Water scarcity is often understood as a problem for regions experiencing drought, but a new study from Cornell and Tufts universities finds that not only can localized water shortages impact the global economy, but changes in global demand send positive and negative ripple effects to water basins across the globe.
“We are looking at water scarcity as a globally connected and multi-sector phenomenon,” said Jonathan Lamontagne, M.S. '14, Ph.D. '15, assistant professor of civil and environmental engineering at Tufts University, who co-authored the study with Patrick Reed, the Joseph C. Ford Professor of Civil and Environmental Engineering at Cornell. Tufts graduate student Flannery Dolan is lead author of the study, which suggests water scarcity dynamics are more complicated than traditionally acknowledged.
The study, “Evaluating the economic impact of water scarcity in a changing world,” was published March 26 in Nature Communications, and uniquely captures the interdependent effects of global trade consistently with differences in regional climate policies as well as river basin-specific capacity to address water scarcity risks.
The researchers coupled physical and economic models to simulate thousands of potential climate futures for 235 major river basins – a technique known as scenario discovery – to better understand how water scarcity is a globally-connected phenomenon, with local conditions having reverberations across the globe in industries such as agriculture, energy, transportation and manufacturing.
Not only can localized water shortages impact the global economy, but changes in global demand send positive and negative ripple effects to water basins across the globe
The research found that global trade dynamics and market adaptations to regional water scarcity result in positive and negative economic outcomes for every regional river basin considered in the study.
For instance, in the lower Colorado River basin, the worst economic outcomes arise from limited groundwater availability and high population growth, but that high population growth can also prove beneficial under some climatic scenarios. In contrast, the future economic outcomes in the Indus Basin depend largely on global land-use policies.
“What is happening elsewhere in the world through differences in regional choices related to energy transitions – how land is being managed as well as different regional water demands and adaptive choices – can shape relative advantages and disadvantages of water intensive economic activities,” said Reed.
Restrictions in water availability usually lead to a negative regional economic impact, but the research revealed that some regions can experience a positive economic impact if they hold an advantage over other water basins and can become a virtual exporter of water. The Orinoco basin in Venezuela, for example, usually has a reliable supply of water and is often in a relative position that can benefit when other regions are under stress, according to the researchers.
The study also found that small differences in projections for future climate conditions can yield very large differences in the economic outcomes for water scarcity.
“Human activities and market responses can strongly amplify the economic effects of water scarcity, but the conditions that lead to this amplification vary widely from one basin to the next,” said Lamontagne.
A river basin can be considered economically robust if it is able to adapt to drought with alternative sources of water or adjust economic activity to limit usage. If a basin is unable to adapt its supply options and if prolonged water scarcity leads to persistent economic decline, then the researchers describe the loss in water basin adaptive capacity as having reached an ‘economic tipping point.’
For example, in the Indus region in South Asia, the water supply is under stress due to heavy agricultural use and irrigation leading to unsustainable consumption of groundwater, which places it close to the tipping point.
The conditions that lead to these tipping points are highly variable from basin to basin, depending on a combination of local factors and global conditions. In the Arabian Peninsula, low groundwater availability and pricing of carbon emissions are key factors. In the lower Colorado River basin, a mixture of low groundwater availability, low agricultural productivity, and strong economic demands from the U.S. and Europe lead to tipping points.
“It is noteworthy that the lower Colorado River basin has some of the most uncertain and widely divergent economic outcomes of water scarcity of the basins analyzed in this study,” said Reed. “This implies that assumed differences in regional, national and global human system conditions as well as the intensity of climate change can dramatically amplify the uncertainty in the basin’s outcomes.”
As climate change makes the physical and economic effects of water scarcity more challenging for policy makers to understand, the researchers hope their work will provide the basis for similar analyses and draw attention to the importance of expanded data collection to improve modeling and decision making.