Water scarcity: How stronger governance could reshape crop competitiveness in the EU

Around one-fifth of total EU crop value is generated in irrigated systems located in water-scarce regions, mainly in Spain, Italy, Greece, and Portugal. With the EU Water Resilience Strategy (2025) signaling stronger policy attention on water scarcity, this production is increasingly exposed to transition risks linked to tighter governance of irrigation water. In this context, we examine how the potential implementation of tradable freshwater rights could affect crop competitiveness and EU markets, focusing on crop groups representing around 90% of total EU crop value.

•    Crop competitiveness: Crops vary in their economic water productivity, ranging from roughly EUR 1 gross revenue per cubic meter of irrigation water for grains & oilseeds (G&O) and sugar beets, up to EUR 30 to EUR 60/m3 for certain berries and greenhouse vegetables. Permanent crops occupy an intermediate position, ranging from around EUR 2.5/m3 for olives (including olive oil) to EUR 7 to EUR 10/m3 for fresh fruit. If tradable water rights were introduced, crops with higher water productivity would gain competitiveness, as farmers could afford to pay more to keep – or even expand – access to irrigation water. Conversely, producers of crops with lower water productivity facing higher water costs would have to choose between improving water efficiency to raise economic water productivity, continuing to irrigate amid lower margins, or shifting production toward rain-fed or more efficient alternatives.

•    Crop market impacts: Impacts are expected to vary markedly across sectors. G&O and sugar beets should face limited impacts, as global markets would likely buffer losses in irrigated production from water-scarce regions. Vegetables and berries are best positioned to maintain – or increase – irrigated production, thanks to their ability to pay higher water prices. Permanent crops fall in between. Fresh fruit and grapes would be relatively well protected by their higher economic water productivity, but citrus and olives would face stronger impacts due to their lower water productivity and high share of production in irrigated systems in water-scarce regions. Global and EU olive oil markets appear to be particularly vulnerable because production is concentrated in a handful of Mediterranean countries.

For food and agribusiness companies, stronger water governance would mainly threaten sourcing. There is no one-size-fits-all solution, as impacts and adaptation options vary across crops and regions. To safeguard future availability, costs, and supply continuity, companies should assess their exposure to water-scarce sourcing areas, determine whether and how suppliers can improve water efficiency, and identify where alternative sourcing may be needed.