Modelling freshwater resources use and the economic impacts of demand-driven water scarcity

Water deficits are increasingly perceived as a threat to future global prosperity. Given current projections of population growth and economic development, the pressure over the water resource base coming from human abstraction would continue to expand including in regions currently dealing with water scarcity. The aim of this thesis is to determine the implications of demand-driven water deficits for economic development and food security by accounting for three major factors influencing future water demand – income, population and climate change. The first main contribution of this thesis consists in the advance of the current state-of-the-art in the macroeconomic modelling of freshwater use and the endogenous mechanisms of adaptation to water scarcity. The second contribution is the development of knowledge regarding the sector-specific impacts of water scarcity under different water allocation regimes. The analyses are carried out through a global Computable General Equilibrium model (RESCU-Water) which considers the heterogeneity of water uses across the economy. Due to the importance of irrigation in global withdrawals, an emphasis is made on crop systems through a bottom-up representation of irrigated and rainfed crop production. The findings show that the aggregate economic effects of water scarcity highly depend on the choice of the water allocation method, with important trade-offs between food security and GDP impacts. Next, although the demand for irrigation water is slowing down in the next decades, any water allocation regime based on differences in sectoral water productivities will have a significant impact on crop production notably on staple crops. In this context, the demand-driven water deficits become an additional constraint for crop systems and further amplify the negative effects of climate change on crop output