There is limited literature available regarding the economic benefits of drought. One reason for this is that it is difficult to measure the economic impacts of droughts on a community's residents, businesses, and industries and how those effects differ when a drought plan is implemented.
This study estimated the cost of reduced water supply in a community due to water shortages caused by drought and drought plan-imposed water supply restrictions using economic methods from the resilience factor and welfare economics literature.
The resilience factor approach allowed quantification of the community's industries and public entities' capacities to function in the face of water disruption. Residents' welfare losses were quantified regarding the impact of water supply disruptions with and without a drought plan. In addition, the approach estimated the changes in revenue for the City's water utility due to drought and drought-plan-related reductions in water sales.
The economic model we developed estimated the impact of drought restrictions applied to Cedar Rapids, Iowa, using it drought plan, its 2017 water utility prices, and the 2012 combined monthly water demands of its residents, industry, and public sector. For the period studied, the City's water supply came from an aquifer fed by the Cedar River. The potential economic impact of the drought plan was estimated by applying the model to droughts based on low river flow for the streamflow record between 1904 to 2014 (111 years).
The results showed businesses and industries experienced fewer economic losses than would have occurred if there had been no drought plan. Cedar Rapids' residents' welfare losses also declined under the restrictions of the drought plan compared to when there was no plan. The Cedar Rapids' water utility also reduced its revenue losses by participating in the drought plan.
The study's findings are significant, as they provide valuable insights into the economic benefits of drought plans. This economic model of drought plans provides insights into how to enhance community drought resilience planning. The use of resilience factors provides insights into how businesses and industries can better be integrated into holistic community drought planning.
It opens up avenues for further research and exploration in the field of community drought planning. The model can facilitate an increased understanding of the implications of alternative drought plans, water restriction thresholds, and the limits of such plans by location, water demand composition, and water source. For the atmospheric and hydrologic research communities, it provides a method to link place-based physical science research to applied policy and decision-making.
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