Aquastat data measures water stress – a situation where there is not enough water of sufficient quality to meet the demands of people and the environment – around the world. As the table below shows, it is most severe and reaching dangerously high levels in some major emerging markets, most notably South Africa, China, India and Pakistan. Agricultural production is using up the most resources by far.
Besides water stress, many emerging markets are also suffering from pollution and other environmental disasters. China’s air quality in some of the main cities is notoriously bad, especially in winter. Low values of the index mean better air quality. Lockdowns during the pandemic have slightly reduced the amount of pollution – extreme values have been significantly lower throughout 2020 and 2021.
Household greenhouse gas emissions in Japan have been fairly constant over the past two decades. Power emissions increased sharply for a couple of years right after the Fukushima disaster as many nuclear power plants were temporarily shut down. Total national emissions, however, have been on a very slight downward trend for several years.
Germany’s energy production has seen some considerably changes since the early 2000s. Renewables have largely increased in importance, with their share rising from less than 10% some 20 years ago to about 30% today. Meanwhile, nuclear energy production has gone down significantly, especially after the Merkel government decided to phase it out back in 2014.
As a consequence, some of the missing electricity production had to be generated through dirty coal power plants, meaning that Germany’s overall emissions actually increased in the late 2010s despite its uptake of renewables.
Exacerbating the energy crisis gripping Europe is the Russia-Ukraine conflict and the threat of a Russian invasion. Gas and oil prices recently surged to record highs. This chart shows how the natural gas price is affecting electricity prices in Germany – already among the highest in the world – with a correlation of more than 95%.
Gas supplies from Russia to the Ukraine and Belarus have declined sharply throughout the year and are much lower than just a few months ago. There are fears Russia could further reduce gas exports to put pressure on Eastern European economies, and Ukraine in particular.
The geopolitical risk index shows how economic policy uncertainty has surged for Ukraine amidst the fear of a potential Russian invasion.
Consequently, Ukraine’s gas reserves are being depleted at a rather rapid pace. As the following chart shows, daily withdrawals have roughly halved the country’s reserves since October 2021.
While Ukraine’s exports to the EU and Russia have increased markedly over the last 12 months as the global economy recovers, trade with Russia will obviously take a hit if the Russia-Ukraine crisis escalates further.
While Russia’s import prices are relatively stable, export prices fluctuate quite wildly. This is to be expected as the country is one of the largest commodity exporters in the world – for oil and gas in particular – and commodity prices are volatile.
Consequently, Russia’s terms of trade – the ratio of export to import prices – also fluctuate over time. This is also affecting the nominal exchange rate. As commodity prices decline and the terms of trade deteriorate, so does the value of the ruble and vice versa.
As commodity prices surge this year, Russia’s terms of trade have increased significantly. However, the exchange rate has yet to recover amid the Ukraine conflict and the imposition of sanctions.
The following chart compares Russia’s export and import prices and terms of trade with the broad nominal exchange rate.
The following table ranks Russia’s top trading partners by exports. With the exception of China, Kazakhstan and Turkey, Russia’s top trading partners are Europe and the US.
Remember that Russia’s nominal GDP is rather small, roughly the size of Belgium plus the Netherlands at current market exchange rates. If western nations impose sanctions, it could obviously hurt the Russian economy. However, European countries have little incentive to further escalate the crisis as record high energy prices are already hurting consumers across Europe.
