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The potential of water markets to allocate water between industry, agriculture, and public water utilities as an adaptation mechanism to climate change

Mitigation and Adaptation Strategies for Global Change : Volume 22, Issue 1, January 2017

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The potential of water markets to allocate water between industry, agriculture, and public water utilities as an adaptation mechanism to climate change

Content Provider	Springer Nature Link
Author	Koopman, Jason F. L. Kuik, On Tol, Richard S. J. Brouwer, Roy
Copyright Year	2015
Abstract	One of the climate change scenarios that have been developed for the Netherlands predicts hotter and drier summers and a substantial drop in river discharge. This might lead to water scarcity with detrimental economic and environmental effects. Among the possible adaptation responses to climate change-induced water scarcity, the re-allocation of water resources among competing uses should also be considered. In this paper, we extend and apply a computable general equilibrium (CGE) model to assess the potential of water markets (water allocation according to its shadow price) to guide the allocation of scarce water across agriculture, manufacturing, and public water supply. We develop four scenarios in which the scope of water markets is increased from industry-specific to economy-wide. The results show that the agricultural sector bears nearly all of the losses from a new water-scarce climate, while the manufacturing sectors are able to mitigate their losses to a large extent by technical measures. Extending the scope of water markets unambiguously increases economic output and results in a re-allocation of water to the manufacturing sector from the agricultural sector and from public water services. If, perhaps for political reasons, public water services are excluded from water trading, water is re-allocated from agriculture to manufacturing. Depending on which sectors are included, the construction of a water market can have negative or positive effects on a sector’s output, and although the implementation of water markets may be positive for overall economic output and can hence assist adaptation, the effect on vulnerable or societally sensitive economic sectors, such as public water, should be taken into account when implementing such a market.
Starting Page	325
Ending Page	347
Page Count	23
File Format	PDF
ISSN	13812386
Journal	Mitigation and Adaptation Strategies for Global Change
Volume Number	22
Issue Number	2
e-ISSN	15731596
Language	English
Publisher	Springer Netherlands
Publisher Date	2015-06-11
Publisher Place	Dordrecht
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Climate change Water scarcity Water markets Computable general equilibrium Atmospheric Sciences Climate Change Management and Policy Environmental Management
Content Type	Text
Resource Type	Article
Subject	Ecology Global and Planetary Change

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