Climate Change, Water Scarcity on Agriculture and the Economy-Wide: impacts in the LAC Region

Abstract

Water resources are facing several stresses in terms of quantity and quality. These pressures are closely related to the human interventions in fields like: agriculture, land-use/land use change, and pollutant emissions, among others. Within this context, the expected changes in climate pattern will exacerbate the challenges faced by water resources. Considering the critical role that water plays for agricultural production, any shock in water availability will have great implications for agricultural production, and through agricultural markets these impacts will reach the whole economy with economy-wide consequences. In this paper a new modeling approach is developed aiming to include water explicitly within the ICES CGE model. In order to reach this objective a new database was built considering explicitly the water endowment, precipitation changes, and unitary irrigation costs. The results suggest different economic consequences of climate change on the LAC economy. The impacts are related to change in crop production, endowment demands, and international trade