Regional Economic Impacts of a Verdugo Scenario Earthquake Disruption of Los Angeles Water Supplies: A Computable General Equilibrium Analysis

This paper advances the state of the art in the development and application of a computable general equilibrium model to estimate the business interruption impacts of a Verdugo scenario earthquake on the water system serving Los Angeles. The model has been especially designed to incorporate engineering and spatial aspects of this system in the context of the regional economy to include resilience responses at various water outage levels. The Verdugo earthquake scenario and Monte Carlo simulations show that water outages in LA County could result in business interruption losses of several billion dollars without any resilience adjustment. However, a reduction of these losses by more than 90% is possible through the application of several types of resilience on the customer side, most prominently rescheduling production, in addition to conservation, input substitution, and storage of water. Allowing the price of water to rise to reflect its scarcity would reduce the losses even further. [DOI: 10.1193/1.3610245]