As the demand for water mounts, competition for water among agricultural, industrial, and residential purposes will increase within countries, and tensions between countries that share water basins could escalate into open conflict. A study focusing on the Middle East by Aaron Wolf of the University of Alabama details how looming shortages of water could ignite water wars. In many poor countries, particularly those in dry regions, developing new water sources is costly, and investment capital is in short supply. Since agriculture now claims an average of 80 percent of water consumed in developing countries, water shortages could limit increases in future food production. The study argues that water is not recognized as a scarce resource and valued accordingly.
Current policies including water subsidies encourage excessive use.
Where the price of water is kept artificially low, the study recommends that subsidies be reduced as part of a comprehensive reform of water policy. The authors note that, in Chile, such reforms, allowing farmers to sell portions of their water allocations, increased the overall efficiency of irrigation by 22 to 26 percent between 1975 and 1992. This is the equivalent of freeing up at least an additional 264,000 hectares for crops. Problems of soil and water are closely linked. If drainage is inadequate in irrigated soils, excess use of water causes waterlogging and salinization, reducing crop yields and potentially putting the land out of cultivation.