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How Might Climate Change Affect the Water Industry?

January 19, 2011

Over the next 20 years, climate change forecasts from UK Climate Impacts Programme (UKCIP) do not suggest major changes in the UK in terms of average temperatures. However, we may already be seeing more extreme weather patterns. Some longer term changes are already built into the global air and sea systems, and will be unavoidable whatever actions we take now.

So what are the implications of climate change for the water industry over the next 20 years?

The effects of climate change on the UK in the short-term

Many social and economic factors affect water supply, drainage, and flood prevention – existing trends include growing water consumption, single-occupancy households, building on floodplains, and development pressures in the South East. But over and above these, the effect of climate change needs to be considered.

In the short term, changes to the climate will be relatively modest. Over the next twenty years, sea levels will rise by approximately 10cm (on the East coast); average temperatures are expected to rise by 1 degree; winter precipitation to increase by 10%; and summer precipitation to decrease by 10%. Extreme events (storms, winter floods, summer droughts) are expected to increase.

But over the next 20 years other factors related to climate change will affect the water industry more than the changing climate:

  • Improvements in climate science, in both the robustness of climate change predictions, and in the art of long-range and seasonal weather forecasting; and
  • Changes to public attitudes about the climate, which may give greater scope for politicians to impose changes on society

These factors could have profound implications for the industry, but the outcomes over twenty years are quite uncertain. Scenarios were therefore used to explore the range of possible outcomes.

Scenarios: Looking back after the next 20 years

At SAMI we generated three scenarios for 2025, based around two axes.

At the top end of the vertical axis, public anxiety about climate change has risen to the point where governments had a mandate to address carbon emissions, but the focus of attention was on energy production, energy consumption and transport. For the water industry, the effects of climate change were seen as just another cost that would have to be borne – through increased energy and materials prices, and through the activities needed to adapt to climate change.

The other end of this axis represents a situation where events have raised public awareness and force the government to change its water policies. These events may not be the result of climate change to have the required effect on public opinion, but we thought that they do have to affect London to have the necessary impact on government and media opinion formers. In this instance a drought event was used to generate Scenario C. Flood, storm, heat-wave and cold events could also have been the drivers.

The horizontal axis generated distinct scenarios A and B, where the key difference was – who pays for the costs of adaptation? Either the costs of adapting to climate change were seen as a general cost to society to be paid through general taxation or by a general charge on all utility customers. In the other, the individuals who benefit were expected to pay.

Scenario A: Social Tax

The cost of providing new supply infrastructure is seen as a social good that must be recovered equally from all customers. The public still considers unlimited water supply as a basic human right and effectively gives the government a mandate to provide whatever reservoir building programmes, regulatory regime, and abstraction permissions to keep the taps flowing whatever the rainfall.

Scenario B: On Your Head Be It

Climate change adaptation is required but the cost is largely left up to the market and the individual.  The cost of water supplies is seen as a local liability. Property developers (of both green field and brown field sites) are required to pay for the full capital cost of providing reservoir capacity and water supplies to new housing.

Scenario C: Government Must Do Something

A drought event has occurred that causes the public to accept changes to the way it consumes and pays for water – perhaps two dry summers, with minimal rainfall in the intervening winter, has left parts of London with stand pipes in the street. The price of water will be raised many-fold to choke off demand in times of drought (often predicted well in advance).

Implications for the Water Industry

  • Climate change is a predictable and very gradual process, but social and political factors, driven by public attitudes to climate change, are developing rapidly. These will affect the water industry in complex and unpredictable ways.
  • Weather events, even within the normal range of variation, could influence public opinion, especially if they affect London.
  • There is much scope for market mechanisms to match supply and demand in the water industry.
  • Water supply and flood protection have significant implications for house prices and land values.
  • It seems inevitable that the cost of water will rise.

Written by SAMI Consulting’s Gill Ringland  and Martin Duckworth.  This article is based on a 2010 report undertaken in conjunction with The Futures Forum. After taking evidence on climate change over ten months, the project has now moved on to consider the effect on specific industry sectors. In February 2011, they will be considering the effect on Energy, and in March on London.

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