An Integrated Modeling Framework for Analyzing Water-Economy Links

This paper describes a linked model system consisting of a dynamic Computable General Equilibrium (CGE) economywide model and a water-basin management model. The combined CGE-W model is applied to Pakistan and is designed to analyze the economywide economic impacts of changes in water resources in the Indus river basin, focusing on water “shocks” such as droughts. The CGE-W model starts from the IFPRI standard CGE model applied to Pakistan, with extensive disaggregation of agriculture and additions to include the impacts of water stress on agricultural productivity. The water model is based on the Indus Basin Model Revised (IBMR) that was first developed by the World Bank. The IBMR is a water system simulation model and is designed to manage the water system (reservoirs and canal system) under different scenarios of river flows and competing demands (now provided by the CGE model). Both models are designed to consider long-run economic growth and water resource scenarios, supporting analysis of long-run climate change scenarios. The CGE-W model framework combines the strengths of the component economic and water models, without having to make model compromises typical of water models that incorporate simple economics or economic models that include water in a simplified manner. We present empirical results for various drought scenarios and analyze the economic benefits of adding new dams to the system under an stochastic ensemble of climate change scenarios. Future developments include hydropower benefits and addition of the impacts of periodic floods on infrastructure. See above See above