Environmental Markets Lab (emLab) (@emlab.ucsb.edu)

Cape Town’s 2015–2018 drought showed that higher prices & restrictions can avert crisis but also hurt the most vulnerable. However, our @nber.org working paper reminds us that climate adaptation should balance concerns for equity & resilience. ➡️ Read the story @voxeu.org cepr.org/voxeu/column...

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Climate adaptation and inequality: Lessons from Cape Town’s drought A growing number of urban areas around the world face water scarcity. Focusing on the prolonged drought that Cape Town experienced from 2015 to 2018, this column examines how adaptation shaped outcomes for the city’s residents and for its municipal water utility. While policy measures including higher prices and usage restrictions saved the city from running out of water, they reduced demand more among wealthy households who were able to substitute away from municipal water, undermining the utility’s ability to cross-subsidise lower-income households’ consumption. Post-drought tariff reforms led to a more efficient pricing scheme that maintained support for low-income households. https://cepr.org/voxeu/columns/climate-adaptation-and-inequality-lessons-cape-towns-drought