Water as commons: blue capital in the era of global water bankruptcy

Source: David Becker on Unsplash

Introduction

In recent years, an increasing number of cities around the world, especially in the global south, have experienced frequent alternation of extreme events at close intervals such as floods and prolonged droughts. Aquifers are depleted, glaciers are melting and urban water networks are inefficient as demand for water grows.

A flagship report by the UNU-INWEH organization uses the phrase “global water bankruptcy”(https://collections.unu.edu/eserv/UNU:10445/Global_Water_Bankruptcy_Report__2026_.pdf)  to refer to the situation in which renewable water income is insufficient to cover growing global needs, metaphorizing in financial terms a condition of availability of the most fundamental resource of the globe that can no longer support the weight of our expectations. For years we have treated natural resources, constituting natural capital, as inexhaustible and infinite: the reality of the facts forces us to confront the bitter scenario in which for many citizens of the world a good that was taken for granted can become difficult to find, with more unequal and conflictual access.

The report highlights the following data:

• 50%: lakes worldwide that have lost water since the early 1990s (with 25% of humanity directly dependent on those lakes)
• 70%: Major aquifers showing long-term decline
• 30%+: Global glacier mass lost in several locations since 1970, with entirely low- and mid-latitude mountain ranges expected to lose functional glaciers altogether within decades
• 75%: Humanity in countries classified as water-insecure or critically water-insecure
• 4 billion people facing severe water scarcity for at least one month each year
• $307 billion annually as a global cost associated with drought

Source: https://unu.edu/inweh/news/world-enters-era-of-global-water-bankruptcy

In this article, I use natural water capital to mean freshwater stocks and systems (aquifers, rivers, lakes, glaciers) that generate and store water over time. I use blue capital to mean marine and coastal ecosystems and their services. The two are connected, but they are not the same governance and accounting problem.

In this perspective, the “failure” concerns the erosion of natural water capital (aquifers, glaciers, rivers, lakes) that produces and stores water in the long term. At the same time, blue capital, marine and coastal ecosystems, whose services often remain invisible in the financial statements, are also weakening. That is why the accounting lens matters: it helps make visible both freshwater depletion and coastal-marine damage that remain largely off the books.

The report not only highlights the material crisis in which we find ourselves, but also an institutional one: crisis due to fragmented governance, insufficient investment and mismanagement of water capital, including its economic treatment from an accounting point of view.

The need for water and blue capital accounting

This detailed evidence from the flagship report, grounded in peer-reviewed research, prompts us to reflect on evidence of dual nature: on the one hand, the crisis exacerbated by its potential irreversibility, and on the other, the awareness that we are underestimating the real social costs related to the mismanagement of water resources.

As a consequence, being able to correctly identify, and consequently account, the impacts on the use of blue capital, understood as the set of resources, ecosystems and ecosystem services linked to marine and coastal environments, from an economic point of view can mean correcting a market failure by reintegrating the negative externalities produced by the impacts on water resources.

Definition: A negative externality is a cost borne by someone (often society) but not correctly accounted for and consequently imputed and paid by the person who is responsible for the production of said externality.

Social cost of carbon (SCC) is a measure that assigns an economic value to CO₂ to be able to “tax” (and internalize) the negative consequences produced by pollution and to be able to somehow “repay” the green capital used. Specifically, it is the economic and social cost associated with the emission of one ton of CO₂, considering future damage to health, agriculture and ecosystems, but underestimating the importance of water resources.

A study recently published in Nature Climate Change also talks about the value of blue capital in relation to CO2 pollution. The researchers, basing their thesis on the fact that water is a fundamental and often underestimated natural resource, show that by integrating water into the Social Cost of Carbon, through appropriate methodological operations, show that integrating ocean-related impacts into SCC calculations yields an ocean-based component (‘blue SCC’) of about US$48 per tCO₂, almost doubling the SCC estimate from the same model when ocean impacts are omitted.

Just as in the climate field, tools are being introduced to make the externalities of emissions visible and internalize, from the price of carbon to regulatory mechanisms along the supply chains, economic and institutional devices capable of incorporating the cost of scarcity, quality and risk into public and private accounts are also needed for water. Not to “financialize” the resource, but to direct investments and behaviors towards a more efficient and equitable use.

Water as commons

Alongside the possibility of introducing an accounting system that is more sensitive to natural capital, with particular attention to water resources, numerous global institutions such as the European Union, the UNDP, the UN and others recognize that water is a resource to be managed as a common good, belonging to the domain of public goods and not appropriated, therefore governance options for the management of this crisis would be desirable.

Water, following an Ostromian approach, is a CPR (common pool resources) and therefore, in the absence of stewardship, accountability, training, clear and simple rules and multi-level governance, it is subject to reckless use, as well as problems such as free riding.

If water can be considered a commons, the city can act as an enabling platform: not only to provide services, but to build capacity, rules and above all incentives for shared care and co-governance. In concrete terms, this requires polycentric governance: a control room on the scale of an urban basin (or “urban resource”) that coordinates the Municipality, consortia, managers, communities, universities and businesses, clarifying roles and responsibilities. The expected results are not abstract: collaboration pacts for river parks and renaturalizations, sustainable urban drainage systems, nature-based solutions (widespread micro-basins, infiltrating soils) and transparent and community-based monitoring, with accessible and usable data to decide priorities and investments.

Conclusion

If we take the metaphor of “failure” seriously, water sustainability becomes a choice of accounting and institutions: we cannot regenerate water capital without a governance approach capable of distributing costs and benefits in a legitimate way. The blue SCC adds a useful reminder: a major part of the damage remains invisible to prices, but it is no less real. The call to action, for urban and territorial policy-makers, is concrete: experiment with commons pacts, measure water capital, and co-govern at the basin scale, with verifiable objectives and continuous learning.