Hellmann, F Presentation

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Economic impacts of the land-water-energy nexus

Exploring its feedbacks on the global economy

Eighth Annual Meeting of the IAMC, 16-18 November 2015, Potsdam

Background

Most global assessments: – One-way analysis: impacts of economic growth -> environment. – They do not assess: impacts of environmental degradation ->

economic growth

CIRCLE: – Two-way analysis:

› environmental and resource scarcity feedbacks into the economy.

– Land-water-energy nexus is a focal point.

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CIRCLE

CIRCLE is a big project; it encompasses several subprojects

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CIRCLE

Air pollution Climate change Land-water-energy nexus Biodiversity

CIRCLE

CIRCLE is a big project; it encompasses several subprojects

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CIRCLE

Air pollution Climate change Land-water-energy nexus Biodiversity

What is the Land-Water-Energy nexus? Strong linkages between land, water and energy

– Economic activity in 1 sector requires inputs from the others – Competition for the same resources – Many sectors affect each other through these resources

In most cases resources are sufficient – Scarcity often regional – But more critical:

› when environment is considered › when mega trends are considered

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What is the Land-Water-Energy nexus? Strong linkages between land, water and energy

– Economic activity in 1 sector requires inputs from the others – Competition for the same resources – Many sectors affect each other through these resources

In most cases resources are sufficient – Scarcity often regional – But more critical:

› when environment is considered › when mega trends are considered

Resource scarcity (= bottleneck in land, water or energy

supply) thus more prominent in future! 6

How to assess impact of nexus bottlenecks on economic growth?

Baseline scenario with bottleneck Counterfactual scenario without bottleneck

Difference in economic performance = cost of bottleneck

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Which models do we use?

ENV-Linkages

IMAGE

Demand for resources

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Biophysical impacts Yield

with bottleneck without bottleneck

Which models do we use?

ENV-Linkages

IMAGE

Demand for resources

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∆ Yield

Biophysical impacts Yield

with bottleneck without bottleneck

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And now a worked-out example.. non-renewable groundwater limitation

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Lower irrigation yields Reallocation irrigated agriculture Increase area rainfed agriculture Production losses to ENV-Linkages

Non-renewable groundwater: Biophysical impacts Some highlights:

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Region Yield impacts Remarks

Canada, Brazil, Africa, Latin America, Oceania, Russia

No No irrigated areas

Japan, Korea, Indonesia No Renewable groundwater

USA Small Reservoirs

Mexico, S Africa Moderate Increasing land competition

India Severe

China Small

N Africa, Middle East Severe impacts Severe land competition

Europe Seems dramatic Only OE5 really affected

Non-renewable groundwater: Economic impacts Agricultural value added in 2060 (in % change from baseline): - Substantial loss:

EU, India, Middle East and North Africa

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-15%

-10%

-5%

0%

5%

10%

15%

Sugar crops Other Grains Other Crops

Oil Seeds Rice Fibres Plant

Vegetables and fruits Wheat Total

GDP impacts are quite small, except for Mediterranean, North Africa and India.

Food prices increase everywhere, but more dramatic in India and North Africa

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Non-renewable groundwater: Economic impacts

-1.4%-1.2%-1.0%-0.8%-0.6%-0.4%-0.2%0.0%0.2%

Real GDP

0%1%2%3%4%5%6%7%8%9%

Food Prices

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Thank you PBL Team

• [email protected] • [email protected] • [email protected] • [email protected]

OECD Team

• [email protected] • [email protected] • [email protected] • [email protected]

www.pbl.nl www.oecd.org/environment/indicators-modelling-outlooks/modelling.htm