Potential impacts of water scarcity on the world economy.

Water affects the economy of a country in many respects. Rivers and streams are used for transportation, acid rain leads to forest damages and health problems caused by water pollution not only reduce the quality of life but also entail economic costs (just to mention a few examples). Mainly though, from an economic perspective, water is an input that is needed directly or indirectly for the production of most goods and services. Water is needed for irrigation in agriculture, serves as a coolant in power stations and is used for cleaning purposes in the chemical industry. The often minor monetary value of water only insufficiently reflects the importance of this most relevant natural resource also for the world economy. This paper will start with a short overview over the economic role of water, the demand for water and its supply in different world regions. This information can then be used to deduce the economic effects of increasing water scarcity on a global level - caused by an increasing demand for water and by climate change. Furthermore, distorted water prices and trade in virtual water will be discussed.