The existence of different types of droughts (meteorological, agricultural, hydrological and socioeconomic droughts), their slow onset and long duration and their multiple effects (direct and indirect) over different economic sectors make the quantification of drought impacts an extremely difficult task. Examples of direct impacts focus but extend beyond the agricultural sector. Direct impacts can propagate or cascade quickly through the economic system, affecting adjacent economic sectors that can belong to regions further apart from where the drought originates. This spatial heterogeneity makes it crucial to analyse the effects of droughts at the local level as well as to consider the implications for regions and economic sectors.
Drought risks and water scarcity are expected to intensify as a result of human-induced climate change. Some areas in Europe, notably the Mediterranean countries are more prone to prolonged drought spells than others. Understanding and properly measuring the overall and sector-wide economic impact of those episodes at the geographically most disaggregated level is very relevant for the efficient design of disaster risk management instruments and other policy-related measures relevant to adapt to the consequences of climate change.
The objectives of WATER DROP are twofold: a) to advance in the process of understanding and accurately measuring the overall and sector-wide economic impact of agricultural droughts at the local level; b) to integrate the previously estimated direct impacts into economic tools that enable the identification of indirect impacts of droughts using a bottom-up approach. The combination of a) and b) result in a comprehensive assessment of the total economic effects of droughts on the economy.
WATER DROP has demonstrated that: i) to effectively characterise agricultural drought stress at the local level, satellite-based indicators that look at the vegetation health status of the plant are preferred to precipitation anomaly indicators; ii) even though the combination of multiple meteorological and satellite indicators help to better characterise the behaviour of agricultural productivity under drought scarcity, the use of only a few representative variables can be enough to obtain good predictive models of the direct effect of droughts on crop yields, and iii) the macroeconomic cost of agricultural droughts at the country level is dependent on the intensity of the experienced drought and the productive economic structure of the region analysed. For example, in Italy, drought can cost 0.55 to 1.75 billion euro, depending on the overall drought severity experienced.
