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Switzerland is already and will continue to be affected by climate change. In its fourth assessment report, the IPCC indeed predicts a temperature increase of approximately 2 °C during winter and 2.5 °C during summer until 2050 compared to 1990 levels. By then, precipitation is estimated to increase by about 8% during winter and decrease by 15% in summer. These changes are bound to affect the hydrological cycle and alter both water supply and demand in multiple ways, thus highlighting the importance of understanding the hydrological consequences of climate change and their impact on the Swiss economy. Indeed, the broad objective of this study is to estimate the economic impact of changes in water availability due to climate change at a 2050 time horizon in Switzerland. This study employs GEMINI-E3, a computable general equilibrium model that is specifically designed for the analysis of climate change and energy policies. This model originally comprises 28 regions, including Switzerland, and 18 different sectors. The sectoral structure of the model is being extended in order to assess the economic impacts of climate change on particularly sensitive sectors and to study the role of specific adaptation measures for alleviating climate change costs. To assess the consequences of changes in water availability, raw water resources are introduced as a production factor into GEMINI-E3. Further, a drinking water distribution sector is specified for Switzerland and a more detailed representation of agriculture is proposed to allow for a precise analysis of the economic consequences of restricted water supply. Predictions of water availability in 2050 are taken from a hydrological model developed for Switzerland and alternative climate change scenarios from the EU-ENSEMBLES project are considered. Simulations show that possible restrictions in water resource availability will increase raw water prices substantially compared to the benchmark scenario. Sectors most affected are drinking water distribution and agricultural sectors that use irrigation. However, the global economic impact for Switzerland is small due to the low price of raw water in Switzerland and its small value in the benchmark scenario. Finally, the simulation of scenarios featuring alternative levels of endogenous adaptive capacity of the economy reveals the possible economic impact of adaptation to climate change.

The economic impact of climate-driven changes in water availability in Switzerland