The economic impacts of a drought depend critically on how water is allocated to different users. Choices as to water allocation can often reflect wider economic policy, environmental, and social goals and constraints. This research applies a multi-objective linear programming input-output method to determine a suite of water supply allocations for different economic sectors in a drought. Using the UK as a case study, we develop estimates of the minimum potential economic impact associated with different water allocations under a range of climate and policy scenarios. Estimates of total impact range from −0.16% to −1.48% of total output depending on the drought scenarios tested. The approach offers the flexibility to set different policy objectives in terms of water allocations/restrictions, employment or a range of other objectives, including constraints to rebalance the economic system. In allowing for the inclusion of other economic, social, and environmental constraints, it provides a framework for policymakers to assess how water allocation decisions interact with other policy goals to determine the economic impacts of a drought. Challenging decisions about how to allocate water during a drought are likely to remain important in the future.
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