Responses and Thresholds of the Egyptian Economy to Climate Change Impacts on the Water Resources of the Nile River

Abstract

Are there "thresholds" in greenhouse gas (GHG) concentrations above which associated climate change impacts become economically, socially or environmentally unacceptable? If thresholds exist, then emissions might be limited in such a way that GHG concentrations are not exceeded. Environmental, social, and economic systems should be examined in order to determine these threshold levels.

This paper addressed the potential impacts of climate change on the water resources of the Nile River and associated impacts on the Egyptian economy through the use of a recursively dynamic general equilibrium model. The model was used to examine both economy-wide and sectoral impacts, and impacts on social and national policy indicators under various economic growth and climate change scenarios. Macro-economic indicators such as Gross Domestic Product (GDP) showed that strict economic thresholds, characterized by discontinuities in the response function, did not occur. This was because autonomous economic adjustments generated a smooth socioeconomic transition over the 70-year simulation period. The economy underwent a gradual structural transformation, as capital and resources were moved from cropped agricultural to both the livestock and the non-agricultural sectors. Under "wet" climate scenarios, surplus water beyond 75 billion cubic meters (BCM) remained unused, as the marginal value of water dropped to zero and other resource constraints limited agricultural growth. For drier scenarios (below 75 BCM), water was a constraint to agricultural production into the 21^st century, as resources were diverted to less water demanding crops and the livestock and non-agricultural sectors. The reduced water scenarios showed agriculture declining in its total share of GDP, burdening the agricultural wage earner. Egypt increased its dependence on imports to meet food demand, dramatically decreasing grain self-sufficiency, while increasing protein self-sufficiency. If national policy requires a certain level of food self-sufficiency, then these metrics could be used in defining policy-based thresholds.