Abstract
This paper presents findings from a stochastic benefit-cost analysis (BCA) using Monte Carlo simulations to estimate the probable values for net benefit and benefit cost ratio for a series of proposed strategic and operational water management options under climate change and socioeconomic development. The study is performed in the Tacna region in southern Peru, geographically within the Atacama Desert and under prevailing water scarcity conditions. We examined the benefits and costs to four main water users: urban, agriculture, mining and the environment over a 30-year time horizon. The main scenarios under consideration include reduced water demand from improved water use efficiency in the urban and agriculture sector, and investment in water supply infrastructure including inter-basin infrastructure and dams, a desalination plant, and increased groundwater extraction. Our findings suggest that implementation of demand-side management strategies, which in this instance is investment in water use efficiency technology and water conservation measures result in more favourable net benefit outcomes than investment in water supply infrastructures. The primary outcome of this study is to help the Regional Government of Tacna, Peruvian water authorities and water users, make more informed decisions about water investment options going forward, thereby supporting regional development opportunities.
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