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Quantifying the Cost of Day Zero–Like Events
Building on the lessons from prior studies, a new approach was developed to analyze the economic impact of day zero-like water scarcity events in cities. To do so, a global database was assembled that links urban areas with their specific water sources. This unique data set from the Nature Conservancy and McDonald (2016) links global cities with the locations from which they receive their municipal water supplies. It gives the location and name of water sources for more than 500 medium and large cities in the world.
The water points identified by the Nature Conservancy and McDonald (2016), and the cities they link to, are used to identify when cities are likely to be experiencing a water supply shock. This is done by overlaying a global database of historical weather from Matsuura and Willmott (2018) on top of the water points data. By looking into the past and examining what the typical rainfall is around these water points, it is possible to identify years in which rainfall is significantly below average. When several of these years are stacked together, it becomes likely that the water points are experiencing a prolonged drought, and the city is therefore facing a water shortage. Thus, the same “rainfall shocks” that are used in prior chapters can identify urban “water shocks,” where cities are likely experiencing reduced water supplies. Details of how these water shortages are identified are explained in box 4.1. Finally, econometric analysis is used to estimate the impact of these shocks on city-level growth.
BOX 4.1: The Resilience of Urban Water Systems
Urban water systems around the world are designed to cope with droughts of varying frequency, lengths, and severity. It is neither practical nor affordable to design a system capable of providing water through any possible length of drought, so water supply systems are typically planned to meet a design standard, expressed as a return period (for example, maintain supplies without any restriction on use through a drought with a return period of 1 in 50 years) (Watts et al. 2012). There is no formula or standard engineering prescription to setting the “design” drought. The standard comes down to a typical risk-based trade-off between what the water utility or community in question is prepared to accept in terms of the frequency, severity, and duration of water use restrictions associated with drought and what they are prepared (or able) to pay to avoid these restrictions (Erlanger and Neal 2005).
Although the length of the “design” drought that urban water systems can handle varies depending on context, worldwide experiences show that long droughts lasting three or more years are typically more taxing for water supply systems. As shown in
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table 4.1, recent droughts in urban areas that resulted in major water use restrictions (such as cuts or countdowns) lasted three or more years. This is confirmed by Buurman, Mens, and Dahm (2017), who analyze impacts and responses in 10 cities that have faced drought since 2010, and show that most cities start imposing severe water use restrictions following two dry years.
Adopting this three-year period as a rule of thumb, the analysis calculates how much rainfall has deviated from long-run averages over each three-year period for each water point. This is done through the use of a z-score, which measures, in a particular year, the number of standard deviations rainfall deviates from the long-run average dating back to the year 1900 (for instance, a z-score of −2 standard deviations means that rainfall in that year is 2 standard deviations below the long-run average, which marks a year with a significant rainfall deficit that is only expected to occur two or three times every century). Summing these z-scores over three years allows a year of rainfall deficit to be canceled out if the following two years have significantly above-average rainfall. This is critical, as positive rainfall deviations, or wet water shocks, can replenish water storage facilities and mitigate urban water supply shocks. At the same time, if there are multiple years with significant rainfall deficits, these deficits will stack, and the calculation will record a very deep three-year water deficit for that city.
The Nature Conservancy and McDonald (2016) data set contains data on all water points for cities, and cities in the data set have anywhere between 1 and 28 water source points. Because the analysis is looking at rainfall, only surface water points (reservoirs, lakes, dams, rivers, and canals) are included in this study. Thus, cities that receive their water supplies strictly from groundwater sources or desalination plants are removed. The resulting sample is 171 cities in developing countries that have at least one surface water supply point. For cities that have multiple surface water supply points, the z-scores for each of the supply points are first averaged by year, and then the three-year sums are calculated.
Before proceeding, it is instructive to see how these water deficits are distributed around the world. Map 4.1 plots the locations of all cities in developing countries in the database. The size and color of the dots indicate the deepest water deficit that the city experienced from 1992–2013 (the time period of the study). Red dots indicate large and sustained rainfall deficits with a cumulative z-score of less than −6 standard deviations (SD). This means that rainfall deficits were, on average, at least 2 standard deviations below the long-run average in each year over the three-year period. This is quite a large and prolonged shock, which will undoubtedly put stresses on the city’s water supply. And yet, at least six large cities have experienced such a shock between 1992 and 2013. Note that cities facing large deficits
