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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%