Abstract
The economic impacts of a drought depend critically on how water is allocated to different users. Choices as to water allocation can often reflect wider economic policy, environmental, and social goals and constraints. This research applies a multi-objective linear programming input-output method to determine a suite of water supply allocations for different economic sectors in a drought. Using the UK as a case study, we develop estimates of the minimum potential economic impact associated with different water allocations under a range of climate and policy scenarios. Estimates of total impact range from −0.16% to −1.48% of total output depending on the drought scenarios tested. The approach offers the flexibility to set different policy objectives in terms of water allocations/restrictions, employment or a range of other objectives, including constraints to rebalance the economic system. In allowing for the inclusion of other economic, social, and environmental constraints, it provides a framework for policymakers to assess how water allocation decisions interact with other policy goals to determine the economic impacts of a drought. Challenging decisions about how to allocate water during a drought are likely to remain important in the future.
Highlights
The economic impacts of drought and water scarcity are an increasing concern for society in general, and governments in many parts of the world
These factors are amplified in many countries by the effects of changes in the climate which is seen as increasing the risk of more frequent and severe droughts, and which, in turn, can give rise to adverse environmental, social, and economic impacts
Against the background of increasing policy concern about the economic impacts of drought and water scarcity, this research applies an input-output linear programming (IO-LP) approach to illustrate how choices made about water allocation can minimise economic production losses at both the aggregate and sectoral level
Summary
The economic impacts of drought and water scarcity are an increasing concern for society in general, and governments in many parts of the world. Population growth, increasing urbanization, and rising incomes are all factors that are contributing to an increased risk of water scarcity and drought. These factors are amplified in many countries by the effects of changes in the climate which is seen as increasing the risk of more frequent and severe droughts, and which, in turn, can give rise to adverse environmental, social, and economic impacts. Drought and periods of water scarcity has become a more widespread and frequent phenomenon in Europe, and there is an expectation that this will continue if temperatures keep rising as a result of climate change [3]. In the UK, a country typically associated with an abundance of water, the combination of population growth, intensifying use of water and the impacts of climate
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