Droughts and Water Scarcity in the EU: Economic Impact, Adaptation, Policy Implications and Integrated Assessment Modelling (WATER DROP)

Drought risks and water scarcity are expected to intensify as a result of human-induced climate change. Some areas in Europe, notably the Mediterranean countries are more prone to prolonged drought spells than others. Understanding and properly measuring the overall and sector-wide economic impact of those episodes at the geographically most disaggregated level is of crucial importance for the design of disaster risk management instruments and other policy-related issues. At the same time, it becomes necessary to assess whether this response varies over time. In other words, we need to know whether we are somehow adapting to climate change. Adaptation in the context of climate change is a concept that raises many questions: empirical estimates are scarce and highly desired by scientists and institutions like the IPCC; how this adaptation mechanism can be embedded into economic models of climate change is also an unresolved issue.

The objectives of WATER DROP are twofold: on the one hand, obtain quantitative measures of the economic impact of droughts and test for the existence of adapting behaviour and, on the other hand, respond the demands of the IPCC that urge for progress in the integration and modelling of adaptation into climate-economy models.

WATER DROP has demonstrated that: i) to effectively characterise agricultural drought stress at the local level, satellite-based indicators that look at the vegetation health status of the plant are preferred to precipitation anomaly indicators; ii) even though the combination of multiple meteorological and satellite indicators help to better characterise the behaviour of agricultural productivity under drought scarcity, the use of only a few representative variables can be enough to obtain good predictive models of the direct effect of droughts on crop yields, and iii) the macroeconomic cost of agricultural droughts at the country level is dependent on the intensity of the experienced drought and the productive economic structure of the region analysed.