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Estimation of the economic loss associated with the potential water scarcity due to climate change over a river basin in northeast Brazil: guiding policy making process on a tangible scientific basis

IWRA World Water Congress 2017 - Cancun Mexico
A. Bridging science and policy
Author(s): Layla Lambiasi
Alexandre Gross
Mário Mozoni

Layla Lambiasi
Center for Sustainability Studies (GVces) of the Business Administration School of Fundação Getulio Vargas (FGV-EAESP)
layla.lambiasi@fgv.br
Alexandre Gross
Center for Sustainability Studies (GVces) of the Business Administration School of Fundação Getulio Vargas (FGV-EAESP)
alexandre.gross@fgv.br
Mário Mozoni
Center for Sustainability Studies (GVces) of the Business Administration School of Fundação Getulio Vargas (FGV-EAESP)
mario.monzoni@fgv.br


Keyword(s): Northeast Brazil, climate change, economic loss, water deficit, decision making process
Article: Oral:

Abstract

Often technical information is hardly apprehended by decision makers and therefore not incorporated in the planning process. On the other hand, many types of data are constantly produced and still poorly interpreted. Additionally, when the topic is climate change, the difficulty in understanding its complexity and at the same time find the balance among science and policy implementation can be even more challenging.

With that in mind, the project aims to quantify economic loss in monetary terms as a consequence of variations in flow rates patters due to possible effects of climate change, and therefore water availability, over a river basin located in northeast Brazil, region well recognized for its drought problems and social vulnerability.

For this propose, different future climate and economic scenarios were simulated through specific water allocation decision support system that computes how this resource will be distributed according to the set priorities. In the local context, human and animal supplies are always the first priority, followed by agriculture, industry and aquaculture, in this order. As an outcome, the modeling provides corresponding water deficits in a monthly basis based on each user.

It is recognized that users will respond differently to a scarcity situation, therefore each type of activity needs to be addressed from a specific angle. To estimate the loss in monetary terms several economic methods can be appropriate depending on the desired level of coverage. In this sense, the economic loss was calculated considering how a potential deficit can affect the production of goods for each user.

By translating water scarcity into economic value it is possible to bring together climate change understanding and management in a hydrologic perspective and thus provide objectivity to decision makers. Through a more practical point of view, also offer solid ground for further planning pertinent applications, like cost-benefit, cost-effectiveness and multicriteria analyses, among others.

Significant value is at stake. The results shows that, when compared to the baseline scenario, the total deficit in the river basin can be up to 133% higher in the worst case scenario, corresponding to a potential total economic loss estimated around US$ 1.16 trillion until 2065.

Consequently, it is possible through an economic standpoint to measure the dimension of the potential loss and begin to understand how water shortage can affect societal and productivity dynamics. By translating something as abstract as climate change into physical risk and ultimately into a tangible financial damage, the decision making process can be guided in a robust manner, offering palpable scientific substance to the policy sphere. Moreover, the economic loss was estimated for six different future configurations of climate and economics dynamics, scaling up scenario planning and promoting strong adaptation actions strategies.  

Besides that, the distance between scientific approach and management actions start to be reduced. Advances in economic loss estimation methodology can solidify its understating and replicability, empowering decision makers and consequently promoting general welfare.

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