The Costs of Drought: the Exceptional 2007-2008 Case of Barcelona

The drought affecting Catalonia between 2007 and 2008 was the most severe of the last century and serves as a case study for the assessment of the economic costs of such an event. The main focus is the drought affecting the so-called Ter-Llobregat system which serves the Metropolitan area of Barcelona, where most of the population is concentrated (approximately 5.5 million people). The 2007-2008 drought is a good illustrative case study due to its extreme severity and the availability of economic information both on the impacts (damages) and the measures taken. Moreover, important communication campaigns were put into place and led to significant reduction of the demand and the set up of mechanisms for public participation for future water management. Direct costs of the affected sectors, indirect costs of the Catalan economy and non-market welfare losses due to the worsening of the environmental quality and restrictions on water supply to households due to scarcity conditions are reported here. The total losses are estimated at 1,661,000,000 Euros (for a one year period), almost 1% of Catalonian´s GDP. The results of this study point out the need for further research on the estimation of the costs of drought (especially at European level) that needs to be embedded into the assessment of the costs of adaptation to climate change.