Economic optimization of climate adaptation for water security: an integrated water–energy nexus risk assessment framework

The world faces unprecedented demands on water and energy infrastructure because of climate change, and a massive economic structure is needed to enable adaptation planning. This study presents a combined cost–benefit analysis that can be used to analyze climate adaptation strategies in the water and energy sectors. Our model is a multi-objective optimization model, where climate risk measurement, infrastructure vulnerability measurement, and economic evaluation of the measures for adaptation are combined. The proposed methodology uses indices of climate resilience, net present value (NPV), and benefit–cost ratio (BCR) to evaluate the efficiency of climate-adaptation investments. We analyze the adaptation scenarios of 25 countries based on available datasets on the World Bank Climate Change Knowledge Portal and from the International Energy Agency (IEA). The results show that the benefit–cost ratios for proactive adaptation investments range from 2.4 to 11.8, including high pay-off for investments in the water sector in drought-prone locations. The water–energy nexus approach shows there are synergistic benefits that can reduce the overall costs of adaptation by 18%–34% compared to that of sector-based planning. The study also provides a testable and valid economic decision support framework that enables water and energy resource managers to target climatic adaptation investments to the water–energy nexus, helping to facilitate the transition to creating more resilient infrastructure.