Economic Growth and Climate Change Bangkok 2013 Time

Economic Growth and Climate Change Bangkok 2013

Time • Economic growth takes time to unfold • Climate change takes time to unfold • Cannot measure effects of climate change by just seeing how impacts change over time • Must separate influence of economic growth from influence of climate change • Dynamic world from economic growth is the baseline from which to measure climate effects

Water and Growth • Economic growth rarely leads to more water supply • More people and higher income lead to more residential water use • Higher GDP means more industrial water demand • More rainfed farming has little effect on water but more irrigated farming increases water demand- though farmers can substitute capital for water (sprinklers and drip)

Growth U&I Supply Price Farmer Water for farmers Water for Urban/Industry

Growth Requires Water Reallocation • Growth alone will generally call for water to be reallocated from users with low marginal value to users with high marginal value • In most cases, water needs to be shifted from farmers to U&I • Failure to reallocate leads to large losses in U&I sector (slower overall economic growth)

Climate Change • Climate change can exacerbate the water problem caused by growth by slightly increasing demand but mostly by reducing supply • Need to find more efficient solution or water sector losses can be large

Growth and Climate Change U&I Supply Price Farmer Water for farmers Water for Urban/Industry

Water Reallocation as Adaptation • By moving water to higher valued uses, water system can adapt to even large losses in supply • California adapted to recent drought by buying water from lowest valued agricultural use (crops for livestock) • With 25% loss of water supply, California agriculture declined only 3% • Without reallocation loss would have been 25%