The Economic Response to Water Availability due to Climate and Policy Change in the Saskatchewan River Basin, Canada
Date:
Abstract: The Saskatchewan River Basin (SaskRB) has been facing water allocation issues, such as the over-allocation of water in Alberta, that intensify competition among different water users due to the impacts of climate change on the amount of available water. Consequently, efficient water allocation among competing users becomes more challenging for decision makers. Under such circumstances, assessing the economic impacts of different water availability scenarios and alternative water allocation policies helps identify the most efficient policy options in the face of climate change induced water shortage. However, in the case of multi-jurisdictional river basins, such as SaskRB, evaluating these impacts in an integrated manner across the entire river basin is essential to identify the most promising water allocation policies. Despite the importance of adopting an integrated approach in evaluating the economic impacts of different water availability and policy options, none of the previous studies of the SaskRB have considered the entire river basin as an integrated system. Mainly focused on one sub-basin (e.g., the South Saskatchewan River Basin) or a province (e.g., Alberta), these studies failed to evaluate the impacts of climate change or alternative policy options on the economy of the SaskRB as a whole. To fill this gap in the literature, we aim to assess the economic impacts of different water availability options in the SaskRB due to climate and policy change on not only sub-basins and provinces that share this river basin but also the entire river basin as an integrated system. In this study, we developed an inter-regional Supply-side Input-Output modelling framework for the SaskRB to evaluate the direct and indirect economic impacts of different water availability options under climate and policy change conditions. Unlike previous studies that adhered only to administrative (e.g., provinces) or hydrological (e.g., sub-basins) boundaries, this study combines these boundaries to examine the impacts of water availability under climate and policy change on the economy of both provinces and sub-basins in the SaskRB. We apply this model to investigate the economic response of the SaskRB to two different water availability scenarios. In the first scenario, we assume that reduction in available water due to climate change is uniformly imposed on all industrial sectors, while in the second scenario, we consider a number of policy options to mitigate the economic impacts of this water shortage in the SaskRB. Findings of this study show that adopting appropriate water allocation policies, such as prioritizing water demand of different sectors, using alternative water sources (e.g., groundwater or saline water), and water reuse helps mitigate the economic impacts of a shortage in water availability. Results reveal that by adopting these policy options, the provincial GDP can be improved by between 40 and 60 percent, and GDP losses in the SaskRB can be reduced by almost 50 percent.