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Keywords:

  • climate change;
  • economics;
  • modeling;
  • impacts;
  • watershed;
  • management

ABSTRACT: Water is potentially one of the most affected resources as climate changes. Though knowledge and understanding has steadily evolved about the nature and extent of many of the physical effects of possible climate change on water resources, much less is known about the economic responses and impacts that may emerge. Methods and results are presented that examine and quantify many of the important economic consequences of possible climate change on U.S. water resources. At the core of the assessment is the simulation of multiple climate change scenarios in economic models of four watersheds. These Water Allocation and Impact Models (Water-AIM) simulate the effects of modeled runoff changes under various climate change scenarios on the spatial and temporal dimensions of water use, supply, and storage and on the magnitude and distribution of economic consequences. One of the key aspects and contributions of this approach is the capability of capturing economic response and adaptation behavior of water users to changes in water scarcity. By reflecting changes in the relative scarcity (and value) of water, users respond by changing their patterns of water use, intertemporal storage in reservoirs, and changes in the pricing of water. The estimates of economic welfare change that emerge from the Water-AIM models are considered lower-bound estimates owing to the conservative nature of the model formulation and key assumptions. The results from the Water-AIM models form the basis for extrapolating impacts to the national level. Differences in the impacts across the regional models are carried through to the national assessment by matching the modeled basins with basins with similar geographical, climatic, and water use characteristics that have not been modeled and by using hydro-logic data across all U.S. water resources regions. The results from the national analysis show that impacts are borne to a great extent by nonconsumptive users that depend on river flows, which rise and fall with precipitation, and by agricultural users, primarily in the western United States, that use a large share of available water in relatively low-valued uses. Water used for municipal and industrial purposes is largely spared from reduced availability because of its relatively high marginal value. In some cases water quality concerns rise, and additional investments may be required to continue to meet established guidelines.