IPCC Fourth Assessment Report: Climate Change 2007
Climate Change 2007: Working Group II: Impacts, Adaptation and Vulnerability

3.5 Costs and other socio-economic aspects

Impacts of climate change will entail social and economic costs and benefits, which are difficult to determine. These include the costs of damages and the costs of adaptation (to reduce or avoid damages), as well as benefits that could result from improved water availability in some areas. In addition to uncertainties about the impacts of future climate change on freshwater systems, there are other compounding factors, including demographic, societal, and economic developments, that should be considered when evaluating the costs of climate change. Costs and benefits of climate change may take several forms, including increases or decreases in monetary costs, and human and ecosystem impacts, e.g., displacement of households due to flooding, and loss of aquatic species. So far, very few of these costs have been estimated in monetary terms. Efforts to quantify the economic impacts of climate-related changes in water resources are hampered by a lack of data and by the fact that the estimates are highly sensitive to different estimation methods and to different assumptions regarding how changes in water availability will be allocated across various types of water uses, e.g., between agricultural, urban, or in-stream uses (Changnon, 2005; Schlenker et al., 2005; Young, 2005).

With respect to water supply, it is very likely that the costs of climate change will outweigh the benefits. One reason is that precipitation variability is very likely to increase. The impacts of floods and droughts could be tempered by appropriate infrastructure investments, and by changes in water and land-use management, but all of these responses entail costs (US Global Change Research Program, 2000). Another reason is that water infrastructure, use patterns, and institutions have developed in the context of current conditions (Conway, 2005). Any substantial change in the frequency of floods and droughts or in the quantity and quality or seasonal timing of water availability will require adjustments that may be costly not only in monetary terms, but also in terms of societal impacts, including the need to manage potential conflicts among different interest groups (Miller et al., 1997).

Hydrological changes may have impacts that are positive in some aspects and negative in others. For example, increased annual runoff may produce benefits for a variety of instream and out-of-stream water users by increasing renewable water resources, but may simultaneously generate harm by increasing flood risk. In recent decades, a trend to wetter conditions in parts of southern South America has increased the area inundated by floods, but has also improved crop yields in the Pampa region of Argentina, and has provided new commercial fishing opportunities (Magrin et al., 2005; also see Chapter 13). Increased runoff could also damage areas with a shallow watertable. In such areas, a watertable rise will disturb agricultural use and damage buildings in urban areas. For Russia, for example, the current annual damage caused by shallow watertables is estimated to be US$5-6 billion (Kharkina, 2004) and is likely to increase in the future. In addition, an increase in annual runoff may not lead to a beneficial increase in readily available water resources if the additional runoff is concentrated during the high-flow season.