Total Regional Economic Losses from Major Water Supply Disruptions in Los Angeles Complete Invited Paper 767028

Abstract:

Water is the lifeblood of any economy. It is a necessary input to every producing sector, a key ingredient to sustaining life for its population, and is indispensable to fire protection and other specialized uses. The reality is that Southern California is far from self-sufficient in its fresh water supplies. Moreover, the aqueducts that import water into the region are vulnerable to natural disasters, terrorist attacks, technological accidents, and regulatory changes. This study estimates the total regional economic impacts of one major set of disruption scenarios stemming from a Bay Delta earthquake that would cause the closure of the California Aqueduct for 6, 24, or 36 months. The study is based on the use of a computable general equilibrium (CGE) model, the state-of-the-art approach to regional macroeconomic impact analysis of severe shocks to a system. Essentially, CGE models the economy as a set of interrelated supply chains in relation to behavioral responses of businesses and consumers to market price signals, external shocks and resource constraints. The LA County CGE Model is specifically designed to focus on water production and use. Moreover, it is constructed using primary data from wholesale and retail water providers. The model is used to estimate the impacts of potential water supply disruptions on output, employment, and prices. A novel feature of the study is the incorporation of resilience, or tactics that households and businesses use to cushion the blow of a disruption. That is, water customers do not just react passively or in a business as usual manner, but act first by invoking a set of coping strategies inherent in the water delivery and use system, such as storage and diversion of replenishment water. Moreover, they can adapt to the crisis with various forms of ingenuity, such as undertaking extra levels of conservation and recycling, and implementing technological innovations. We find that these resilience tactics have the ability to significantly cushion the shock of the closing of the California Aqueduct.