Trucost Blog / 18 Dec 2015

Cyprus’s water crisis shows climate change is here and businesses must act now

Water scarcity is the new normal on Cyprus. Business and government need to manage the risks using natural capital valuation.

With the historic agreement at the recent COP21 climate change conference in Paris, the world’s leaders finally seem to recognise the magnitude of the risks we face. One of the most immediate threats is water scarcity as global temperature increases change global climatic patterns.

Countries like my own homeland of Cyprus are already experiencing prolonged and frequent droughts which demonstrate, as President Obama said, that climate change is not some far-off future risk, but a danger that we must confront now.

The most recent drought in Cyprus lasted four years between 2004 and 2008, and caused reservoir levels on the island to plunge. Groundwater and desalination proved insufficient to meet demand. There were 30% cuts to water supplies, giving households only just enough water to live on. People were fined for using more than their share.

Farming on Cyprus was badly affected as there was no water for irrigation and livestock, leading to illegal water abstraction from aquifers. At the height of the crisis, the government imported eight million cubic meters of water over six months from Greece at a cost of over €40 million.

Despite this, many see the 2008 situation as a one off ‘freak’ event rather than something that could increasingly become the ‘new normal’.

My research (Ioannou, 2014) suggests that water scarcity is indeed the new normal on Cyprus. I studied the effect of climate change on the Kouris Dam reservoir which supplies 40% of the country’s water for agricultural irrigation. The results show that decreases in rainfall and increases in evaporation mean that water levels in the reservoir will decrease in future.

While problems due to water shortages become ever more acute, action is delayed because low water prices mitigate against the financial case for investing in water conservation. Prices signal value to consumers, and it is important that policymakers use prices to reflect the increasing scarcity of water and its importance to sustaining life.

Working at Trucost has shown me that businesses can act now to prepare for increasing water scarcity by getting better information on the water they consume at their production sites and through their supply chains. They need to understand how their use of water in drought-prone regions creates risks for their business, so that these can be factored into plans for business growth alongside operational costs and revenue forecasts.

At COP21, France’s energy and environment minister Ségolène Royal said: “It is through water that we can measure both the severity and the acceleration of global warming; however, we can also see that, through water, solutions can be found.”

Companies can work towards these solutions by monetizing water risks, enabling them to use information about water scarcity to drive more effective business decisions.

Nikol Ioannou worked as a research intern at Trucost from October to December 2015 after achieving a Masters degree in climate change from University College London

Ioannou, N. 2014. Assessment of the impact of climate change on water resources in the semi-arid environment of Cyprus. Thesis (unpublished, MSc), University College London, University of London

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