion by 2050, we will have to increase current levels of food production by 60 percent over the same period.

The challenge is to invest in boosting production while also safeguarding the natural environment for future generations. And it is a big challenge. Competition over limited natural resources will continue to intensify in the coming years, with the impact of climate change further complicating the situation.

Wishing to draw greater attention to the interrelated nature of our global resource system, FAO is embarking on an approach in support of food security and sustainable agriculture around the water-energy-food nexus.

No one-sector approach

When it comes to investing in agriculture and rural development, if we want to optimize the way we manage our natural resources and achieve decent economic results, we have to work across sectors. There is no one-sector approach.

That is why understanding and analysing the complex and dynamic links between water, energy and food is so important.

That means understanding how a decision in one sector can have an impact on another. Investing in a hydropower dam upstream, for example, can affect the water availability and food security of communities downstream. Access to cheap energy may provide false incentives to farmers to over pump water for irrigation, depleting groundwater resources in return.

Being able to anticipate such trade-offs but also to build synergies among different natural resource users is key to making smart and sustainable agricultural investments.

Informing policy-making

Part of what we do in the FAO Investment Centre is facilitate policy dialogue and advise governments on how to make policies and legislation more conducive to public and private investment. Adopting a holistic approach to issues related to water, energy and food security is an important message we need to get across to policy-makers.

Although the interrelationship between water, energy and food manifests itself at different places, including at the local level, national governments have a key role to play in integrating the nexus approach into national policies and development plans as well as within regional and border relations.

Failure to do so could lead to tensions and suboptimal investment decisions. It could also lead to financial and economic losses when, for example, infrastructure development does not address multiple purposes. Well-designed public policies that take the nexus into account can provide incentives, like prices and subsidies, for a better allocation of resources and “greener” behaviour.    

Translating the nexus ideas into policy-making requires an inter-sectoral response that involves a broad range of stakeholders – various sector ministries, NGOs, academia, civil society, the private sector − and making them understand the importance of discussing and finding consensus on food, water and energy issues. Innovative energy policies, for example, could have an impact on water use efficiency and dissuade farmers from wasting energy and ground water. Existing governance structures for agriculture, water and energy may need to be adapted in order to incorporate the nexus into national policy-making.

Making nexus-proof investments

At the planning and design stage, an analysis of nexus interactions will help investment decision-makers understand the impact investments may have across different sectors and uses in the longer term. 

This encourages greater coordination across sectors and has implications for investment design at different scales – from farms to national watersheds. It is applicable at regional level where investments in one country could positively or negatively affect economic development in others. The nexus approach also allows not only identifying possible trade-offs, such as the risks of unsustainable water pumping to irrigate crops, but also synergies, whereby an investment in one sector benefits the others.  

In looking at the entire food supply chain from the nexus perspective, about 80 percent of energy use happens after farm gate, whereas for water, about 70 percent is used at farm gate and only 30 percent after. Our goal is to waste less at all stages, which is why investing along the whole supply chain − including in transport, storage, food processing, marketing − makes better sense economically. It allows us to maximize the total benefits of investment in terms of energy and water use.

The nexus approach has triggered a lot of new thinking, but its use in the field and, specifically, in investment planning and implementation, requires hands-on strategies. This is an area where we could work together with countries to address the issues of water, energy and food production together and in equal measure.