Estimating the value of El Niño Southern Oscillation information in a regional water market with implications for water management

SummaryThis study employs both a stochastic programming without recourse model and a regression approach to estimate the value of the El Niño Southern Oscillation (ENSO) information in the Northern Taiwan regional water market. The empirical estimation results provide several useful implications for water resource management. First, the precipitation of this region is significantly affected by El Niño Southern Oscillation events, which increases the uncertainty of regional water supply. Secondly, the damage caused by the El Niño Southern Oscillation events to this regional water market could reach up to NT$ 146 million (i.e., US$ 4.56 million). Finally, the possible water management strategies, which include water transfer activities among different demand groups, with a perfect El Niño Southern Oscillation forecast could substantially mitigate the damage and result in a benefit of NT$ 370 million (i.e., US$ 11.56 million).

Research highlights
► The estimation of the effects of ENSO on rainfall and the forecast of ENSO phases could substantially mitigate the economic impacts of ENSO events.
► The stochastic regional water economic model is an effective tool to evaluate the economic impacts of ENSO events on a regional water market.
► Economic damages caused by ENSO events could be significantly reduced through water transferring activities.