Multi-driver ensemble to evaluate the water utility business interruption cost induced by hydrological drought risk scenarios in Brazil

Abstract

Climate change and increasing water demand in urban environments necessitate planning water utility companies’ finances. Traditionally, methods to estimate the direct water utility business interruption costs (WUBIC) caused by droughts have not been clearly established. We propose a multi-driver assessment method. We project the water yield using a hydrological model driven by regional climate models under radiative forcing scenarios. We project water demand under stationary and non-stationary conditions to estimate drought severity and duration, which are linked with pricing policies recently adopted by the Sao Paulo Water Utility Company. The results showed water insecurity. The non-stationary trend imposed larger differences in the drought resilience financial gap, suggesting that the uncertainties of WUBIC derived from demand and climate models are greater than those associated with radiative forcing scenarios. As populations increase, proactively controlling demand is recommended to avoid or minimize reactive policy changes during future drought events, repeating recent financial impacts.