New research details $3.7 trillion impact of water risk to the U.S. by 2050  

New research recently released by global professional services company GHD, titled Aquanomics: The economics of water risk and future resilience reveals droughts, floods and storms could result in a total loss of $3.7 trillion to U.S. gross domestic product (GDP) between 2022 and 2050.

This is the largest dollar impact faced by any of the countries included in the study, making up the majority of the $5.6 trillion total GDP losses projected across all seven focus countries. This equates to an average annual GDP loss of 0.5 percent. 

This study represents the first time the economic impact of water risk has been calculated at a GDP and sector level. The research combines insurance data with econometric modelling to demonstrate the wider economic impact of increased future water risk. It focuses on seven key countries across GHD’s footprint – Australia, Canada, China, the Philippines, the UAE, the United Kingdom and the United States – and three U.S. regions – Northeastern U.S., Southeastern U.S. and Southwestern U.S. 

When it comes to direct losses, storms are predicted to account for more than half of the overall damage ($1.4 trillion) followed by floods ($645 billion) and droughts ($432 billion).

The study projects, in less than 30 years (2022 to 2050), the Southwestern region of the United States could face a total loss of more than $1.4 trillion to GDP. In the Northeastern region, water risk is predicted to account for total GDP losses of over $700 billion between these years, and this figure is over $400 billion for the Southeastern region.

The study also presents the potential impact on five critical economic sectors: agriculture; fast-moving consumer goods (FMCG) and retail; manufacturing and distribution; energy and utilities; and banking and insurance. It reveals the U.S. manufacturing and distribution sector could suffer total losses of $2.2 trillion by 2050 – equating to average annual output losses of 0.7 percent. The agriculture sector, on the other hand – the most water-intensive industry – faces projected losses of $143 billion by 2050, but this equates to average output losses of 1.2 percent each year.  

“The Infrastructure Investment and Jobs Act (IIJA) provides a much-needed injection of funding for the water sector, which has long been starved of the capital needed to maintain vital infrastructure,” said Don Holland, water market leader at GHD. “Building future water resilience across the U.S. will require solutions as diverse as the types of water risk the country faces. Managing water scarcity caused by drought in California will require an entirely different approach to mitigating the worst impact of storm surges in the Gulf of Mexico. In the Northeast, flooding is the biggest problem, although replacing lead pipes in the drinking water system is also a key priority. In the Southeast, flooding and coastal protection top the agenda. For these regions, a focus on flood mitigation should be at the center of any water resilience strategy.

“What unites all these regions is the need to adopt innovative new solutions and technology – which the U.S. has in abundance – and to pursue an approach of radical collaboration across all jurisdictions and stakeholders,” added Holland. “In other words, a One-Water approach.”  

GHD is a global professional services company. To find out more visit ghd.com.  

Economic modeling for the study was conducted by Cambridge Econometrics, a U.K.-based economics consulting firm.

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