The Hidden Wealth of Nations: Groundwater’s Critical Role in a Changing Climate

Groundwater is vital to economic activity and growth, food security, socioeconomic development, and adapting to the impacts of climate change. But the sustainability of this critical resource is at risk in many regions, partly because it is not valued appropriately and is taken for granted. In the context of global pressures on food systems and water supply, policymakers need to act now to ensure groundwater is managed responsibly across sectors depending on this resource.

Groundwater is our most important freshwater resource—particularly in times of drought. As climate change advances, policymakers need to understand better and manage this critical asset. A new World Bank report considers the economic value of groundwater, the costs of misusing it, and the opportunities to leverage it more effectively.

The report, titled The Hidden Wealth of Nations: The Economics of Groundwater in Times of Climate Change, demonstrates how groundwater can safeguard food security while boosting economic growth and job creation. However in most cases, this resource has been undervalued and overexploited, with insufficient regard for its long-term sustainability. This is partly due to a lack of systematic research into its economic importance.

With this in mind, the new report offers fresh data and evidence that with the right policies in place, we can maximize the benefits of groundwater harvesting—both now and long into the future.

Nature’s insurance policy

Groundwater is nature’s very own insurance mechanism. It can buffer a third of the losses to global economic growth caused by droughts, while ensuring cities do not run out of water during extended dry periods. 

This resource is especially important to the agricultural sector, where it can reduce up to half of the losses in productivity caused by rainfall variability. This, in turn, translates into protection against malnutrition. In stark contrast, a lack of access to shallow groundwater increases the chances of stunting among children under five years old by up to 20 percent.

As such, we can use this resource to pursue our collective development goals. For example, solar pumps with adequate safeguards can increase groundwater-based irrigation in Sub-Saharan Africa, thereby reducing poverty and protecting communities from climate shocks. 

More broadly, as the impacts of climate change increase, groundwater could keep playing a crucial role in sustaining sensitive ecosystems that sequester carbon and in safeguarding vulnerable communities from extreme weather.

A mismanaged resource

But depletion of the water table, degradation of groundwater quality, and growing competition for this resource threatens its sustainability. This means societies could become even more vulnerable to climate shocks.

While some countries use groundwater insufficiently, others have become overly reliant on it. Already, up to 92 percent of transboundary aquifers in the Middle East and South Asia are showing signs of groundwater depletion. In South Asia, groundwater has provided an agricultural revenue advantage of between 10 percent and 20 percent, but this benefit is declining as the resource is depleted.  

At the other end of the spectrum, groundwater is underutilized in Sub-Saharan Africa. More than 255 million people in the region who live in poverty live in areas where expanding shallow groundwater is feasible. By using this resource responsibly—and valuing it appropriately—the region could improve its agricultural yields and advance its development. 

A call for urgent political action to prioritize groundwater

A central message of the report is that groundwater needs to be prioritized by policymakers to ensure it is used in a way that benefits society, the economy, and the environment. High-level political action is needed to align the private and social costs of groundwater use.

As an example, targeted policies and subsidy reforms can ensure that the expansion of green energy and agricultural investment does not lead to the overexploitation, degradation, and mismanagement of groundwater resources and their dependent ecosystems.  

Government support for agriculture—at about $635 billion a year—influences crop and irrigation choices, including how much groundwater is used. This means that groundwater-sensitive agricultural policies and subsidy reforms are needed to promote the sustainable management of this asset. In Nepal, for instance, the subsidization and expansion of solar irrigation led farmers to extend their agricultural livelihoods into aquaculture. 

Meanwhile, the declining cost of solar power, and the accelerated move to clean energy in general, provide an opportunity for policymakers to consider groundwater management in their green policies, institutions, and investments. With easier access to affordable solar power technology, we could see expanded groundwater use for irrigation and water supply—raising the risk of overexploitation. 

A comprehensive understanding of the interrelated impacts on sustainability and poverty goals is essential for assessing trade-offs and guiding policies. Another important consideration for policymakers is the nature of the aquifer present in their territory, the level of use of the groundwater resource, and the need to protect the quality of this resource.

Naturally, each country will need to consider its own circumstances when devising policies. 

Where groundwater is currently underused—in Sub-Saharan Africa, for instance—it will be important to improve knowledge of the resource and prioritize the sustainable development of local shallow aquifers to support irrigation, improve food security, and mitigate climate shocks. 

For countries that use moderate amounts of groundwater—such as Cambodia, Nicaragua, and most of Eastern Europe—a better understanding of the asset’s value is needed to ensure the preservation of its quality and sustainability. 

And where groundwater is overexploited—such as in much of South Asia, the Middle East, and North Africa—additional actions will be essential, including programs to enhance unconventional water sources, surface water storage, and improve demand management.  

In each case, it is high time that policymakers give groundwater the attention it deserves.