The increased number and severity of weather events resulting from climate change have a big impact on water quality and availability. Water scarcity and drought are often a result. Drought is a silent, slow-moving natural hazard whose effects such as dwindling reservoirs and declining crop yields take time to appear and have wide-ranging impacts. While rural areas with fewer infrastructure resources are often hit hard by drought, cities, too, are concerned about sustaining water security for urban water consumption. Risk mitigation efforts are classified as structural, nonstructural, or flexible. Most water security cases have been addressed by structural changes (think building reservoirs or desalination plants). These solutions can be expensive, whereas nonstructural measures explore allocation or demand changes. With the many unknowns around climate change, flexible solutions incorporating both structural and nonstructural efforts may win the day.
In a new study, “Flexible Instruments to Address Water Security in the Context of Climate Uncertainty: A Case Study of Option Contracts in a Chilean River Basin,” authors Antonia Ávila, Sebastián Vicuña, Jorge Gironás, Oscar Melo, Daniela Rivera, and María Molinos evaluate the use of option contracts as a flexible water management tool to reduce the impact of droughts on urban water security. This flexible measure involves a temporary transfer of water volumes under certain circumstances from one user to another with monetary compensation. Their use case comprised an option contract between farmers on the Aconcagua River and the main water company in the area. Learn more about this research and how option contracts might be employed to improve water security in an urban context in the Journal of Water Resources Planning and Management at https://doi.org/10.1061/JWRMD5.WRENG-6654. The abstract is below.
Abstract
Climate change is causing widespread extreme weather events around the world, affecting food and water security. One example is Chile, which is facing the longest drought in its history. To cope with this situation, adaptation measures such as option contracts have been explored. This type of contract allows the temporary transfer of water from one user to another, depending on weather conditions, with monetary compensation for the users who give up the water. Using the Aconcagua River basin as a case study, it was possible to evaluate the effectiveness of these contracts to mitigate the impact of drought on human consumption in a context of climatic uncertainty. The results indicate that the contract is activated between 0 and 49 times depending on the scenario and that the water supply of the water utility is increased. In conclusion, it is found that option contracts allow mitigating future water scarcity, reducing unsatisfied demand, and improving the water security of the affected populations.
Read more on how option contracts can enhance urban water security in the ASCE Library: https://doi.org/10.1061/JWRMD5.WRENG-6654.
