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Changing drought, flood and storm conditions have the potential to cost the UAE in the Middle East up to $27 billion in lost GDP between 2022 and 2050, an average annual GDP loss of 0.1%.
The future economic impact of water risk in different climates: UAE, Australia, Canada, China, Philippines, UK and US, according to a new study called Aquanomics: The Economics of Water Risk and Future Resilience, launched by global professional services firm GHD.
While the economic impact of water risk will accelerate throughout the century, it becomes a particularly pressing issue this decade – water risk could cost these major economies a combined slightly more than $1.3 trillion between now and 2030 U.S. dollars of funding will grow to $5.6 trillion by 2050.
Econometric modeling of insurance data
The study is the first to calculate the impact of water risk on GDP at the economy-wide and sectoral levels. The study combined insurance data with econometric modeling to demonstrate the broader economic impact of future increases in water risk.
The study also highlights how increasingly frequent and severe water-related events pose a threat not only to the global economy, but also to communities and natural ecosystems that depend on a balanced water cycle.
The study found that the UAE would face significant water risks – albeit low compared to other countries and regions in the study. The main sector-level threat facing the UAE is expected to fall on the UAE’s growing agricultural sector, with a potential year-on-year production loss of 0.5% due to widespread water risks.
The UAE is known to have unique water risk profiles in both desert and developed urban landscapes, where rising temperatures and the frequency and intensity of dust storms could threaten these areas.
uneven distribution
Aquanomics also reveals that water risks are not evenly distributed across countries and outlines the unique opportunity the UAE has in preparing its communities, infrastructure and investment portfolio to mitigate such risks. In terms of total water-related GDP losses between 2022 and 2050, the United States is estimated to be the hardest hit, with a projected loss of $3.7 trillion, while the UAE, a particularly arid country, is projected to be much less affected, with a projected loss of $270 One hundred million U.S. dollars.
The study also presents potential future impacts on five key economic sectors: agriculture; banking and insurance; energy and utilities; fast moving consumer goods (FMCG) and retail; and manufacturing and distribution.
The Aquanomics model predicts that the agricultural sector will be the most affected by increased water risk – with an average annual yield loss of 0.5% and a total yield loss of $3 billion by 2050. Despite the linkages between water and energy systems, the energy and utilities sector is estimated to be the least affected, with an estimated total output loss of $2 billion.
desalination
Commenting on the study, Andrew Saunders, Head of Water Markets UAE, GHD, said: “As one of the world’s major water-scarce countries, the UAE is heavily adopting desalination methods to provide adequate supplies and reduce risks, with 42% of its drinking water supply coming from desalination.”
However, the economic costs of these methods are high and the environmental impact is clear, so the UAE will need to seek fewer and more efficient desalination methods as the technology develops, he said.
Taking a long-term view and increasing the use of innovative technologies such as water recycling and desalination using renewable energy will be key to building resilience and achieving targeted demand management in the country. Strategic use of precious groundwater resources is also crucial, especially for the agricultural sector.
global benchmark
The study highlights the opportunities for the UAE to innovate and set a global benchmark around modern water management that will be able to respond appropriately to the major impacts of climate change and create a sustainable, vibrant and resilient environment in the UAE community he added. – trade arab news agency
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