Modelling the economic and social consequences of drought under future projections of climate change
Drought events and their consequences pose a considerable problem for governments, businesses and individuals. Superimposed on this risk is the danger of future anthropogenic climate change. Climate models are increasingly being used to understand how climate change may affect future drought regimes. However, methodologies to quantify the type and scale of social and economic effects that could occur under these future scenarios are virtually non-existent. Consequently, this study developed a methodology for projecting and quantifying future drought risk in terms of economic damages and numbers of lives lost and affected. In this study, historic drought events were identified in regional precipitation data using the Standardised Precipitation Index, and their magnitude quantified. Drought magnitude was linked to reported historic data on economic damages and the numbers of lives affected and lost, to create country specific economic and social drought damage functions for Australia, Brazil, China, Ethiopia, India, Spain/Portugal and the USA. Future projections of drought magnitude for 2003-2050 were modelled using the integrated assessment model CIAS (Community Integrated Assessment System), for a range of climate and emission scenarios, and applied to the drought damage functions to estimate future economic and social drought effects. Additionally, a preliminary investigation of indirect economic drought damages was conducted using the Adaptive Regional Input-Output model (ARIO). The analysis identified large variability in the scale and trend of economic and social effects from future drought. Economic benefits projected to occur in some countries were outweighed by negative effects elsewhere, with annual losses to global GDP from drought increasing in the first half of the 21st century. The analysis suggested that severe and extreme SPI-6 and SPI-12 drought events could cause additional losses to global GDP of 0.01% to 0.25% annually. Whilst this effect on global GDP may appear small, this is considered a conservative estimate namely as the analysis is representative of six countries only; the estimates do not incorporate the possibility of successive drought events, or compounding effects on vulnerability from interactions with other extreme events such as floods. Additionally, the global economic estimates exclude indirect economic effects, and social and environmental losses; the possibility of increasing vulnerability due to changing socio-economic conditions; and the possibility of irreversible or systemic collapse of economies as, under future climate change, drought magnitude may exceed current experience and surpass thresholds of social and economic resilience. Yet importantly, even just considering direct economic effects of individual drought events on a handful of countries still resulted in a noticeable effect on global GDP. Stringent mitigation had little effect on the increasing economic and social effects of drought in the first half of the 21st century, so in the short-term adaptation in drought ‘hot spots’ is crucial. However, stringent mitigation will be required to reduce increasingly severe drought events that are projected for the second half of the 21st century. A case study of Spain suggested that indirect economic losses increased non-linearly as a function of direct losses, amplifying total economic damages of drought. Importantly the non-linearity seen between direct and indirect economic costs suggests that the benefits of stringent mitigation policies, in terms of avoided indirect losses, may be more substantial than for direct losses in the second half of the 21st century. The main impact of the research is its contribution to the assessment of economic and social damages from drought events through the creation and application of drought damage functions. The drought damage functions could be incorporated into wider economic assessments of climate change or integrated assessment models that currently exclude extreme weather events. The inclusion of drought related economic and social damages could help to guide appropriate levels of climate change mitigation, help to gauge the vulnerability of communities to future drought events, guide drought risk management, and inform drought adaptation strategies. The application of I-O analysis to estimate indirect economic losses from drought is a relatively new and developing area of research. The research highlights how I-O analysis could be used to provide estimates of economic drought damages under future climate change, which are more comprehensive, and useful for assessing benefits of future mitigation and adaptation strategies. Consequently, there are many gains to be seen from the continued development and application of this research methodology for drought.
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