Dodging Day Zero: Drought, Adaptation, and Inequality in Cape Town

Alexander Abajian, Cassandra Cole, B Kelsey Jack, Kyle C Meng and Martine Visser

Journal of the European Economic Association, 2026, vol. 24, issue 3, 851-884

Abstract: A near-catastrophic drought in Cape Town, South Africa, illustrates three implications of climate change for publicly provided utility services. First, to reduce aggregate water demand, the public utility increased prices, leading to large demand reductions by richer households. Prior to the drought, they used twice the public piped water of poorer households. At the peak of the drought, they use less. Second, some of the differential demand reduction comes from richer households substituting away from public water toward privately financed groundwater. This private adaptation both lowers the public utility’s total revenue and shifts costs onto poorer households, consequences that persist after the drought abates. Third, policy interventions mitigate some of the fiscal and distributional impacts of private adaptation. These findings highlight how climate adaptation, in the context of publicly provided goods and services, can create pecuniary and environmental externalities with equity consequences.

Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1093/jeea/jvaf045 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:jeurec:v:24:y:2026:i:3:p:851-884.

Access Statistics for this article

Journal of the European Economic Association is currently edited by Romain Wacziarg

More articles in Journal of the European Economic Association from European Economic Association
Bibliographic data for series maintained by Oxford University Press ().