COP 16 Riyadh: Mitigating droughts is not just about altruistic climate action — it’s also good economics

We can collectively enhance agricultural resilience, protect water resources and foster sustainable economic growth by mitigating droughts

Mitigating effects of droughts can be less costlier and can cost only 70 per cent of what the world has to bear as economic loss due to effects of droughts as per the new report on  Economics of drought: Investing in nature-based solutions for drought resilience – Proaction pays released on December 3, 2024 — Day 2 of the United Nations Convention to Combat Desertification (UNCCD) – COP-16 at Riyadh.

The report has been developed by the United Nations University Institute for Water, Environment and Health (UNU-INWEH), the Economics of Land Degradation Initiative (ELD) – Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, and UNCCD.

It was co-funded by the German Federal Ministry for Economic Cooperation and Development, the International Drought Resilience Alliance (IDRA) and the European Union.

UNCCD asserts that the economic costs of the damages done due to droughts is underestimated by 2.4 times amounting to US$307 billion per year.

The report brings forth the fact that the human-induced droughts have also been so far neglected and under-estimated and if calculated properly, supported by credible data collection, the damage in economic terms is far greater.

Prof. Kaveh Madani, Director of UNU-INWEH and one of the lead authors says the economic cost of drought extends beyond immediate agricultural losses. It affects entire supply chains, reduces GDP, impacts livelihoods, and leads to hunger, unemployment, migration and long-term human security challenges; effective management and investment in nature are crucial to mitigate these effects.

Adopting the nature based solutions (NBS) to address the drought risks costs lesser than the opportunities lost as economic loss. Rather a business generation value of up to US$ 10.1 trillion annually and millions of jobs annually is estimated by the authors. It also estimates restoration of more than 2.5 billion hectares of land globally if NBS is adopted. This equates to a combined total land area of Brazil, China and the United States.

UNCCD Deputy Executive Secretary Andrea Meza adds managing our land and water sustainably is essential to unlock economic growth and build resilience for communities that are becoming locked into cycles of drought around the world.

Economy of droughts

It is firstly important to understand the reason for droughts completely to be able to understand the economic impacts of the droughts. Droughts may happen due to a factors that could be meteorological, hydrological, ecological or agricultural.

The report identifies anthropogenic or human activity induced reasons such as over extraction of groundwater, depletion of freshwater ponds and water bodies (which act as sinks to flood water, hold water for lean season, recharge the groundwater, irrigate the agricultural areas and maintains the local flora and fauna), deforestation, urbanisation, conversion of agricultural land to concrete areas which prevents infiltration of water into ground and sometimes lack of rain; as reasons of drought and degradation of land and water resources.

This mismanagement of water resources creates a demand and supply-gap of water. This would also mean clean water may not be accessible to all resulting in diseases and increased expenditure on healthcare.

If the source of water being mismanaged is being used to generate revenues for various businesses it would cause economic loss for the small and large scale business and in-turn affect the country’s economy.

Apart from that incidences of forest fires would increase during drought further adding on to the degradation of the ecosystem. The report mentions that these human induced factors are often not accounted for while calculating the economic losses and can account for much more than being estimated.

The report focuses on the need and importance towards proactive drought management using Nature Based Solutions (NBS) to strengthen Sustainable Land Management (SLM) practices and create a resilient society by regular capacity building of various stakeholders.

Dissecting NBS

NBS would mean learning from nature to imbibe those practices to address the challenges of drought and build up resilience to adverse events. It would mean promoting SLM practices such as conservative agriculture, water harvesting to be taken up.

Furthermore, it will also require restoring soil health by using natural fertilisers, catchment restoration, ensuring proper water availability and ensuring conveyance as required.

Lastly, it should also entail the building up of the capacities of stakeholders to adopt these solutions which would act as factors to drought resilience. 

The report supplements case studies as evidence in support of its statement from India among various countries like Chile, Jordan, Kenya, Spain and Tunisia.

It talks about how semi-arid regions of Maharashtra in India have been able to demonstrate effective sustainable land management through adoption of practices such as water budgeting, crop planning, watershed structures, etc. to reduce soil erosion by 24.7 per cent, increased productivity, and also reduce the need of water tankers.

Agro-meterological advisories help better decision making to the villagers to develop resilience to changing climate patterns.

This could be done by active community participation. The cost benefit analysis shows average ratio of 1.51-1.91 for every dollar invested which included the financial and societal returns both over a period of 10 years

These instances also highlight the fact that the community knowledge combined with evidence based decision making can help prevent the degradation and also help in developing business and revenue generation models for the communities who would otherwise be displaced due to harsh spiraling effects of climate change.

Shloka Nath, CEO of India Climate Collaborative, a council of philanthropies for climate, says the climate crisis is intertwined with the biodiversity and water crises, and is aggravating socio-economic risks faced by farmers.

Through this, we can collectively enhance agricultural resilience, protect water resources, and foster sustainable economic growth. We call on stakeholders across India and beyond, including philanthropists, to prioritise these solutions for an equitable, sustainable future, says Nath.

The report highlights the importance of collective responsibility and also that the data on quantification of cost- benefit of NBS is scarce and has mostly been followed informally. It highlights the steps through which cost and benefit analysis can be done to generate a business case to bring forth the public-private partnership models.

For NBS to be scaled up- needs policy level interventions and also mode of financing through public and private sector interventions. It is important to generate data on cost benefit analysis to help leverage better financial interventions.

It proves the economic case by providing evidence from various countries like India and brings forth the triple dividend model where scaling up of NBS would help mitigate losses through droughts, increase income of land and water users and generate co-benefits of climate change and sustainable development.

The report recommends more public-private partnerships to invest in land and water management to reduce risk build capacities of stakeholders and resilience to drought, strengthen evidence, monitoring impacts and CBA of NBS with better methodologies and data collection models along with adoption of sustainable land management practices learning from countries like India as NBS would prove a no regret option for strengthening resilience.

Niels Annen, German Parliamentary Secretary for the Ministry for Economic Cooperation and Development (BMZ) adds Proactive drought management is an ecological and societal imperative. It is also a significant economic opportunity.

Every dollar invested in nature-based solutions not only reduces drought impacts, but can generate benefits of up to US$27 – including higher farmer incomes, value chain resilience, and reduced long-term economic costs. We must urgently act to rethink how we value land and relearn how to manage land sustainably, says Annen.

Courtesy: Down To Earth

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