Environmental Economics and Policy, Resource /Energy Economics and Policy, Q25, Q54,

Adams, Richard M.

Peck, Dannele E.

English

Research Papers in Economics

12  CHOICES  1st Quarter 2008 • 23(1) 
The magazine of food, farm, and resource issues
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Effects of Climate Change on Water     
Resources
Richard M. Adams and Dannele E. Peck
JEL Classifications: Q25,Q54
Climate change will affect water resources through its im-
pact on the quantity, variability, timing, form, and inten-
sity of precipitation. This paper provides an overview of the 
projected physical and economic effects of climate change 
on water resources in North America (with a focus on wa-
ter shortages), and a brief discussion of potential means to 
mitigate adverse consequences. More detailed information 
on this complex topic may be found in Adams and Peck 
(forthcoming) and in the Intergovernmental Panel on Cli-
mate Change Fourth Assessment Report (IPCC AR4).
Global Climate Change and Precipitation
Models of climate change (GCMs) predict U.S. annual-
mean temperatures to generally rise by 2° C to 3° C over 
the next 100 years, with greater increases in northern re-
gions  (5°  C),  and  northern  Alaska  (10°  C).  Numerous 
other climatic effects are also expected. For example, U.S. 
precipitation, which increased by 5 to 10% over the 20th 
century, is predicted to continue to increase overall. More 
specifically, an ensemble of GCMs predicts a 20% increase 
for northern North America, a 15% increase in winter pre-
cipitation for northwestern regions, and a general increase 
in winter precipitation for central and eastern regions. De-
spite predictions of increased precipitation in most regions, 
net decreases in water availability are expected in those ar-
eas, due to offsetting increases in evaporation. A 20% de-
crease in summer precipitation, for example, is projected 
for southwestern regions, and a general decrease in sum-
mer precipitation is projected for southern areas. Although 
projected regional impacts of climate change are highly 
variable between models, the above impacts are consistent 
across models. 
Global Climate Change and Water Resources
Additional effects of global climate change that have im-
portant implications for water resources include increased 
evaporation rates, a higher proportion of precipitation re-
ceived as rain, rather than snow, earlier and shorter runoff 
seasons, increased water temperatures, and decreased water 
quality in both inland and coastal areas. The physical and 
economic consequences of each of these effects are dis-
cussed below. 
Increased evaporation rates are expected to reduce water 
supplies in many regions. The greatest deficits are expected 
to occur in the summer, leading to decreased soil moisture 
levels and more frequent and severe agricultural drought. 
More frequent and severe droughts arising from climate 
change will have serious management implications for water 
resource users. Agricultural producers and urban areas are 
particularly vulnerable, as evidenced by recent prolonged 
droughts in the western and southern United States, which 
are estimated to have caused over $6 billion in damages to 
the agricultural and municipal sectors. Such droughts also 
impose costs in terms of wildfires, both in terms of control 
costs and lost timber and related resources.
Water users will eventually adapt to more frequent and 
severe droughts, in part by shifting limited water supplies 
towards higher-value uses. Such shifts could be from low- 
to high-value crops, or from agricultural and industrial to 
environmental and municipal uses. A period of delay is 
likely, however, because gradual changes in the frequency 
and severity of drought will be difficult to distinguish from 
normal inter-annual variations in precipitation. Economic 
losses will be larger during this period of delay, as compared 
to a world with instantaneous adjustment, but preemptive 
adaptation could also be costly given the uncertainty sur-
rounding future climate. 
Rising surface temperatures are expected to increase the 
proportion of winter precipitation received as rain, with a 
declining proportion arriving in the form of snow. Snow 
pack levels are also expected to form later in the winter, ac-
cumulate in smaller quantities, and melt earlier in the sea-  1st Quarter 2008 • 23(1)  CHOICES  13
son, leading to reduced summer flows. 
Such shifts in the form and timing of 
precipitation and runoff, specifically 
in snow-fed basins, are likely to cause 
more frequent summer droughts. Re-
search shows that these changes are 
already  taking  place  in  the  western 
United States. Changes in snow pack 
and runoff are of concern to water 
managers in a number of settings, in-
cluding hydropower generation, irri-
gated agriculture, urban water supply, 
flood protection and commercial and 
recreational fishing. Timing of runoff 
will  affect  the  value  of  hydropower 
potential in some basins if peak water 
run-off occurs during nonpeak elec-
tricity demand. Energy shortages and 
resulting  energy  price  increases  will 
provide  incentives  to  expand  reser-
voir capacities or develop alternative 
energy sources. 
If  the  runoff  season  occurs  pri-
marily  in  winter  and  early  spring, 
rather than late spring and summer, 
water availability for summer-irrigat-
ed crops will decline, and water short-
ages will occur earlier in the growing 
season, particularly in watersheds that 
lack large reservoirs. Agricultural pro-
ducers, in response to reduced water 
supplies and crop yields, will adjust 
their crop mix. Producers in irrigated 
regions  might  reduce  total  planted 
acreage, or deficit-irrigate more acres, 
to concentrate limited water supplies 
on their most valuable crops (e.g. on-
ions and potatoes, rather than wheat 
and alfalfa). Producers in rain-fed re-
gions might shift to crop species and 
varieties with shorter growing season 
requirements or greater drought tol-
erance, such as winter grains. 
Cropping  practices  are  likely 
to shift as well, perhaps towards re-
duced- or no-till technologies, which 
enhance  water  infiltration  and  con-
serve  soil  moisture,  or  towards  ir-
rigation  technologies  that  are  more 
efficient at the farm level (although 
not  necessarily  at  the  basin  level). 
Producers may begin to supplement 
dwindling surface water supplies with 
groundwater  resources,  a  response 
that  has  already  been  observed  in 
many  drought-stricken  areas.  These 
adjustments  will  mitigate  a  portion 
of private economic losses. They will 
also affect environmental quality, al-
though the expected direction is more 
difficult to predict. 
A shift in stream hydrographs to 
more winter flow may also disrupt the 
life cycle of cold water fish species, 
such as salmon, which depend on late 
spring flows to “flush” young salmon 
to the ocean, and on summer flows to 
moderate water temperatures. Unless 
winter runoff is captured and stored 
for late spring or summer use, fewer 
salmon smolt will survive migration 
and more frequent fish kills will oc-
cur from lethal stream water tempera-
tures.  Such  environmental  impacts 
will  intensify  debates  about  con-
sumptive versus instream water uses, 
such as those ongoing in the Klamath 
and Platte River Basins. 
Climate  change  is  expected  to 
affect  water  quality  in  both  inland 
and  coastal  areas.  Specifically,  pre-
cipitation is expected to occur more 
frequently via high-intensity rainfall 
events, causing increased runoff and 
erosion. More sediments and chemi-
cal  runoff  will  therefore  be  trans-
ported into streams and groundwa-
ter systems, impairing water quality. 
Water  quality  may  be  further  im-
paired  if  decreases  in  water  supply 
cause nutrients and contaminants to 
become  more  concentrated.  Rising 
air and water temperatures will also 
impact  water  quality  by  increasing 
primary  production,  organic  matter 
decomposition, and nutrient cycling 
rates in lakes and streams, resulting in 
lower dissolved oxygen levels. Lakes 
and wetlands associated with return 
flows  from  irrigated  agriculture  are 
of  particular  concern.  This  suite  of 
water quality effects will increase the 
number of water bodies in violation 
of  today’s  water  quality  standards, 
worsen  the  quality  of  water  bodies 
that are currently in violation, and ul-
timately increase the cost of meeting 
current water quality goals for both 
consumptive and environmental pur-
poses. 
Rising  sea  levels  could  also  re-
duce water quality and availability in 
coastal  areas.  Recent  projections  of 
sea-level rise by the end of the 21st 
century range from 19 to 58 cm. A 
more  dramatic  increase  in  sea-level, 
on  the  order  of  meters  rather  than 
centimeters, is possible, but most sci-
entists consider it a low probability 
risk. For example, complete melting 
of the Greenland Ice Sheet or West 
Antarctic Ice Sheet would trigger such 
a large rise. Rising sea levels could af-
fect groundwater quality directly via 
saltwater  intrusion.  Radical  changes 
to the freshwater hydrology of coastal 
areas, caused by saltwater intrusion, 
would threaten many coastal regions’ 
freshwater supplies. 
Rising sea levels could also affect 
water availability in coastal areas in-
directly  by  causing  water  tables  in 
groundwater aquifers to rise, which 
could increase surface runoff at the 
expense  of  aquifer  recharge.  Water 
shortages will cause the price of water 
to rise, through monthly water bills 
or one-time connection fees for new 
homes and businesses. A sufficiently 
large price increase could affect the 
extent and pattern of urban growth 
throughout the United States. Costly 
water supply projects, such as desali-
nation  plants,  pipelines,  and  dams 
will also become more economically 
attractive. 
One final and important effect of 
the water resource impacts discussed 
above is the potential for more fre-
quent and intense interstate and in-
ternational water allocation conflicts. 
Water markets have the potential to 
prevent or diffuse such conflicts; how-
ever, the assignment of water rights to 
establish the market can create more 
conflict than it diffuses.1  CHOICES  1st Quarter 2008 • 23(1) 
Coping With Changing Water 
Resources
Although subject to uncertainty, fore-
casts of climatic change offer a glimpse 
into  possible  future  water  resource 
impacts  and  challenges.  Predicted 
impacts vary by region, but include 
increased temperatures and evapora-
tion rates; higher proportions of win-
ter precipitation arriving as rain, not 
snow; earlier and more severe summer 
drought, and decreased water quality. 
Water shortages, which currently re-
sult in substantial economics losses, 
will be more common in many re-
gions because of these impacts. Such 
economic losses, which occur across a 
range of sectors, from agriculture to 
energy and recreation, have profound 
effects  on  local  communities.  More 
frequent  shortages  imply  increased 
costs to society, although adaptation 
by water users will mitigate some por-
tion of these costs. 
Water  resource  users  can  reduce 
the negative effects of water shortages 
through a number of strategies. These 
include revising water storage and re-
lease programs for reservoirs, adopting 
crops and cropping practices that are 
robust over a wider spectrum of water 
availability, expanding and adjusting 
crop insurance programs (such as the 
Multi-Peril Crop Insurance program’s 
Prevented  Planting  Provision),  ad-
justing water prices to encourage con-
servation and the expansion of water 
supply infrastructure, and supporting 
water transfer opportunities. Damage 
from  drought-induced  wildfires  can 
be  minimized  by  using  long  range 
soil moisture forecasts to pre-position 
fire suppression resources and in the 
longer  term,  by  changing  land-use 
regulations to restrict development in 
areas facing increased fire risk.
The ability to anticipate and ef-
ficiently prepare for future water re-
source management challenges is cur-
rently limited, in part, by imprecise 
regional climate change models and 
long-term  weather  forecasts.  Uncer-
tainty about future climate conditions 
makes it more difficult to optimally 
prepare  for  and  adapt  to  associated 
changes in water resource availability 
and  quality.  Imagine,  for  example, 
trying to prepare optimally for a wa-
ter shortage when you are uncertain 
of when it will occur, how severe it 
will be, or how long it will persist. It 
may be tempting to make manage-
ment plans based on the worst-case 
scenario;  however,  the  opportunity 
cost of this “safety-first” approach can 
be high if the worst-case does not oc-
cur. Imperfect information ultimately 
increases the magnitude of economic 
losses  (or  reduce  the  magnitude  of 
any potential economic gains) attrib-
utable to water resource changes. 
Improvements in climate projec-
tions  and  long-term  weather  fore-
casts, such as forecasts based on the 
El  Niño-Southern  Oscillation  phe-
nomenon (ENSO), offer potential for 
reducing economic losses (or increas-
ing economic gains) associated with 
climate  change.  More  specifically, 
improvements in the ability to detect 
water shortages farther in advance, to 
more precisely forecast their location, 
intensity,  and  duration,  and  to  use 
such forecasts to inform management 
strategies would enhance water users’ 
confidence in regional forecasts, and 
their ability to efficiently prepare for 
and  adapt  to  future  water  resource 
management challenges.
For More Information
Adams, R.M and D. E. Peck. (2008). 
“Effects  of  Climate  Change  on 
Drought  Frequency:  Impacts 
and  Mitigation  Opportunities”; 
Chapter 7 in Mountains, Valleys, 
and Flood Plains: Managing Wa-
ter Resources in a Time of Climate 
Change. A. Dinar and A. Garrido, 
eds. Routledge Publishing..
Gleick, P. H. (lead author). (2000). 
Water: The Potential Consequences 
of Climate Variability and Change 
for the Water Resources of the Unit-
ed States. A report of the National 
Water Assessment Group for the 
U.S.  Global  Change  Research 
Program.  Pacific  Institute  for 
Studies  in  Development,  Envi-
ronment, and Security, Oakland, 
CA, USA.
Solomon, S., D. Qin, M. Manning, 
Z. Chen, M. Marquis, K. B. Av-
eryt, M. Tignor, and H. L. Miller 
(eds.)  (2007)  Climate  Change 
2007:  The  Physical  Science  Basis. 
Contribution of Working Group 
I to the Fourth Assessment Report 
of the Intergovernmental Panel on 
Climate Change. Cambridge Uni-
versity Press, Cambridge, U.K. 
Richard Adams is professor emeritus of 
resource economics at Oregon State Uni-
versity, Corvallis, OR. richard.adams@
oregonstate.edu. Dannele Peck is assis-
tant professor of agricultural economics 
at the University of Wyoming, Laramie, 
WY. dpeck@uwyo.edu
Partial  support  for  this  research  from 
USDA, ERS under Cooperative Agree-
ment No. 43-3AEL-2-80095 is grate-
fully acknowledged.

Effects of Climate Change on Water Resources

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