Water Resources and Extreme Events in the Awash Basin: Economic Effects and Policy Implication

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September 2016
Global Green Growth Institute (GGGI)

The report Water Resources and Extreme Events in the Awash Basin seeks to better understand and quantify this critical economic vulnerability, as well as draw out the implications of this for water management policies. The study examines scenarios where agricultural production is affected by water scarcity and extreme hydrological events and calculates the economic impacts to Ethiopia's agricultural sector as well as the knock - on effects of reductions in the supply of agricultural produce in other sectors of the economy. 

The study finds that a protracted drought could reduce GDP in the Awash basin by as much as 20% under current economic conditions. As Ethiopia's economy and population grows rapidly in the coming years, this economic vulnerability will become much more severe unless substantial policy changes are enacted to mitigate water vulnerability. To mitigate this vulnerability, the report discusses the efforts of the Awash Basin Authority to improve data collection, forecast supply-demand balances, and develop tariffs and permitting schemes for water abstraction and wastewater discharges. 

While support these activities, the report also stresses the importance of quantifying the economic value of water. This can be used to quantify the costs and benefits of different programs and thereby improve decision making over water allocation and investment policies.