Multisectoral models for water management under droughts and climate change

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The escalating conflicts and competition for freshwater resources are widely acknowledged. The demand for water is on the rise due to rapid population growth and socioeconomic development, while climate change is disrupting the water cycle by changing precipitation patterns, leading to alterations and increasing uncertainty in the availability, quality and distribution of water resources. This is compounded by extreme weather events, especially droughts, which further aggravate both the supply and reliability of water resources. Water scarcity poses a major threat to human health, ecosystems sustainability and economic development, challenging both global food security and economic stability. The complex interplay between water resources and economic systems requires models that encompass the interconnectedness among all economic activities, to properly understand the economy- and region-wide effects of local scarcity and to guide the design of both demand and supply instruments to cope with water stress. By using environmentally-extended multi-sectoral models, this thesis aims to address the impacts of water-induced supply side disruptions in the economy under climate change, proposing methods and policies to mitigate and adapt to changes in water resources availability. It assesses the macroeconomic impacts of localized droughts on different world regions by evaluating two different allocation regimes adopted to deal with the water shortage (namely, water restrictions borne solely by agricultural sectors vs. uniform reduction of water allotments). The results show that the policy-regime chosen, together with the role of the region in global supply chains, greatly determine the extent of the economic impacts, both in the directly affected region and in third countries. When the drought affects only agriculture, the negative economic impacts can be mitigated by adjusting production and trade. In contrast, when water availability is reduced uniformly across all economic sectors in the drought-stricken region, economic losses spread across the globe. This thesis goes further in the analysis of water allocation policies by developing a model capable of finding the optimal allocation to minimize the overall economic disruption during a drought ​
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