Climate Change, Water Scarcity in Agriculture and the Economy-Wide Impacts in a CGE Framework

Abstract

This paper analyzes the economic impacts of changes in water availability due to climate change. We develop a new modeling approach as an alternative to include water as a production factor within a global CGE model. We tailor the structure of the ICES model to characterize the key features of the world economy with a detailed representation of the agricultural sector. In order to reach this objective, a new database has been built to explicitly consider water endowments, precipitation changes, and unitary irrigation costs. Results suggest different economic consequences of climate change depending on the specific region. Impacts are related to change in crop production, endowment demands, and international trade.

Keywords: CGE Models, Climate Change, Agriculture, Irrigation, Water Resources

JEL Classification: C68, Q54, Q15, Q25