Costs and other socioeconomic aspects

Impacts of climate change will entail social and economic costs and benefits, which are difficult to determine. These include the costs of damages and the costs of adaptation (to reduce or avoid damages), as well as benefits that could result from improved water availability in some areas. In addition to uncertainties about the impacts of future climate change on freshwater systems, there are other compounding factors, including demographic, societal, and economic developments, that should be considered when evaluating the costs of climate change. Costs and benefits of climate change may take several forms, including increases or decreases in monetary costs, and human and ecosystem impacts, e.g., displacement of households due to flooding, and loss of aquatic species. So far, very few of these costs have been estimated in monetary terms. Efforts to quantify the economic impacts of climate-related changes in water resources are hampered by a lack of data and by the fact that the estimates are highly sensitive to different estimation methods and to different assumptions regarding how changes in water availability will be allocated across various types of water uses, e.g., between agricultural, urban, or in-stream uses (Changnon, 2005; Schlenker et al., 2005; Young, 2005).

With respect to water supply, it is very likely that the costs of climate change will outweigh the benefits. One reason is that precipitation variability is very likely to increase. The impacts of floods and droughts could be tempered by appropriate infrastructure investments, and by changes in water and land-use management, but all of these responses entail costs (US Global Change Research Program, 2000). Another reason is that water infrastructure, use patterns, and institutions have developed in the context of current conditions (Conway, 2005). Any substantial change in the frequency of floods and droughts or in the quantity and quality or seasonal timing of water availability will require adjustments that may be costly not only in monetary terms, but also in terms of societal impacts, including the need to manage potential conflicts among different interest groups (Miller et al., 1997).

Hydrological changes may have impacts that are positive in some aspects and negative in others. For example, increased annual runoff may produce benefits for a variety of instream and out-of-stream water users by increasing renewable water resources, but may simultaneously generate harm by increasing flood risk. In recent decades, a trend to wetter conditions in parts of southern South America has increased the area inundated by floods, but has also improved crop yields in the Pampa region of Argentina, and has provided new commercial fishing opportunities (Magrin et al., 2005; also see Chapter 13). Increased runoff could also damage areas with a shallow watertable. In such areas, a watertable rise will disturb agricultural use and damage buildings in urban areas. For Russia, for example, the current annual damage caused by shallow watertables is estimated to be US$5-6 billion (Kharkina, 2004) and is likely to increase in the future. In addition, an increase in annual runoff may not lead to a beneficial increase in readily available water resources if the additional runoff is concentrated during the high-flow season.

3.5.1 How will climate change affect the balance of water demand and water availability?

To evaluate how climate change will affect the balance between water demand and water availability, it is necessary to consider the entire suite of socially valued water uses and how the allocation of water across those uses is likely to change. Water is valuable not only for domestic uses, but also for its role in supporting aquatic ecosystems and environmental amenities, including recreational opportunities, and as a factor of production in irrigated agriculture, hydropower production, and other industrial uses (Young, 2005). The social costs or benefits of any change in water availability would depend on how the change affects each of these potentially competing human water demands. Changes in water availability will depend on changes in the volume, variability, and seasonality of runoff, as modified by the operation of existing water control infrastructure and investments in new infrastructure. The institutions that govern water allocation will play a large role in determining the overall social impacts of a change in water availability, as well as the distribution of gains and losses across different sectors of society. Institutional settings differ significantly both within and between countries, often resulting in substantial differences in the efficiency, equity, and flexibility of water use and infrastructure development (Wichelns et al., 2002; Easter and Renwick, 2004; Orr and Colby, 2004; Saleth and Dinar, 2004; Svendsen, 2005).

In addition, quantity of water is not the only important variable. Changes in water quality and temperature can also have substantial impacts on urban, industrial, and agricultural use values, as well as on aquatic ecosystems. For urban water uses, degraded water quality can add substantially to purification costs. Increased precipitation intensity may periodically result in increased turbidity and increased nutrient and pathogen content of surface water sources. The water utility serving New York City has identified heavy precipitation events as one of its major climate-change-related concerns because such events can raise turbidity levels in some of the city's main reservoirs up to 100 times the legal limit for source quality at the utility's intake, requiring substantial additional treatment and monitoring costs (Miller and Yates, 2006).

Water demand

There are many different types of water demand. Some of these compete directly with one another in that the water consumed by one sector is no longer available for other uses. In other cases, a given unit of water may be used and reused several times as it travels through a river basin, for example, providing benefits to instream fisheries, hydropower generators, and domestic users in succession. Sectoral water demands can be expected to change over time in response to changes in population, settlement patterns, wealth, industrial activity, and technology. For example, rapid urbanization can lead to substantial localised growth in water demand, often making it difficult to meet goals for the provision of a safe, affordable, domestic water supply, particularly in arid regions (e.g., Faruqui et al., 2001). In addition, climate change will probably alter the desired uses of water (demands) as well as actual uses (demands in each sector that are actually met). If climate change results in greater water scarcity relative to demand, adaptation may include technical changes that improve water-use efficiency, demand management (e.g., through metering and pricing), and institutional changes that improve the tradability of water rights. It takes time to implement such changes, so they are likely to become more effective as time passes. Because the availability of water for each type of use may be affected by other competing uses of the resource, a complete analysis of the effects of climate change on human water uses should consider cross-sector interactions, including the impacts of changes in water-use efficiency and intentional transfers of the use of water from one sector to another. For example, voluntary water transfers, including short-term water leasing as well as permanent sales of water rights, generally from agricultural to urban or environmental uses, are becoming increasingly common in the western USA. These water-market transactions can be expected to play a role in facilitating adaptation to climate change (Miller et al., 1997; Easter et al., 1998; Brookshire et al., 2004; Colby et al., 2004).

Irrigation water withdrawals account for almost 70% of global water withdrawals and 90% of global consumptive water use (the water fraction that evapotranspires during use) (Shiklomanov and Rodda, 2003). Given the dominant role of irrigated agriculture in global water use, management practices that increase the productivity of irrigation water use (defined as crop output per unit of consumptive water use) can greatly increase the availability of water for other human and environmental uses (Tiwari and Dinar, 2002). Of all sectoral water demands, the irrigation sector will be affected most strongly by climate change, as well as by changes in the effectiveness of irrigation methods. In areas facing water scarcity, changes in irrigation water use will be driven by the combined effects of changes in irrigation water demand, changes in demands for higher value uses (e.g., for urban areas), future management changes, and changes in availability.

Higher temperatures and increased variability of precipitation would, in general, lead to an increased irrigation water demand, even if the total precipitation during the growing season remains the same. As a result of increased atmospheric CO2 concentrations, water-use efficiency for some types of plants would increase, which would increase the ratio of crop yield to unit of water input (water productivity - 'more crop per drop'). However, in hot regions, such as Egypt, the ratio may even decline as yields decrease due to heat stress (see Chapter 5).

There are no global-scale studies that attempt to quantify the influence of climate-change-related factors on irrigation water use; only the impact of climate change on optimal growing periods and yield-maximising irrigation water use has been modelled, assuming no change in irrigated area and climate variability (Doll, 2002; Doll et al., 2003). Applying the SRES A2 and B2 scenarios as interpreted by two climate models, these authors found that the optimal growing periods could shift in many irrigated areas. Net irrigation requirements of China and India, the countries with the largest irrigated areas worldwide, change by +2% to +15% and by -6% to +5% for the year 2020, respectively, depending on emissions scenario and climate model. Different climate models project different worldwide changes in net irrigation requirements, with estimated increases ranging from 1 to 3% by the 2020s and 2 to 7% by the 2070s. The largest global-scale increases in net irrigation requirements result from a climate scenario based on the B2 emissions scenario.

At the national scale, some integrative studies exist; two modelling studies on adaptation of the agricultural sector to climate change in the USA (i.e., shifts between irrigated and rain-fed production) foresee a decrease in irrigated areas and withdrawals beyond 2030 for various climate scenarios (Reilly et al., 2003; Thomson et al., 2005b). This result is related to a declining yield gap between irrigated and rain-fed agriculture caused by yield reductions of irrigated crops due to higher temperatures, or yield increases of rain-fed crops due to more precipitation. These studies did not take into account the increasing variability of daily precipitation, such that rain-fed yields are probably overestimated. In a study of maize irrigation in Illinois under profit-maximising conditions, it was found that a 25% decrease of annual precipitation had the same effect on irrigation profitability as a 15% decrease combined with a doubling of the standard deviation of daily precipitation (Eheart and Tornil, 1999). This study also showed that profitmaximising irrigation water use responds more strongly to changes in precipitation than does yield-maximising water use, and that a doubling of atmospheric CO2 has only a small effect.

According to an FAO study in which the climate change impact was not considered (Bruinsma, 2003), an increase in irrigation water withdrawals of 14% is foreseen by 2030 for developing countries. In the four Millennium Ecosystem Assessment scenarios, however, increases at the global scale are much less, as irrigated areas are assumed to increase only between 0% and 6% by 2030 and between 0% and 10% by 2050. The overwhelming water use increases are likely to occur in the domestic and industrial sectors, with increases of water withdrawals by 14-83% by 2050 (Millennium Ecosystem Assessment, 2005a, b). This is based on the idea that the value of water would be much higher for domestic and industrial uses (particularly true under conditions of water stress).

The increase in household water demand (e.g., for garden watering) and industrial water demand due to climate change is likely to be rather small, e.g., less than 5% by the 2050s at selected locations (Mote et al., 1999; Downing et al., 2003). An indirect but small secondary effect on water demand would be the increased electricity demand for cooling of buildings, which would tend to increase water withdrawals for cooling of thermal power plants (see Chapter 7). A statistical analysis of water use in New York City showed that above 25°C, daily per capita water use increases by 11 litres/1°C (roughly 2% of current daily per capita use) (Protopapas et al., 2000).

Water availability for aquatic ecosystems

Of all ecosystems, freshwater ecosystems will have the highest proportion of species threatened with extinction due to climate change (Millennium Ecosystem Assessment, 2005b). In cold or snow-dominated river basins, atmospheric temperature increases do not only affect freshwater ecosystems via the warming of water (see Chapter 4) but also by causing water-flow alterations. In northern Alberta, Canada, for example, a decrease in ice-jam flooding will lead to the loss of aquatic habitat (Beltaos et al., 2006). Where river discharges decrease seasonally, negative impacts on both freshwater ecosystems and coastal marine ecosystems can be expected. Atlantic salmon in north-west England will be affected negatively by climate change because suitable flow depths during spawning time (which now occur all the time) will, under the SRES A2 scenario, only exist for 94% of the time in the 2080s (Walsh and Kilsby, 2007). Such changes will have implications for ecological flow management and compliance with environmental legislation such as the EU Habitats Directive. In the case of decreased discharge in the western USA, by 2050 the Sacramento and Colorado River deltas could experience a dramatic increase in salinity and subsequent ecosystem disruption and, in the Columbia River system, managers will be faced with the choice of either spring and summer releases for salmon runs, or summer and autumn hydroelectric power production. Extinction of some salmon species due to climate change in the Pacific Northwest may take place regardless of water policy (Barnett et al., 2005).

Changed freshwater inflows into the ocean will lead to changes in turbidity, salinity, stratification, and nutrient availability, all of which affect estuarine and coastal ecosystems (Justic et al., 2005). While increased river discharge of the Mississippi would increase the frequency of hypoxia (shortage of oxygen) events in the Gulf of Mexico, increased river discharge into the Hudson Bay would lead to the opposite (Justic et al., 2005). The frequency of bird-breeding events in the Macquarie Marshes in the Murray-Darling Basin in Australia is predicted to decrease with reduced streamflow, as the breeding of colonially nesting water-birds requires a certain minimum annual flow. Climate change and reforestation can contribute to a decrease in river discharge, but before 2070 the largest impact can be expected from a shift in rainfall due to decadal-scale climate variability (Herron et al., 2002).

Water availability for socio-economic activities

Climate change is likely to alter river discharge, resulting in important impacts on water availability for instream and out-of-stream uses. Instream uses include hydropower, navigation, fisheries, and recreation. Hydropower impacts for Europe have been estimated using a macro-scale hydrological model. The results indicate that, by the 2070s, under the IS92a emissions scenario, the electricity production potential of hydropower plants existing at the end of the 20th century will increase, by 15-30% in Scandinavia and northern Russia, where between 19% (Finland) and almost 100% (Norway) of the electricity is produced by hydropower (Lehner et al., 2005a). Decreases by 20-50% or more are computed for Portugal, Spain, Ukraine, Bulgaria, and Turkey, where between 10% (Ukraine, Bulgaria) and 39% of the electricity is produced by hydropower (Lehner et al., 2005a). For the whole of Europe (with a 20% hydropower fraction), hydropower potential shows a decrease of 7-12% by the 2070s. In North America, potential reductions in the outflow of the Great Lakes could result in significant economic losses as a result of reduced hydropower generation at Niagara and on the St. Lawrence River (Lofgren et al., 2002). For a CGCM1 model projection with 2°C global warming, Ontario's Niagara and St. Lawrence hydropower generation would decline by 2535%, resulting in annual losses of Canadian $240 million to $350 million (2002 prices) (Buttle et al., 2004). With the HadCM2 climate model, however, a small gain in hydropower potential (+ 3%) was computed, worth approximately Canadian $25 million/yr. Another study that examined a range of climate model scenarios found that a 2°C global warming could reduce hydropower-generating capacity on the St. Lawrence River by 1% to 17% (LOSLR, 2006). Increased flood periods in the future will disrupt navigation more often, and low flow conditions that restrict the loading of ships may increase, for the Rhine river, from 19 days under current climate conditions to 26-34 days in the 2050s (Middelkoop et al., 2001).

Out-of-stream uses include irrigation, domestic, municipal, and industrial withdrawals, including cooling water for thermal electricity generation. Water availability for withdrawal is a function of runoff, aquifer conditions, and technical water supply infrastructure (reservoirs, pumping wells, distribution networks, etc.). Safe access to drinking water depends more on the level of technical water supply infrastructure than on the level of runoff. However, the goal of improved safe access to drinking water will be harder to achieve in regions where runoff decreases as a result of climate change. Also, climate change leads to additional costs for the water supply sector, e.g., due to changing water levels affecting water supply infrastructure, which might hamper the extension of water supply services to more people.

Climate-change-induced changes of the seasonal runoff regime and interannual runoff variability can be as important for water availability as changes in the long-term average annual runoff amount if water is not withdrawn from large groundwater bodies or reservoirs (US Global Change Research Program, 2000). People living in snowmelt-fed basins experiencing decreasing snow storage in winter may be negatively affected by decreased river flows in the summer and autumn (Barnett et al., 2005). The Rhine, for example, might suffer from a 5 to 12% reduction in summer low flows by the 2050s, which will negatively affect water supply, in particular for thermal power plants (Middelkoop et al., 2001). Studies for the Elbe River Basin have shown that actual evapotranspiration is projected to increase by 2050 (Krysanova and Wechsung, 2002), while river flow, groundwater recharge, crop yield, and diffuse-source pollution are likely to decrease (Krysanova et al., 2005). Investment and operation costs for additional wells and reservoirs which are required to guarantee reliable water supply under climate change have been estimated for China. This cost is low in basins where the current water stress is low (e.g., Changjiang), and high where it is high (e.g., Huanghe River) (Kirshen et al., 2005a). Furthermore, the impact of climate change on water supply costs will increase in the future, not only because of increasing climate change but also due to increasing demand.

A number of global-scale (Alcamo and Henrichs, 2002; Arnell, 2004b), national-scale (Thomson et al., 2005a), and basin-scale assessments (Barnett et al., 2004) show that semiarid and arid basins are the most vulnerable basins on the globe with respect to water stress. If precipitation decreases, irrigation water demands, which dominate water use in most semi-arid river basins, would increase, and it may become impossible to satisfy all demands. In the case of the Sacramento-Joaquin River and the Colorado River basins in the western USA, for example, streamflow changes (as computed by basin-scale hydrological models driven by output from a downscaled GCM - the PCM model from the National Center for Atmospheric Research) are so strong that, beyond 2020, not all the present-

day water demands (including environmental targets) could be fulfilled even with adapted reservoir management (Barnett et al., 2004). Furthermore, if irrigation use is allowed to increase in response to increased demands, that would amplify the decreases in runoff and streamflow downstream (Eheart and Tornil, 1999). Huffaker (2005) notes that some policies aimed at rewarding improvements in irrigation efficiency allow irrigators to spread a given diversion right to a larger land area. The unintended consequence could be increased consumptive water use that deprives downstream areas of water that would have re-entered the stream as return flow. Such policies could make irrigation no longer feasible in the lower reaches of basins that experience reduced streamflow.

A case study from a semi-arid basin in Canada shows how the balance between water supply and irrigation water demand may be altered due to climate change (see Box 3.1), and how the costs of this alteration can be assessed.

In western China, earlier spring snowmelt and declining glaciers are likely to reduce water availability for irrigated agriculture (see Chapter 10). For an aquifer in Texas, the net income of farmers is projected to decrease by 16-30% by the 2030s and by 30-45% by the 2090s due to decreased irrigation water supply and increased irrigation water demand, but net total welfare due to water use, which is dominated by municipal and industrial use, decreases by less than 2% (Chen et al., 2001). If freshwater supply has to be replaced by desalinated water due to climate change, then the cost of climate change includes the cost of desalination, which is currently around US$1/m3 for seawater and US$0.6/m3 for brackish water (Zhou and Tol, 2005), compared to the chlorination cost of freshwater of US$0.02/m3 and costs between US$0.35 and US$1.9/m3 for additional supply in a case study in Canada (see Box 3.1). In densely populated coastal areas of Egypt, China, Bangladesh, India, and Southeast Asia (FAO, 2003), desalination costs may be prohibitive.

Most semi-arid river basins in developing countries are more vulnerable to climate change than basins in developed countries, as population, and thus water demand, is expected to grow rapidly in the future and the coping capacity is low (Millennium Ecosystem Assessment, 2005b). Coping capacity is particularly low in rural populations without access to reliable water supply from large reservoirs or deep wells. Inhabitants of rural areas are affected directly by changes in the volume and timing of river discharge and groundwater recharge. Thus, even in semi-arid areas where water resources are not overused, increased climate variability may have a strong negative impact. In humid river basins, people are likely to cope more easily with the impact of climate change on water demand and availability, although they might be less prepared for coping with droughts than people in dry basins (Wilhite, 2001).

Global estimates of the number of people living in areas with high water stress differ significantly among studies (Vorosmarty et al., 2000; Alcamo et al., 2003a, b, 2007; Oki et al., 2003a; Arnell, 2004b). Climate change is only one factor that influences future water stress, while demographic, socio-economic, and technological changes may play a more important role in most time horizons and regions. In the 2050s, differences in the population projections of the four SRES scenarios would have a greater impact on the number of people living in water-stressed river basins (defined as basins with per capita water resources of less than 1,000 m3/year) than the differences in the emissions scenarios (Arnell, 2004b). The number of people living in severely stressed river basins would increase significantly (Table 3.2). The population at risk of increasing water stress for the full range of SRES scenarios is projected to be: 0.4 to 1.7 billion, 1.0 to 2.0 billion, and 1.1 to 3.2 billion, in the 2020s, 2050s, and 2080s, respectively (Arnell, 2004b). In the 2050s (SRES A2 scenario), 262-983 million people would move into the water-stressed category (Arnell, 2004b). However, using the per capita water availability indicator, climate change would appear to reduce global water stress. This is because increases in runoff are heavily concentrated in the most populous parts of the world, mainly in East and South-East Asia, and mainly occur during high flow seasons (Arnell, 2004b). Therefore, they may not alleviate dry season problems if the extra water is not stored and would not ease water stress in other regions of the world.

If water stress is not only assessed as a function of population and climate change, but also of changing water use, the importance of non-climatic drivers (income, water-use efficiency, water productivity, industrial production) increases (Alcamo et al., 2007). Income growth has a much larger impact than population growth on increasing water use and water stress (expressed as the water withdrawal-to-water resources ratio). Water stress is modelled to decrease by the 2050s on 20 to 29% of the global land area (considering two climate models and the SRES A2 and B2 scenarios) and to increase on 62 to 76% of the global land area. The principal cause of decreasing water stress is the greater availability of water due to increased precipitation, while the principal cause of increasing water stress is growing water withdrawals. Growth of domestic water use as stimulated by income growth was found to be dominant (Alcamo et al., 2007).

The change in the number of people under high water stress after the 2050s greatly depends on emissions scenario: substantial increase is projected for the A2 scenario; the speed of increase will be slower for the A1 and B1 emissions scenarios because of the global increase of renewable freshwater resources and the slight decrease in population (Oki and Kanae, 2006). Nevertheless, changes in seasonal patterns and the increasing probability of extreme events may offset these effects.

Table 3.2. Impact of population growth and climate change on the number of people (in millions) living in water-stressed river basins (defined as per capita renewable water resources of less than 1,000 m3/yr) around 2050 (Arnell, 2004b; Alcamo et al., 2007).

Estimated millions of people From Arnell, 2004b From Alcamo et al., 2007

Baseline (1995)

1,368

1,601

2050: A2 emissions

4,351 to 5,747

6,432 to 6,920

scenario

0 0

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