Economic consequences of optimized water management for a prolonged, severe drought in California

If abrupt climate change has occurred in the past and may be more likely under human forcing, it is relevant to look at the adaptability of current infrastructure systems to severe conditions of the recent past. Geologic evidence suggests two extreme droughts in California during the last few thousand years, each 120–200 years long, with mean annual streamflows 40%–60% of the historical mean. This study synthesized a 72-year drought with half of mean historical inflows using random sampling of historical dry years. One synthetic hydrological record is used, and sensitivity to different interpretations of the paleo record is not evaluated. Economic effects and potential adaptation of California’s water supply system in 2020 to this drought is explored using a hydro-economic optimization model. The model considers how California could respond to such an extreme drought using water trading and provides best‐case estimates of economic costs and effects on water operations and demands. Results illustrate the ability of extensive, intertied, and flexible water systems with heterogeneous water demands to respond to severe stress. The study follows a different approach to climate change impact studies, focusing on past climate changes from the paleorecord rather than downscaled general circulation model results to provide plausible hydrologic scenarios. Adaptations suggested for the sustained drought are similar for dry forms of climate warming in California and are expensive but not catastrophic for the overall economy but would impose severe burdens on the agricultural sector and environmental water uses.