What defines a Drought? Types, Impacts and Financial Realities

• Droughts are defined by both a lack of water and the adverse effects this causes, such as harm to agriculture and infrastructure.

• Increasing water demand due to population growth and lifestyle changes exacerbates drought conditions, despite the abundance of inaccessible water.

• Droughts have significant financial impacts, including billions in losses to agriculture, energy, and transportation, while also affecting public health and increasing wildfire risks.

Dictionary definitions of ‘drought’ are typically succinct, referring to dry weather or low rainfall. The definitions also tend to add on an impact, such as negative impacts on agriculture or lives. In other words, a lack of water is not a drought unless it has adverse effects.

These problems include the physical risks from water availability being less than water demand. Crops wilt, livestock die, and ground shrinks and subsides, cracking roads and damaging buildings. People, too, perish from dehydration or abandon their homes in search of safer locales.

Water deficits arise from the changing environment and from our changing water use.

The weather always varies, bringing episodes with lots of rain and periods which could be months or years with precipitation far below the long-term average. Sometimes, variations are not really noticed. An exceptionally wet winter high in the mountains can build up snow and ice, which then melts and keeps the downland rivers flowing even with little rainfall.

Natural and expected variations in water availability are now being added to by humans changing the climate rapidly and substantively. Time periods with less water than the long-term average are changing around the world, leading to some areas with more frequent and intense precipitation deficits.

Meanwhile, water use is generally increasing.

Every person needs a minimum amount of water per day to survive. As population increases, total water use increases. Our lifestyles also make a difference. Flushing toilets and showers on demand alongside as much water as we need to drink and to wash our hands frequently keeps us safe and healthy. These services are expanding to people who have never before had them, increasing water consumption per person and so increasing the likelihood of drought.

A perpetual irony with drought is the amount of water available, yet inaccessible. Huge ice sheets freeze water in Kalaallit Nunaat (Greenland), across Antarctica (much of which is a desert due to the low precipitation rates), and in mountain glaciers – too remote and too solid to be of much use.

Earth’s main water is, of course, the oceans: dangerously salty to drink and too salty for most applications. Drought closes its grip in places surrounded by inaccessible water. In fact, only 2.3% of the Earth’s surface is covered by freshwater, with perhaps 3.8% more given over to freshwater wetlands. As desalination becomes cheaper and easier to maintain, drought risk in coastal areas might decline.

Putting together all these factors, even if the amount of fresh water remains steady or actually increasesr

In the US, long-term drought costs range from €6-9 billion per year.

California’s 2015 drought is said to have cost the state over €2.5 billion and 21,000 jobs, accounting for direct and indirect losses. Across the Atlantic, the 2007-2008 drought in Barcelona was calculated to cost €1.6 billion.

Economic losses from drought across most of Europe were recently estimated as €9 billion per year, of which agriculture represents 53%. Sectors badly affected in any drought also include energy, water, buildings, and transport.

Lower river levels impede the shipping of goods along major river routes, such as the Danube and Mississippi Rivers. Hydroelectric output diminishes, with the possibility of power outages affecting businesses.

Yet it is not all bad news. When examining climate change’s impacts on inland shipping, the earliest days indicated a balance of outcomes. For the Great Lakes, drought can lower water levels to the worst yet documented, but less lake ice leads to an extended shipping season.

Where droughts frequently affect farms and ports, land values can decline.

Asset values can be hit further, such as a dam not producing as much electricity as assumed or a highway requiring much more frequent repair.

While homeowners might get annoyed by bans on using garden hoses, their dried up lawns are mainly an aesthetic concern. Others will lose the food that they grow behind their house or in their local allotment, just as household expenses can rise if water rates increase or, in extreme situations, they need to purchase bottled or trucked drinking water. The largest cost to homeowners is likely to be ground movement due to drying soil leading to structural cracks and instability.

Major costs in healthcare emerge with drought affecting people’s mental health and physical health.

Worsening food availability and water quality can lead to malnutrition, gastrointestinal diseases especially involving diarrhoea, and animal corpses contaminating already scarce surface water.

Where the drought is accompanied by a heat wave, then heat-related stresses compound dehydration. Crops and livestock can be wiped out by the lack of water, leading to huge financial losses.

Drought also exacerbates fire risk.

In the US, annual insured wildfire losses exceed €20 billion annually with another 10% of costs added for response measures. With fires often burning more intensely and travelling farther in drought-stricken locales, people and livestock die or are injured in the flames, while the smoke travels far afield leading to problems with heart and breathing ailments.

Given the variety of droughts and their huge financial impacts, data and models can support asset managers in determining possible impacts on their assets–and then retrofitting and adapting to reduce these physical risks.