The costs of adaptation to climate change for water infrastructure in OECD countries

There is concern that climate change may greatly increase the costs of providing water infrastructure in rich countries, but the estimates available cannot be compared across countries. This paper develops and applies a top-down approach to estimate the costs of adapting to climate change on a consistent basis for different climate scenarios. The analysis separates (a) the costs of maintaining service standards for a baseline projection of demand, and (b) the costs of changes in water use and infrastructure as a consequence of changes in climate patterns. The engineering estimates focus on the direct capital and operating costs of adaptation without relying upon economic incentives to affect patterns of water use. On this assumption, the costs of adaptation are 1-2% of baseline costs for all OECD countries with the main element being the extra cost of water resources to meet higher level of municipal water demand. There are large differences in the cost of adaptation across countries and regions. Adopting an economic approach under which water levies are used to cap total water abstractions leads to a large reduction in the burden of adaptation and generates savings of $6-12 billion per year under different climate scenarios.