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o the surprise of many, COP21 2015 has finished in Paris with a spectacular achievement. The target is to hold the increase in the global average temperature to below 2 degrees Celsius above preindustrial levels and pursuing efforts to limit the temperature increase to 1.5 degrees Celsius.

In spite of its success, COP21 ignored the risk of water scarcity, which is closely related to climate change. From the other side, many issues about financing the agreement are left hanging in the air.

The main issue of the agreement is reducing greenhouse gas emissions. At the same time, people are busy talking about the substitution of fossil fuels, but forget the risk of a more profound significance to human life: water. The two issues have opened up new opportunities for investment.

The year 2015 has been declared the hottest year in history, with a lot of damage occurring. There were crop failures and disruptions to activities in the fourth quarter of the year. A prolonged dry season reduces water flow in rivers substantially and lowers water tables.

The prolonged dry season increased cases of illegal forest burning, which is cost effective for planters especially for palm oil plantations. The disaster escalates external costs to the society and the economy at large, including that of neighboring countries.

The negative impact of water scarcity has hit China and India, limiting their economic growth. Many wells in California, in the US, home to hi-tech firms, ran dry in 2014-2015. It has become a challenge to industry, agriculture, electricity generation and manufacturing of many kinds.

Climate change has distorted the geographical and time-period distribution of rainfall, resulting in floods and excessive dry seasons.

Floods cause damage to properties, buildings and agricultural land and drought provokes crop failures and other related economic and social costs.

An investment expert has written that water-related investment will be one of the booming sub-sectors in the near future. From the economic point of view, it will be a structural economic shift, increasing all water-related costs. Semiconductor production, for example, needs a huge amount of ultra-clean water.

In 2010 in Cancun, Mexico, COP16 established the Green Climate Fund (GCF) with an objective of supporting developing countries to limit or reduce their carbon emissions and to adapt to the impact of climate change.

Developing countries proposed a capitalization of close to US$100 billion annually for the GCF, financed by contributions from developed countries. By contrast, developed countries envisaged a GCF with loose ties to the COP. Limited public finance would primarily be used to catalyze and leverage private-sector action.

The COP21 agreement did not enter into the debate, except that all sources of funding must be suitably arranged to achieve bigger goals and must be subject to relevant decisions by state parties.

The achievement of the objectives of the GCF and also the COP21 agreement should mitigate the negative effects of climate change. But it is still questionable how far it can neutralize the previous damage from climate change.

Nonetheless, water demand to meet economic and population growth will substantially exceed the present global water supply, which is almost constant while the world population is growing at a rate of 50 million per year.
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Climate change has distorted the geographical and time-period distribution of rainfall.

One of the alternatives for combating greenhouse gas emissions is biofuel. Alas, it is a mistaken alternative in relation to the scarcity of water.

According to a study in the US, the amount of water needed to produce enough biofuel to fill an SUV tank equals the amount of water to feed one person on grain for a whole year.

This is one of the errors in the search for an alternative source of energy to oil and gas. It seems some of the proposals to reduce greenhouse gas emissions are not economically justified.

If the water scarcity is not resolved, many advanced-technology industries or their subsidiaries will be at risk.

One of the problems is the way to allocate limited water to the agricultural sector, drinking water for households and industry etc.

Agriculture uses around 70 percent of water in the world. Rising world temperatures have reduced or depleted glaciers, which are a water source for many countries, namely China, India, Pakistan etc.

One of the vital challenges is to build large dams to keep the excess run-off water during the rainy season. For communities in coastal regions, desalination plants could be a solution, which could be cheaper in the future, both in terms of investment and operational costs. But localities distant from the coast will face much higher costs due to transportation and distribution.

There is an opportunity for investment as mentioned above, but at what cost? Can the GCF be used for these purposes? These are questions that need answers. But the economics of water is an urgent issue; too late to respond could entail social unrest or upheaval.

Given the acuity of the water problem, any program related to the mitigation of climate change should take into account that issue. It seems that Indonesia'€™s Climate Change Trust Fund does not have any program to tackle the rising water risks in the country.

As far as the available information can show, a program for optimal water allocation in Indonesia is absent.

The sale of biofuel continues, which is used as an instrument to support falling crude palm oil prices in the world market, but it should not ignore water scarcity because they are closely intertwined, and the relevant economic analyses of the two should be promoted. Water is more important for life than fuel.
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The writer is a lecturer at University of Indonesia'€™s School of Economics, Jakarta.