This chapter makes the case for drought adaptation action, examining how policy frameworks, instruments, and financing mechanisms can strengthen resilience to drought in the face of climate change. It explores strategies for integrating drought resilience into national policies, managing water demand and supply, protecting ecosystems, and adapting key sectors to increasing drought risk. Through case studies and best practices from OECD countries and beyond, the chapter illustrates how countries are enhancing their capacity to mitigate drought impacts and build long-term resilience.
Global Drought Outlook
Trends, Impacts and Policies to Adapt to a Drier World
Abstract
The increasing risks and impacts imposed by droughts underscore the urgent need for stronger policy action to build resilience against increasingly dry conditions, protect communities, and ensure the sustainable use of resources in the face of climate change. Without decisive policy action, the socio-economic and environmental costs of drought will continue to rise globally, with cascading and potentially irreversible consequences for societies, economies, and ecosystems in all continents (see Chapters 2 and 3).
In response to the rising frequency of drought episodes, many countries have scaled up the use of emergency measures, most notably water use restrictions (Gerber and Mirzabaev, 2017[1]; UNW-DPC, 2015[2]). For instance, in France’s Île-de-France region, the average number of days per year subject to water use restrictions increased from 0.7 days/year in 2011-2016 to 21.7 days/year in 2017-2022 (OECD, 2025[3]).1 Similarly, some of Spain’s most drought-prone regions have increasingly relied on water use restrictions (Agència Catalana de l'Aigua, 2020[4]).
While these measures can effectively curb water consumption during acute shortages, their limitations are becoming evident as droughts become more frequent and severe. Water use restrictions are typically short-term responses aimed at reducing immediate surface water consumption, but they do little to enhance long-term resilience. Once restrictions are lifted, water use usually rebounds to pre-restriction levels (Climate ADAPT, 2023[5]). Sometimes, water use restrictions can even be counterproductive from a climate resilience perspective, as they can trigger mechanisms that further increase vulnerability to drought. For example, if groundwater extraction is not strictly regulated, users may turn to groundwater sources as an alternative for surface water, accelerating aquifer depletion. Moreover, by limiting water use, these restrictions can reduce the surface runoff that naturally replenishes groundwater, further hindering aquifer recharge. Moreover, while cutting water use could alleviate scarcity in the short term, the economic efficiency cost of such measures can be considerable when compared to other management strategies such as water pricing, and affects users across the residential, commercial and industrial sectors (Woo, 1994[6]; de los Angeles Garcia Valiñas, 2006[7]). Equity concerns also arise, as the users most affected by these restrictions are not always those responsible for water scarcity.
Addressing the challenges posed by drought requires a decisive shift towards preventive action that mitigates and adapts to changing conditions. Effective drought adaptation involves a broad range of proactive efforts designed to reduce the occurrence of drought and drought-induced water scarcity ex ante while minimising their impacts on communities, ecosystems, and economies. The far-reaching impacts of drought – on food security and prices, public health, energy systems, transport, agriculture, and even peace and security – underscore the need for integrated, cross-sectoral approaches. These efforts must include sustainable water management, soil and ecosystem conservation, as well as sector-specific adaptive practices to enhance resilience in affected areas. While these efforts cannot eliminate drought risk entirely, they can minimise impacts. Importantly, these adaptive measures must operate both domestically and across borders to address the complex, interconnected nature of drought risks effectively.
Proactively adapting to drought risk has the potential to deliver a “triple dividend of resilience”, yielding significant socio-economic benefits (Figure 4.1). Firstly, preventive measures can reduce the impacts and costs of drought, including the financial and welfare burdens resulting from emergency response and recovery efforts. Secondly, proactive adaptation reduces economic uncertainty associated with drought impacts, enabling long-term planning and encouraging greater economic activity and investment in productive assets, especially in regions where risk perception is high. Finally, proactive adaptation generates socio-economic and environmental co-benefits, such as improved farmer productivity, reduced vulnerability to poverty, and better human and ecosystem health. As such, proactive adaptation not only mitigates the effects of drought but also enhances overall resilience and economic performance, benefitting countries and communities regardless of whether they are experiencing drought conditions at a given time (Tanner et al., 2015[8]; OECD, 2024[9]).
The triple dividend of drought resilience highlights that the potential returns on investing in resilience far outweigh the associated costs. Cost-benefit ratios vary depending on each country’s specific risk profile and socio-economic conditions. In some cases, resilience-building efforts may yield lower returns during non-drought periods or in areas only sporadically affected by drought (Kusunose and Lybbert, 2014[10]). Despite these variations, the overall benefits of investing in drought resilience and adaptation tend to be positive, with potential returns up to ten times greater than the initial investment (FAO, 2021[11]; IDRA, 2024[12]; IDMP, 2022[13]). The need for increased investment in drought resilience is further emphasised by the substantial impacts of reduced water availability on economic growth (see Chapter 3) (Zaveri, Damania and Engle, 2023[14]). Moreover, due to the slow-onset nature of drought, the benefits of preventive measures accumulate over time, providing significant long-term returns on investment.
Source: Author’s own, remodelled after Tanner et al. (2015[8]).
This chapter aims to outline the range of available strategies, policies, and practices available to adapt to drought risk and assess the extent to which countries are adopting them. It provides an overview of how policy strategies (Section 4.2) and policy measures (Section 4.3) across sectors have evolved to adapt to growing drought risk. This is followed by a discussion on the enabling environment required for effective drought adaptation (Section 4.4). While the analysis primarily focuses on the experiences of OECD countries, it also includes examples and lessons from other drought-prone countries and regions. By exploring different contexts, the chapter aims to provide a comprehensive overview of the diverse policy gaps and opportunities posed by drought. Ultimately, while the strategies and measures proposed throughout the chapter offer promising solutions to strengthen resilience to drought risk, their prioritisation will depend on each country’s unique socio-economic and risk profile.
4.2.1. National policy frameworks for drought resilience
In response to the escalating risks and impacts of drought, countries are increasingly embedding drought resilience into their national policy frameworks. These frameworks emphasise the need for preventive action across sectors and policy domains to address the multifaceted nature of drought risks. This reflects a growing recognition of the importance of long-term planning to mitigate drought impacts on ecosystems, economies, and communities.
Dedicated drought management plans (DMPs) serve as a cornerstone for building resilience by setting clear policy objectives, co-ordinating policy efforts, and reducing resource-related conflicts in drought-prone regions. These plans typically outline strategies, measures, and institutional frameworks to prevent and respond to drought, ensuring an integrated, cross-sectoral approach. Globally, at least 70 countries have established national DMPs, with significant adoption in Africa, Latin America and the Caribbean, and South-East Asia (UNCCD, 2024[15]). Among OECD countries, half have implemented either national or subnational DMPs (Figure 4.2). Subnational plans often complement – and in some case substitute – national DMPs, with scopes ranging from state level (e.g. in the United States (US)) to river basin level (e.g. in Mexico and Spain). These subnational frameworks often serve as laboratories for innovative approaches to drought resilience, as highlighted by examples such as Catalonia’s Special Drought Action Plan and Cape Town’s urban drought management strategy (Box 4.1).
Note: This map shows sub-national DMPs only for countries that do not have a national DMP. It is to be noted that countries without any dedicated DMPs typically address drought risk through water resource management, climate adaptation, or other sectoral or local strategies.
Source: Author’s own.
Some countries have developed sector-specific DMPs and broader strategies to enhance resilience in vulnerable sectors. For instance, Türkiye has developed a national strategy specifically addressing agricultural drought (OECD, 2021[16]), as well as a strategy and action plan that promote water efficiency and climate adaptation in water-dependent sectors (Republic of Türkiye, 2023[17]). Similarly, Poland’s State Water Holding Polish Waters integrates risk reduction and climate adaptation into its recently adopted DMP for water management (European Commission, 2023[18]). In some cases, broader water strategies and agriculture development plans also address drought risk. Germany and Slovakia, for example, integrate drought risk reduction into their long-term water strategies, while France’s National Water Plan and its basin-level water management frameworks explicitly prioritise reducing drought risk in the management of water resources (OECD, 2023[19]; Deltares, 2022[20]; FAO, 2016[21]; FAO, 2021[11]; OECD, 2025[3]). Emerging policies in other sectors, including energy, transport, biodiversity, and urban planning, are also beginning to address drought resilience, reflecting the interconnected nature of drought risks across economies.
Cities and regions prone to drought have long been at the forefront of developing strategies to address water scarcity. For instance, Catalonia’s (Spain) Special Drought Action Plan relies on hydrological indicators (e.g. rainfall, reservoir and aquifer levels) to define drought alert levels, which in turn trigger response measures focused on water use restrictions, strengthened water supply, and water transfers. In contrast, other local strategies take a longer-term perspective. For example, the urban drought management strategy developed in Cape Town (South Africa) in the wake of the severe 2015-2017 drought integrates projections of long-term water demand into its water management measures and combines them with awareness campaigns, water efficiency regulations, and investments to diversify water supply and enhance resilience against future droughts.
These and other strategies have traditionally concentrated on blue water resources – i.e. rivers, lakes, and groundwater – to address water scarcity during droughts. Common measures to this end include water use restrictions, infrastructure development for water storage, and improving water distribution systems. However, in recent years, these has been growing recognition of the importance of green water – i.e. the water stored in soil as moisture – in comprehensive drought management, some governments are beginning to integrate green water management into their drought strategies. Integrating green water considerations involves practices like sustainable land management, improved agricultural techniques, and ecosystem restoration to enhance soil moisture retention. For example, Scotland's policy framework on water incorporates natural water retention measures to manage surface water while creating water-resilient landscapes, signalling a shift toward more holistic and integrated approaches to drought resilience.
National climate adaptation strategies (NAS) and plans (NAPs) have also become vital tools for aligning drought resilience efforts with broader climate policies. These frameworks provide a strategic basis for integrating adaptation into policy planning across sectors and levels of government. The extent to which drought risks are addressed in NAPs and NAS varies, reflecting each country’s unique risk profile and policy priorities. NAPs often identify specific regions, ecosystems (e.g. wetlands, forests), and sectors (e.g. agriculture, energy) as priorities for adaptation, with agriculture and water management frequently highlighted as critical areas. Across OECD countries, these plans emphasise the need for proactive drought management, supporting a transition from reactive responses to anticipatory, long-term solutions (Table 4.1).
Source: Author’s own, based on information from Commonwealth of Australia (2021[27]), Environment and Climate Change Canada (2023[28]), Ministère de la Transition écologique (2024[29]), Ministère de la Transition Écologique et Solidaire (2017[30]), BMUV (2020[31]; 2024[32]), OECD (2020[33]), MITECO (2020[34]) and EPA (2024[35]).
Despite progress, national policy frameworks face persistent challenges in effectively building drought resilience. Limited financial resources, capacity constraints, and weak coordination across sectors and administrative levels undermine implementation. Although many countries have developed DMPs, their effectiveness is often hindered by gaps in enforcement, monitoring, and stakeholder engagement. Many frameworks fail to account for the impacts of climate change under different scenarios, and it remains unclear if observed improvements (e.g. declines in water abstraction) translate into reduced vulnerability to water scarcity. The lack of appropriate indicators (e.g. for soil health) further hampers the effective assessment of actions taken (Climate Change Committee, 2021[36]). Furthermore, the insufficient integration of green water management (Box 4.1) and the lack of alignment between drought risk strategies and broader development priorities reduce their overall impact. Addressing these limitations requires improving the comprehensiveness of drought management frameworks and accelerating their implementation through sustained investment, stronger cross-sectoral coordination, and better alignment between drought resilience efforts and national development objectives.
4.2.2. Informing drought management with climate risk assessments
Increased strategic planning on drought management has been accompanied by strides to better understand the evolving nature of drought risk under climate change. Climate risk assessments are key tools to characterise drought hazard, identify geographic and sectoral vulnerabilities, and inform adaptation needs. These assessments evaluate observed and projected climate risks, including drought, analysing current and future hazards, exposures, and vulnerabilities (Table 4.2) to provide a forward-looking basis for adaptation planning (OECD, 2024[37]). Early warning systems further complement these assessments, offering real-time data and forecasts that enable dynamic interventions and support long-term resilience as risks evolve.
Source: Author’s own.
Many OECD countries use climate risk assessments to shape drought management policies and strategies, though their depth and sophistication vary. Most assessments focus on changes in drought hazard. Countries such as Australia, the United Kingdom, and the United States use global and regional climate models to project future drought frequency and distribution under different climate scenarios. Similarly, the EU has developed high-resolution models to assess future hydrological drought under different warming scenarios (Clark et al., 2024[38]; DOE, 2022[39]; JRC, 2020[40]; EEA, 2024[41]). Some countries complement hazard assessments with evaluations of drought exposures, vulnerabilities, and potential impacts. For example, Spain and the United Kingdom assess water demand trends under different climate scenarios to estimate future risks of drinking water deficits (OECD, 2025[3]). Belgium’s Flanders region conducts regional drought impact assessments under climate change (European Commission, 2023[18]; Klimaatportaal Vlaanderen, 2024[42]), while Lithuania and Slovenia undertake drought impact assessments for specific sectors, such as forestry (GWP and WMO, 2015[43]; GWP CEE, 2015[44]).
Despite significant advancements in data modelling, comprehensively assessing drought risk under climate change remains a challenge. The slow-onset and complex nature of drought makes long-term projections difficult, as even minor changes in its drivers can influence occurrence and severity. The diverse and cumulative impacts of drought complicate the evaluation of exposures and vulnerabilities. To date, only a few countries systematically records drought events including their severity, duration, and impacts (IDMP, 2023[45]), which undermines the accuracy of predictive models reliant on historical data. Gaps in hydrological and socio-economic vulnerability data persist (OECD, 2025[3]),2 along with low capacity to assess drought risk at subnational level (IDMP, 2022[13]) and limited cross-agency co-ordination on data integration and harmonisation. Expanding the integration of early warning systems into these assessments could help address some of these challenges by offering continuous updates, improving data harmonisation, and strengthening subnational and sector-specific monitoring. Addressing these obstacles is key to advancing effective drought risk assessments (OECD, 2025[3]).
To effectively prevent drought risk, drought management and climate adaptation plans highlight the need to develop a wide range of measures across multiple sectors and policy domains. While sustainable water management is central to building drought resilience, it alone is insufficient to address the increasingly complex challenges posed by drought and the interconnected impacts of different policy measures. Hence, measures to manage water demand and supply (Section 4.3.1) need to go hand in hand with measures focused on the sustainable management of land and ecosystems (Section 4.3.2) and on adapting sectoral practices to climate change (Section 4.3.3).
4.3.1. Managing water demand and supply for drought resilience
Efficient water resource management is essential for reducing drought risk. As climate change increases the frequency and severity of droughts, measures to reduce and optimise water demand must be coupled with efforts to enhance freshwater availability and diversify water supplies. Only by addressing both water demand and supply in an integrated manner, in accordance with local needs and hydrological conditions, can countries effectively prevent, prepare for, and build resilience to drought.
Policy measures for managing water demand
Reducing water demand is crucial for adapting to drought risk in the context of climate change, as it directly addresses the growing pressure on limited water resources. Water demand management entails a broad range of policy measures to minimise water waste and encourage water conservation. These include the regulation of water use and abstraction, incentives for water efficiency, water pricing, and awareness-raising efforts directed to households, farmers, and other water users.
Regulating water use and abstraction
In light of the sharp increase in freshwater abstraction in recent decades (Box 4.2), regulating water use and withdrawals has become paramount. Effective regulatory frameworks typically integrate water allocation regimes, permitting systems, and economic instruments to manage water resources sustainably. Water allocation regimes provide a strategic framework for distributing water rights among users and prioritising essential uses (e.g. agriculture, drinking water, sanitation, ecosystem preservation) during periods of scarcity. Permitting and registration systems set limits on the quantity, timing, and purpose of individual withdrawals, including provisions on return flows. Economic instruments such as water markets enable the trading of water permits, promoting flexibility and efficiency in water use. When implemented effectively, these regulations help balance immediate water demand with long-term resilience, promoting water conservation and aligning water use with local ecological needs (Box 4.3) and broader climate adaptation goals.
Water resources are over-exploited in many regions of the world. Over the past century, global freshwater use has increased sixfold, driven primarily by growing demand for irrigation and electricity production. In Europe, water over-abstraction affects 10% of rivers and 17% of groundwater resources.3 On a global scale, 21 of the world’s 37 largest aquifers are being depleted faster than they can recharge. The over-exploitation of water resources is particularly severe in urban, industrial, and agricultural areas, where demand for water is highest.
By depleting aquifers and river flows, the over-abstraction of water exacerbates the impacts of climate change, increasing vulnerability to drought in the long term. For instance, in Europe, eliminating water over-abstraction could reduce the number of days with very low river discharge levels by 50-90% in many areas. In addition to intensifying drought risks, excessive water abstraction damages ecosystems and the critical services they provide. For example, in Spain’s Doñana National Park, over-abstraction was associated with reduced water quality and lower carbon storage capacity, in addition to diminished stream flows, falling groundwater tables, and slower aquifer recharge rates. Such degradation not only threatens biodiversity but also undermines the natural resilience of ecosystems to climate change.
Most OECD countries employ water allocation regimes and permitting systems to manage water resources. For example, Australia, the United States, and many European countries have comprehensive water management frameworks in place that include both allocation and permitting systems. The design of these frameworks – including the conditions for water use limits, efficiency requirements, and seasonal restrictions – vary depending on regional contexts, ultimately defining whether or not these allow to adapt to changing climate conditions and fluctuating water availability. For example, in Australia’s Murray-Darling Basin, water allocation plans dynamically adjust water rights based on actual water availability, ensuring the prioritisation of essential services during drought (Murray-Darling Basin Authority, 2023[52]). In its recent Water Code update, Chile also tied allocated water volumes to water availability and made new water rights revokable in case of under- or inefficient use, though challenges linked to over-allocation and permanent water rights remain (Ministerio de Obras Públicas, 2022[53]; OECD, 2024[54]). Provided compliance is respected, linking water allocation to availability and efficiency can incentivise shifts toward less water-intensive activities or crops and encourage relocation to areas with more reliable water sources (Ramirez, 2022[55]). Formal water markets are in place in various countries, including Australia (see Section 4.3.3), Chile, and Spain (OECD, 2021[56]).
Nonetheless, many water use and abstraction regulations remain insufficiently adapted to the challenges posed by climate change. Quantitative restrictions on water withdrawal are often employed only as reactive measures during drought emergencies, limiting their potential to strengthen long-term resilience.4 While short-term restrictions may help overcome temporary water scarcity, they do not enhance resilience, as they do not trigger the long-term changes needed to foster adaptation. Besides, even in drought-prone countries such as France, individual permits are issued without sufficiently considering their cumulative impact on long-term water resources (OECD, 2025[3]). Moreover, water use regulations often fail to appropriately incorporate the effects of climate change and over-abstraction on future water availability, as observed for example in Chile, France, Spain, and California (Ramirez, 2022[55]; OECD, 2025[3]; Gómez Gómez and Pérez Blanco, 2012[57]; Gleick et al., 2014[58]). A 2015 OECD survey found that only 57% of country respondents integrate considerations on future climate impacts into their water allocation regimes (OECD, 2015[59]). This gap is likely to become more pressing as climate change enhances agricultural potential in traditionally water-abundant regions, heightening competition for freshwater among sectors. This further underscores the importance of integrated, forward-looking, and climate-resilient water allocation frameworks that balance economic and food security objectives with equitable access and the preservation of essential ecosystem functions.
Integrating ecological flows into water allocation regimes is key to ensure drought resilience and maintain the health of aquatic ecosystems. Ecological flows define the amount, timing, and quality of water needed in rivers or lakes to sustain healthy ecosystems and the services they provide to humans and nature. Neglecting ecological flows in water allocation and permitting frameworks can lead to the degradation of river ecosystems and wetlands, disrupting biodiversity and weakening the natural resilience of ecosystems to droughts and other environmental stresses.
Many governments have recognised the importance of preserving ecological flows. For example, South Africa’s National Water Act, the Swiss Federal Act on the Protection of Waters, and the EU Water Framework Directive all include provisions for ecological flows. In Australia, the Murray-Darling Basin Plan sets abstraction limits to protect river health and allocates proportional water entitlements to ecosystems, ensuring minimum ecological functions even during drought. The federal government further supports this approach by buying back water entitlements from water markets to restore freshwater ecosystems. In response to a 2019 OECD survey, 78% of respondents5 reported incorporating minimum environmental flows or sustainable diversion limits in their water allocation regimes. The amount of water needed for ecological functions is often defined before allocating the remainder to other users, either through pre-allocated shares for ecosystems (e.g. Australia) or based on minimum flow requirements meant to maintain ecological functions regardless of other allocations (e.g. Israel and Switzerland).
Despite progress, there is scope to better align abstraction levels and ecological flows and to further prioritise ecological flows in water regulation. For example, in many OECD countries, minimum flow requirements are suspended during water scarcity, undermining their ability to protect ecosystems. Aligning other water-dependent activities, such as hydropower operations, with ecological flow requirements is also critical to maintaining ecosystem health and resilience.
One additional challenge is that illegal water use remains a significant issue in water-scarce regions due to limited monitoring, weak enforcement, and outdated regulations. As of 2019, illegal groundwater abstractions were reported to occur in 12 OECD countries (OECD, 2021[56]). In France and Bulgaria, illegal water use accounts for approximately 13% of total abstraction, while in Spain’s Castile-La Mancha region, it exceeds 22% (European Court of Auditors, 2021[64]). This highlights the need to strengthen regulatory frameworks and improve their enforcement, as well as to scale up the water flow monitoring systems to help detect illegal connections and leaks. Many EU countries, for example, are adopting advanced monitoring systems to identify unauthorised water use (EEA, 2022[65]).
Incentives for water efficiency
Improving water use efficiency can significantly help enhance resilience to drought, as it helps conserve limited water resources and ensure their sustainable use across sectors. By adopting water-efficient technologies, communities can reduce water waste, mitigate the impacts of water scarcity, and maintain essential activities during dry periods. At the household level, devices such as low-flow faucets and flow reducers can lower water use by up to 20% (OECD, 2025[3]). In agriculture, technologies like drip and sprinkler irrigation and soil moisture sensors offer significant potential to boost drought resilience, provided it is combined with regulations limiting water use (see Section 4.3.3). Water metering technologies further support efficient water use by enabling households, farmers, and businesses to monitor consumption, raise awareness, and encourage billing based on actual use. Overall, strengthening water use efficiency is key to address the challenges posed by climate variability and ensure long-term water security for agriculture, industry, and households.
Governments have developed various regulatory and financial incentives to promote the adoption of water-saving technologies. While these often focus on irrigation (discussed in depth in Section 4.3.3), they sometimes also extend to households. For example, in California, the Model Water-Efficient Landscape Ordinance establishes water efficiency and irrigation design standards for large development projects and encourages local governments to provide financial incentives for water-saving technologies (City of Vallejo, 2024[66]). In Australia, rebate programmes encourage households to install water-efficient appliances (Australian Government, 2013[67]). Some local governments and water operators in France have also distributed water-saving kits to households, helping to limit flow rates and improve water use efficiency (OECD, 2025[3]). Israel has developed a comprehensive water metering system for domestic and agricultural use, which relies on a combination of regulatory instruments, financial incentives, and awareness-raising campaigns (OECD, 2023[68]).
The effectiveness of water use efficiency measures ultimately depends on how the volumes of water saved are managed. Without proper oversight, efficiency gains can encourage increased water demand, negating the intended benefits (OECD, 2024[46]; OECD, 2016[69]). This “rebound effect” has been observed in Australia, where irrigation efficiency improvements were linked to a 21-28% increase in water use (OECD, 2025[3]). Mitigating such risks requires the establishment of robust and adaptive water allocation regimes that regulate how and under what conditions saved water can be used. This approach ensures that water savings contribute to reducing drought risk rather than inadvertently increasing demand.
Water pricing
Water pricing is a key mechanism for encouraging water saving. It can consist of abstraction charges for withdrawing water from natural sources or tariffs imposed on water users to pay for water services such as water supply or wastewater treatment. These pricing mechanisms can provide incentives for sustainable water management, reflecting the economic costs of water services, the environmental costs of water abstraction, and the opportunity costs from competing uses (Farnault and Leflaive, 2024[70]; Leflaive and Hjort, 2020[71]; OECD, 2017[72]). Overall, by signalling scarcity, water pricing can promote water use efficiency and incentivise investment in water-saving processes and technologies.
Water pricing is widely implemented but varies significantly in design, objectives, and price levels (Figure 4.3). For instance, charges and tariffs can be based on volumetric use or be differentiated based on usage tiers, regions, seasons and other factors (Table 4.3). Among the countries adhering to the OECD Council Recommendation on Water, 74% have abstraction charges for surface- and groundwater. Half apply charges to energy producers and industrial users, and 45% to agricultural users (OECD, 2021[56]). Different types of tariffs are also widely used. For instance, progressive tariffs are used in countries like Germany, France, and Italy (EEA, 2024[73]; OECD, 2025[3]). Seasonal or regional pricing has been implemented in countries like Greece, Hungary, and Spain (OECD, 2024[46]; Tortajada et al., 2019[74]).
Note: This table does not include pricing mechanisms that do not incentivise long-term conservation, e.g. flat-rate tariffs, fixed charges, or dynamic tariffs and charges.
Source: Author’s own.
The effectiveness of pricing instruments depends on price levels and on users’ ability to adjust their demand. Household consumption tends to be inelastic due to the lack of substitutes for drinking water, with demand estimated to decrease by 0.1% to 1% for every 1% increase in water prices (Reynaud and Romano, 2018[75]; Sebri, 2013[76]). In contrast, agricultural and industrial users are generally more responsive to price changes, though this can lead to unintended social costs. Demand elasticity also varies based on local geography and specific sub-sectors, crops, and productive practices. Along with demand elasticity, water scarcity considerations are also crucial to inform the design of abstraction charges. Yet, in many contexts, abstraction charges primarily function as revenue-generating fees rather than tools to promote efficiency, failing to internalise the full costs of water scarcity (OECD, 2025[3]; OECD, 2024[46]). For example, existing abstraction charges in Europe only internalise an average of 2-3% of water scarcity costs (IEEP, 2021[77]).6 Moreover, in many countries, the exemptions of certain sectors (e.g. agriculture) from water charges often undermine their effectiveness (OECD, 2018[78]).
While water pricing is an effective tool for promoting water conservation, it has limitations. Distributional impacts are a major concern for domestic consumption, as higher water prices may disproportionately affect low-income households. Progressive tariffs can mitigate this by keeping essential water use affordable (Ruijs, Zimmermann and van den Berg, 2008[79]), though they must be carefully designed to account for different consumption patterns and ensure cost recovery (Leflaive and Hjort, 2020[71]).7 Raising water prices to reflect scarcity costs can be politically sensitive and challenging, especially in regions where water use is heavily subsidised. Additionally, water pricing alone may not be sufficient to address challenges such as groundwater over-abstraction or ecosystem deterioration. Combining pricing measures with non-pricing instruments – such as regulations, incentives, and awareness campaigns – can enhance their effectiveness. Accurate water metering is also needed to calibrate price levels to actual demand and consumption trends, ensuring that pricing schemes are fair and aligned with sustainability goals (OECD, 2024[46]).
Note: To allow comparability, the calculations are based on a consumption level of 15m³ per month. Country averages are calculated by weighting the prices charged by operators based on the population they serve. Therefore, the price levels displayed for each country do not represent the average of all prices charged domestically. Price levels must be considered in the context of each country’s specific conditions (e.g. water scarcity levels, income per inhabitant, and changes over time or during periods of scarcity).
Source: adapted from OECD (2025[3]), based on data from the International Benchmarking Network (IBNET).
Awareness raising
Awareness raising measures aim to reduce water use by promoting less water-intensive and more water-efficient behaviours. These low-cost, no-regret measures often have high benefit-to-cost ratios, though their effectiveness depends on factors such as baseline consumption levels, resource availability, and local contexts (e.g. urban vs rural environment). Awareness-raising campaigns can reduce water consumption by approximately 9.5-32.5%, while labels and standards have the potential to achieve reductions of 6-10% (OECD, 2025[3]).
Over the past decades, governments and water operators have implemented numerous awareness-raising initiatives at various territorial levels. Successful urban examples include efforts in Saragossa and Sevilla (Spain), Melbourne (Australia), Tallin (Estonia), Copenhagen (Denmark), and Atlanta (United States). These campaigns have raised awareness about drought risk and encouraged sustainable water-use behaviours (OECD, 2025[3]; EMASESA, 2022[80]). For instance, in Barcelona, awareness-raising campaigns contributed to a 10% reduction in domestic water consumption between 2006 and 2011 (EEA, 2020[81]). In Sevilla, similar measures resulted in a 39% reduction per capita (EMASESA, 2023[82]). Along with the uptake of water-saving technologies, awareness-raising efforts have been among the most effective tools for reducing water demand in Spain (Tortajada et al., 2019[74]).
Labels and standards for water-efficient appliances and buildings have been introduced in some countries to encourage sustainable water-use behaviours. For example, water-saving labels for selected household appliances in Australia have reduced household water consumption by 6% (equivalent to 0.8% of the country’s total consumption) in just one year. In France, water-efficiency labels are already in use, but broader adoption could reduce household water consumption by an estimated 22% in the Paris region (OECD, 2025[3]). Such measures not only guide consumer choices but also incentivise manufacturers to improve the water efficiency of their products, further driving long-term reductions in water demand.
Policy measures for enhancing water supply
Efforts to reduce water demand must be paired with strategies to enhance water supply. These can focus on improving infrastructure efficiency, facilitating groundwater recharge, and diversifying water sources by tapping into unconventional resources such as rainwater, treated wastewater, and desalinated water (Table 4.4). Integrating these innovative approaches with existing supply systems enhances resilience to climate variability and can help communities secure sustainable water resources and strengthen their resilience to prolonged droughts. Other supply and storage solutions – such as the use of artificial reservoirs – also exist, though their role in building long-term resilience to climate change is contentious (Box 4.4). Water supply enhancements must also be at the heart of governments’ economic planning efforts, to ensure that development ambitions are underpinned by adequate, sustainable, and climate-resilient water resources.
Note: The measures included in this table entail economic and ecological costs that must be carefully balanced against their benefits on a case-by-case basis, considering local contexts and long-term resilience and sustainability.
Source: Author’s own.
Artificial water reservoirs have historically played a critical role in buffering water scarcity, though their effectiveness under climate change is uncertain. Water reservoirs can store water for drinking, industrial, agricultural, and energy production purposes. Less predictable precipitation patterns and higher temperatures may limit the ability of these costly infrastructures to maintain sufficient water storage in the future. For example, if a drought similar to that of 1921 were to occur in the Paris metropolitan region, existing reservoirs would recharge to only 28%8 of their capacity. Moreover, depending on their location, local climate conditions, and the type of water withdrawal, artificial reservoirs can reduce the annual flow of rivers by 7-35%, potentially harming downstream ecosystems and water availability. Given these challenges, building new reservoirs might not be the most effective strategy for enhancing water security in all drought-prone regions. Instead, new reservoir projects should be approached as complementary measures and undergo comprehensive resilience and impact assessments to evaluate their feasibility and long-term effectiveness. Equally important is ensuring proper maintenance and retrofitting of existing assets and integrating them with natural water storage solutions to enhance their overall resilience and long-term effectiveness.
The use of water transfers has also been questioned. Such infrastructures involve diverting water from one basin to another. They have been used in countries like China, Korea, Spain, and the United Kingdom to support agricultural, industrial, and municipal water needs in regions with insufficient water supply. While these infrastructures can provide short-term relief, they raise concerns regarding their high construction and maintenance costs, their environmental impacts and climate resilience, and their actual water supply benefits given evaporation during transport and storage. In fact, growing water scarcity may undermine the effectiveness of transfers and exacerbate territorial conflict over shared water resources. Additionally, these infrastructures themselves risk exerting excessive pressure on the basins they rely on, potentially worsening drought risk. These challenges are exemplified by the Chavimochic water transfer project in Peru. While the project has delivered significant socio-economic benefits, including improved well-being and development, its reliance on shrinking glacier resources threatens its long-term sustainability. Such cases underscore the need for careful planning and impact assessments when considering large-scale water transfer projects.
Efficiency of water supply networks
Reducing leakage in water distribution networks has significant potential to improve water-use efficiency and safeguard resources. Currently, 24% of potable water in the EU is lost due to pipeline leakages (Ociepa-Kubicka, Deska and Ociepa, 2024[86]) (Figure 4.4), with losses reaching up to 50% in some countries (European Commission, 2013[49]). These losses are often linked to insufficient investment in urban water infrastructure – including in their operations and maintenance, as observed in countries like Costa Rica and Italy (OECD, 2023[87]; JRC, 2023[88]). Upgrading irrigation conveyance infrastructure also offers considerable water savings, with potential reductions in agricultural water use of up to 25% in the EU (EEA, 2021[47]).
Source: adapted from OECD (2025[3]), based on data from EurEau (2021[89]).
Governments are implementing various measures to improve drinking water infrastructure efficiency. This includes setting efficiency targets for leakage reduction, infrastructure upgrades, and using surveillance technologies such as water meters and sensors to identify leaks. Some municipalities provide inspiring examples in this field. For instance, Sevilla (Spain) reduced pipeline losses by 68% between 1991 and 2021, while Paris (France) maintains a network renewal rate of 1.19% per year, i.e. nearly double the national average. In London (United Kingdom), local water operators also have set leakage reduction targets (OECD, 2025[3]). In Korea, the Smart Water Management initiative uses real-time data to detect leaks and promote household water use efficiency (OECD, 2017[90]). While infrastructure improvements costs vary depending on whether networks run above or below ground, increasing water distribution efficiency is a no-regret measure, insofar as the socio-economic and environmental benefits outweigh the implementation costs (OECD, 2025[3]). However, in some countries, underinvestment caused by poor cost-recovery mechanisms in water supply and sanitation agencies remains a significant barrier.
Managing aquifer recharge and water quality
Managing groundwater recharge and water quality is pivotal to ensure reliable water supplies on the long term. Aquifer recharge can occur naturally through soil infiltration (see Section 4.3.2) or artificially via human interventions. Complementing this, water quality policies safeguard the usability of these resources, preventing aquifer (as well as surface water) contamination and ensure a sustainable supply of clean water for future use.
Managed aquifer recharge (MAR) entails the replenishment of groundwater by allowing water to infiltrate aquifers, enabling the storage of excess water during wet periods for use during dry spells. This can be achieved through recharge basins, injection wells, and nature-based solutions (NbS) that enhance natural infiltration processes. In the context of climate change, MAR is becoming increasingly important to ensure water sustainability, particularly in regions where surface water is scarce or highly variable. Without such interventions, many countries, including Greece, Portugal, and Spain, are projected to experience significant reductions in groundwater recharge rates (JRC, 2018[91]). In parallel, MAR can also contribute to flood protection.
OECD countries have been progressively adopting MAR practices, with the United States, Australia, and several European countries leading the way. In Europe, more than 220 MAR sites are operational, and adoption is projected to grow (Sprenger et al., 2017[92]). For example, Spain’s Pedrajas-Alcazarén MAR site raised the water table by 0.75 metres between 2012 and 2016 (Deltares, 2022[20]). With 26% of the global MAR capacity, the United States have extensively implemented MAR in Arizona and California, successfully reversing declining groundwater levels (Dillon et al., 2019[93]; Scanlon et al., 2016[94]). In Australia, subnational governments (e.g. Western Australia) have developed frameworks and tools to facilitate MAR adoption across the state (Government of Western Australia, 2021[95]). In recent decades, MAR techniques have also gained traction in Africa. Countries like Kenya, Morocco, Namibia, Somalia, and South Africa have implemented MAR to enhance water security in drought-prone regions and areas facing groundwater stress.
Managing the interaction between drought and water quality is also paramount for building drought resilience. Poor water quality reduces the availability of clean water sources, while drought, in turn, often exacerbates water quality issues by concentrating salinity and pollutants in freshwater supplies. The impact of this interplay was observed for example in Denmark, where high pollutant and nitrate concentrations in freshwater have led to the closure of 30% of existing wells (EEA, 2017[96]), as well as in several other instances in Colorado (United States), Germany, and Poland (see Chapter 3). Globally, water contamination is projected to intensify water scarcity by 2050, affecting thousands of surface and groundwater bodies (Wang et al., 2024[97]) and imposing additional treatment costs (EEA, 2024[73]).
Addressing these challenges requires maintaining ecological flows and establishing robust water quality standards. It also involves tackling key pollution sources such as agricultural runoff, industrial discharges, and urban wastewater, e.g. through permitting systems, monitoring requirements, adoption of best available technologies to improve water quality. Innovative approaches, such as salinity credit trading in Australia, have also helped protect critical water resources by regulating industrial discharges in freshwater (NSW EPA, 2024[98]). Coupled with investments in water treatment infrastructure and enhanced monitoring and enforcement, these measures help safeguard freshwater resources and ensure resilience to growing drought risks.
Rainwater harvesting
Rainwater harvesting is an effective strategy to meet water needs by capturing and storing excess rainwater for later use. It can be applied for household and irrigation purposes, as well as municipal uses such as street cleaning, green space irrigation, climatisation. By reducing reliance on surface and groundwater resources, rainwater harvesting helps alleviate pressure on these vital resources. For example, rainwater harvesting has the potential to meet up to 90% of household and recreational water demand, with substantial savings recorded even in low-precipitation areas such as Barcelona (Spain) (OECD, 2025[3]; Domènech and Saurí, 2011[99]). This approach is particularly valuable in regions with limited freshwater availability or subject to saltwater intrusion, such as small islands and arid or semi-arid areas. Regions with distinct wet and dry seasons, and those reliant on unpredictable rainfall for crop growth, can also benefit significantly by storing surplus water for use during dry periods.
The adoption of rainwater harvesting systems has been supported by a combination of regulatory requirements and economic incentives. In many cases, building codes and regulations primarily focus on promoting adoption in new buildings or renovation projects, while grants and subsidies are sometimes used to encourage retrofitting of existing structures (Table 4.5). This is the case in Barcelona (Spain), where rainwater and greywater collection is mandatory for new buildings and subsidies for retrofitting private buildings are in place (OECD, 2025[3]). In San Francisco (United States), legal requirements for rainwater harvesting in new buildings have reduced drinking water consumption by up to 50% in some areas (Shimabuku, Diringer and Cooley, 2018[23]). A careful balance of regulatory requirements and financial incentives is key to encourage the uptake of rainwater collection systems while minimising financial burdens on property owners.
Source: Author’s own, based on information from OECD (2025[3]), EEA (2020[81]), FAO (2016[21]), UNCCD (2022[100]), Australian Government (2013[67]), Shimabuku, Diringer and Cooley (2018[23]), City of Tucson (2024[101]), Esin Attorney Partnership (2022[102]).
To ensure the sustainability of rainwater harvesting, it is important to regulate when and how rainwater can be collected and used. For example, in areas where downstream stakeholders or local water cycles depend heavily on rainwater, harvesting may need to be limited. Conversely, rainwater harvesting could be encouraged during periods of heavy precipitation as a substitute for groundwater abstraction, helping to preserve groundwater resources. Urban areas with high runoff and coastal areas where rainwater is often discharged into the sea could particularly benefit from expanded rainwater harvesting practices (UNCCD, 2023[103]; Gleick et al., 2014[58]; EEA, 2020[81]). Altogether, adapting rainwater harvesting strategies to local contexts is essential to maximise its benefits while avoiding unintended consequences for water systems and stakeholders.
Water reuse
Water reuse (or recycling) is an effective strategy for expanding water supply by recycling greywater and treated wastewater.9 This practice can help ensure supply for irrigation, industrial, and municipal uses and can also contribute to aquifer recharge and domestic non-potable uses. Recent analysis suggests that reusing treated wastewater in urban areas and industrial parks could reduce drinking water consumption by 26-48% (Bauer, Linke and Wagner, 2020[104]).10 In the EU, water reuse for irrigation alone could save up to 50% of water use (EEA, 2021[47]).
Many governments have introduced regulations and incentives to support water recycling (Table 4.6). In Israel, 85% of wastewater is reused, accounting for 45% of agricultural consumption and 21% of total water consumption. This success is attributed to supportive regulations combined with water tariffs and significant investments in technology. Similar wastewater reuse rates (90%) are found in Cyprus (OECD, 2024[46]), which aims to reuse 100% of urban wastewater for non-potable uses such as irrigation and aquifer recharge (EEA, 2020[81]). In Australia, the adoption of water reuse is increasing, supported by national guidelines and monitoring efforts that are often complemented by subnational recycling targets (OECD, 2018[105]; OECD, 2021[56]). Despite these advancements, water recycling still constitutes a small share of total water use globally. For example, in the EU, recycled water accounted for only 2.4% of treated wastewater and 0.4% of annual freshwater withdrawals in 2015 (European Commission, 2018[106]).
Source: Author’s own, based on information from OECD (2025[3]; 2024[46]; 2018[105]; 2023[68]; 2021[56]), EEA (2020[81]), Navarro (2018[107]), Agència Catalana de l'Aigua (2020[4]), Singapore’s National Water Agency (2024[108]) and Chenini (2010[109]).
The broader adoption of water reuse is inhibited by several challenges. In some countries, regulations restrict water reuse for specific purposes (e.g. household use in France (OECD, 2025[3]). In others, the lack of guidance and standards hinders investment in recycling technologies. The EU Water Reuse Regulation addresses this by setting minimum water quality, monitoring requirements, and risk management provisions (European Union, 2020[110]). Developing or retrofitting advanced treatment facilities requires significant upfront investments, which can deter local governments despite long-term savings. Financial incentives are thus key to support adoption, particularly in water-intensive sectors like agriculture (OECD, 2025[3]; OECD, 2024[46]). Finally, public hesitance about potential health risks associated with the use of recycled water (e.g. possible water contamination during domestic use) further inhibits adoption (Morris et al., 2021[111]; European Union, 2020[110]). Targeted awareness-raising campaigns have successfully enhanced public acceptance of water recycling, as seen in Türkiye (Taher et al., 2018[112]).
Regulating when and how water can be reused is vital to ensure the sustainability of this practice. For instance, water reuse might need to be restricted where wastewater discharges support ecological flows or groundwater recharge (OECD, 2025[3]; EEA, 2024[73]). This is the case of the Seine River (France), where treated wastewater accounts for up to 70% of the river flow (Agence de l'Eau Seine Normandie, 2022[113]). Conversely, in coastal regions where treated wastewater would otherwise be discharged into the sea, encouraging reuse could be prioritised (OECD, 2025[3]). By tailoring water reuse regulations to local contexts, countries can optimise its benefits while minimising environmental and socio-economic risks.
Desalination
Desalination can offer a viable solution for regions with limited or shrinking freshwater supply, provided negative side-effects are addressed. This practice involves removing dissolved salts from seawater and brackish water to produce freshwater and is thus often used in areas with scarce freshwater resources but abundant seawater access. For example, in the Middle East, up to 90% drinking water comes from desalinated seawater (Eyl-Mazzega and Cassignol, 2022[114]). Israel has invested significantly in desalination technologies, with over 80% of its urban water supply now sourced from desalination plants (OECD, 2023[68]). In Europe, desalination is widely used in the Mediterranean region (e.g. Greece, Italy, and Spain) as a supplementary source, primarily for addressing seasonal or localised water scarcity in coastal areas. Australia, Chile, and Egypt have also adopted desalination. Egypt has launched a series of five-year plans to 2050 to expand desalination capacity to meet drinking water needs (IDMP, 2019[115]; Elsaie et al., 2023[116]).
Governments use various policy instruments to support the adoption and advancement of desalination technologies. These include financial incentives such as subsidies, grants, and tax breaks to encourage investment in desalination plants and technologies, as well as regulations to ensure the environmental sustainability of desalination processes. Research and development funding is also provided to support innovation in energy-efficient and environmentally sustainable desalination technologies, such as solar-powered desalination. For instance, the US federal government has recently provided USD 250 million in funding to support the construction of desalination plants (White House, 2024[117]). Germany has also launched funding programs for research and development (R&D) projects targeting water reuse and desalination to increase water availability (BMBF, 2024[118]).
Despite its potential to increase freshwater availability, desalination faces several challenges. Although the costs of desalination technologies have decreased significantly in recent years, they remain high compared to other water supply solutions. Costs depend on plant size and the technology used.11 Desalination is also highly energy-intensive (Shokri and Sanavi Fard, 2022[119]) and raises concerns about impacts on marine ecosystems and water quality due to the risk of chemical contamination and brine discharge. Whereas recent technological advancements have improved plant efficiency (Hidalgo González et al., 2020[120]) and reduced environmental impacts, further technology development and investments are needed to enhance environmental safeguards and sustainability, including measures to minimise ecological risks and optimise energy use (Bdour et al., 2023[121]; Berenguel-Felices, Lara-Galera and Muñoz-Medina, 2020[122]; EEA, 2020[81]; EEA, 2021[47]).
4.3.2. Managing land and ecosystems for drought resilience
Managing land and ecosystems sustainably is fundamental to enhance resilience to drought in the context of climate change (see Chapter 2). Healthy soils and ecosystems improve water retention in the landscape, enhancing the availability of surface and groundwater resources and regulating hydrological flows. The benefits of sustainable land and ecosystem management range from improved water availability at the farm, city, or river basin level achieved through locally-implemented interventions, to shifts in hydrological cycles (e.g. enhanced precipitation) when larger-scale interventions are implemented at regional level. At all scales, sustainable land and ecosystem management reduce drought risks while strengthening the resilience of both human communities and natural ecosystems. Furthermore, NbS offer additional co-benefits such as water purification, climate mitigation, biodiversity conservation, and improved air quality (Figure 4.5). To maximise their effectiveness and avoid the risk of maladaptation, NbS must be adapted to local socio-economic, climatic, and environmental conditions (OECD, 2021[123]; Li et al., 2023[124]).12
Governments have increasingly reflected the importance of conserving and restoring land and ecosystems to reduce drought risk, in their policy and regulatory frameworks. For example, the restoration of surface water bodies is explicitly encouraged in Spain’s national adaptation plan and Switzerland’s law on water resource protection (Fedlex, 2023[63]). NbS have also been consistently promoted through EU legislation as a key approach to addressing climate and environmental challenges. Globally, more than 120 Parties to the United Nations Convention to Combat Desertification (UNCCD) have committed to halting land degradation by integrating restoration targets into national legislation, aiming to rehabilitate 450 million hectares of degraded land. The following sections explore the benefits and extent of NbS adoption at landscape and urban level (Section 4.3.2). A further discussion on the role of sustainable agriculture practices for soil and ecosystem health is included in Section 4.3.3.
Source: Author’s own.
Managing ecosystems at landscape level
Protecting and restoring ecosystems at the landscape level is essential for enhancing resilience to drought. Healthy ecosystems, such as rivers, forests, wetlands, and grasslands, play a key role in retaining moisture, recharging groundwater, and regulating hydrological flows (OECD, 2021[123]). For instance, wetlands can store up to 15 000 cubic metres of water per hectare (Office Français pour la Biodiversité, 2012[125]), while plant transpiration contributes to more than half of land-derived atmospheric moisture (UNDRR, 2021[126]). Recognising these functions, governments have increasingly promoted the protection and restoration of these ecosystems, focusing primarily on sustainable landscape and vegetation cover management (Table 4.7).
Source: Author’s own.
Policy efforts in recent years have focused on enhancing landscape management to improve hydrological connectivity. Key measures include reconnecting rivers to floodplains, protecting sensitive ecosystems, and restoring riparian buffers (i.e. vegetation along river and wetland banks). In Europe and the United States, incentive schemes encourage the creation of vegetated buffer zones along rivers and wetlands to enhance water filtration and retention (OECD, 2024[46]). In China, the Sloping Lands Conversion Programme compensates farmers for converting cropland on eroding slopes into forests or grasslands, to reduce drought and flood risks along major rivers (Liu and Lan, 2015[127]). In Estonia and Germany, efforts such as dam removal and levee setbacks have significantly improved river and floodplain connectivity, delivering hydrological and ecological benefits such as enhanced water storage and ecosystem resilience (EEA, 2024[73]; Serra-Llobet et al., 2022[128]). Protecting peatlands and other wetlands from drainage, maintaining minimum water flows (see Box 4.3), and supporting restoration initiatives where needed have also helped restore water balances and preserve water availability in the landscape. For instance, in Israel’s Hula Valley, government support for wetland restoration through regulations, public investments, and ecotourism incentives for local stakeholders successfully enhanced water storage and stabilised local water cycles (Hambright and Zohary, 1999[129]).
National and local authorities have also invested heavily in conserving and restoring vegetation in drought-prone areas. Healthy vegetation cover retains soil moisture, regulates humidity levels during dry periods, and enhances drought resilience while reducing the risks of land degradation (OECD, 2021[123]; Browder et al., 2019[130]). For example, in Mexico’s Izta-Popo National Park, the reforestation of over 300 hectares has improved groundwater recharge, with the potential to store 1.3 million cubic metres of water annually (Oppla, 2023[131]). In Türkiye’s Konya region and Seyhan Basin, local authorities have integrated climate-resilient forest management and drought adaptation considerations into regional forest management plans (Oppla, 2023[132]; IUCN, 2019[133]). An innovative NbS example to minimise drought risk comes from Quito (Ecuador), where a local water fund (the Fondo para la Protección del Agua) has supported the restoration of 2 500 hectares of degraded land and the protection of 33 000 hectares of high-altitude vegetation, ensuring freshwater availability downstream (Browder et al., 2019[130]). Water funds targeting ecosystem regeneration have also been established in Costa Rica and in Scotland (United Kingdom) (Water Conservation Costa Rica, 2023[134]; SEPA, 2024[135]). In recent years, initiatives for vegetation and land restoration at landscape level have also gained momentum at the international level (Box 4.5).
In response to growing drought risk, several multilateral initiatives have been launched to promote large-scale land and ecosystem restoration. These efforts focus on combating desertification, enhancing soil health, and improving drought resilience in affected regions through collaborative partnerships. Key initiatives include:
The G20 Global Land Initiative aims to reduce global degraded land by 50% by 2040 through ecosystem restoration, reforestation, and sustainable land management. Activities include knowledge sharing, civil society engagement, and private sector involvement.
The Great Green Wall Initiative targets the restoration of 100 million hectares across 22 Sahelian countries to combat land degradation, desertification, and drought. By 2030, it aims to enhance climate resilience and food security, while also sequestering 250 million tons of carbon and creating 10 million green jobs. By 2020, 4 million hectares of degraded land had been rehabilitated.
The African Forest Landscape Restoration Initiative (AFR100) unites 34 African governments, as well as businesses and NGOs, to restore 100 million hectares of land by 2030. The initiative promotes agroforestry, pastoralism, and best practices for landscape restoration to improve food security, climate resilience, and rural development.
To inform effective and efficient landscape-level interventions, governments are increasingly using costs-benefit analyses. For example, Cape Town (South Africa) identified invasive plant removal from seven priority catchments as a cost-effective measure to enhance water availability, as the proliferation of such species is associated with lower river flows and aquifer recharge. For example, invasive tree species were found to allow only 16% of annual rainfall to recharge groundwater, whereas native vegetation, such as Fynbos, enable up to 40% groundwater replenishment (FAO, 2021[11]). With yearly savings of 2 million litres per hectare, this intervention could save 100 billion litres of freshwater per year by the middle of the century at one-tenth the unit cost of alternative water supply options (Stafford et al., 2019[141]). Similarly, in the Netherlands, cost-benefit assessments undertaken as part of the Delta Plan allowed to identify the most impactful measures for freshwater supply, such as protecting Lake IJsselmeer (OECD, 2025[3]).
Despite some progress in ecosystem management, challenges persist and the potential of land-based interventions remains untapped. Effective ecosystem management often requires limiting or altering land use, which can lead to sectoral or public opposition due to competing interests or perceived trade-offs (OECD, 2021[123]). For example, in Spain, conflicting land-use priorities have driven public administrations to support the expansion of industrial agriculture around the Doñana protected area, significantly reducing water availability within the protected area (WWF, 2023[48]). This challenge is often compounded by the tendency to underestimate the economic benefits of conservation, as these are not as easily monetised or quantified compared to other uses. Moreover, the implementation of large-scale NbS requires co-ordination and integrated planning among multiple stakeholders, which remain major challenges in many cases (see Section 4.4.1) (OECD, 2021[123]). Another challenge is the frequent prioritisation of water for drinking, infrastructure, and key economic sectors over ecosystem needs. This imbalance often undermines ecosystem health and their ability to maintain essential functions during water scarcity periods. Ensuring a balance between human and ecosystem needs (e.g. by regulating water abstraction and fostering cooperation among users, see Sections 4.3.1 and 4.4.1 respectively) is thus fundamental for sustainable ecosystem management.
Harnessing urban NbS for drought resilience
Nature-based solutions are increasingly recognised as vital tools for enhancing drought resilience in cities. In recent decades, urban sprawl and soil sealing have reduced soil permeability and disrupted aquifer recharge and the natural flow of rainwater. For instance, in Paris, where 21% of the metropolitan area is built-up, only 30% of rainfall infiltrates the soil on average (OECD, 2025[3]). Similar challenges affect many large urban areas globally. By integrating permeable surfaces – such as urban green spaces, green roofs, and permeable paving – into urban planning, NbS slow runoff, enhance rainwater infiltration, and improve groundwater recharge (Table 4.8). In Southern California and the San Francisco Bay, permeable paving and stormwater harvesting systems in urban areas supply an additional 518 to 777 gigalitres of water annually (Gleick et al., 2014[58]). Besides mitigating drought impacts, urban NbS also enhance resilience to other extreme events (e.g. floods and heatwaves), support biodiversity, and improve urban liveability (OECD, 2021[123]).
Many OECD countries have expanded the use of urban NbS for enhanced hydrological connectivity through land-use policies, fiscal incentives, and urban regeneration projects. For example, in Bremen (Germany), financial contributions are offered to homeowners for de-sealing paved areas on their properties (EEA, 2020[81]), to reduce surface runoff and improve water infiltration. Similarly, the Paris metropolitan region enforces stormwater management regulations and funds interventions such as de-sealing, tree planting, green roofs, and renaturation projects on both public and private land. The region aims to de-seal 5 000 hectares by 2030. Currently, nearly 16% of non-potable water use in Paris is sourced from drainage water (OECD, 2025[3]). An innovative approach to urban water management has emerged in Rotterdam (the Netherlands), where an artificial wetland has been developed to collect and treat rainwater, which is then purified and stored beneath a sand layer for non-drinking purposes (EEA, 2020[81]).
Source: Author’s own.
4.3.3. Adapting sectoral practices to climate change
In a changing climate, effective drought management requires strategies that extend beyond water and land management to encompass the role of critical sectors in building long-term resilience to drought. This section explores the need and opportunities for sectoral adaptation in three selected sectors: adapting agricultural practices to sustain productivity and food security under changing climate conditions; ensuring continuity in river transport to maintain trade and communication channels; and preventing risks to physical assets to protect essential services and communities from the impacts of drought.
Adapting agricultural practices to a changing climate
The agricultural sector is highly vulnerable to drought risk under climate change, as rising temperatures and shifting precipitation patterns jeopardise crop yields and food security (see Chapter 3). Strengthening the resilience of farmers, farming communities, and agricultural economies is pivotal. This requires improving irrigation water use efficiency; enhancing the drought resilience of crops, livestock, and farming systems; and promoting sustainable land and water management to alleviate the sector’s pressure on increasingly scarce water resources. The following subsections examine key practices available and their current adoption.
Enhancing irrigation efficiency
As climate change intensifies variability in precipitation patterns, irrigation has become increasingly central to ensuring reliable water supply for crops, thus ensuring resilience to prolonged dry periods. Over the past fifty years, global irrigated area has doubled, and today, irrigation supports 20% of the world’s harvested area and 40% of global crop yields (IPCC, 2022[142]). Yet, irrigation accounts for 70% of global freshwater withdrawals, significantly driving groundwater depletion in many regions (United Nations, 2024[143]). Projections indicate that, as water scarcity intensifies, large-scale shifts from rain-fed to irrigated agriculture will occur, further increasing agricultural water demand until the end of the century (IPCC, 2022[142]). While this shift is vital for adaptation, it must be accompanied by considerations regarding the sustainability of water resource use, especially as most water abstracted for agriculture is not returned to the surrounding environment.
Enhancing irrigation efficiency is thus necessary to alleviate groundwater pressures and promote sustainable water use. Research shows that upgrading irrigation systems can cut inefficient water use by up to 76% globally (Jägermeyr et al., 2015[144]) and lower overall water consumption by 15-20% in some countries (OECD, 2025[3]). Governments worldwide have implemented various measures to encourage the adoption of water-efficient irrigation technologies. Key solutions include micro and drip irrigation systems, which use 20-50% less water than conventional sprinklers (UNCCD, 2023[103]), as well as advanced technologies like sensors, drones, and water metering systems. In Europe, the Common Agricultural Policy (CAP) promotes these technologies through water efficiency requirements and subsidies for water-saving investments (European Court of Auditors, 2021[64]). Hungary provides irrigation subsidies contingent on a water-saving objective, while in the United States, the federal government supports the modernisation of irrigation infrastructure, including off-farm water conveyance systems (OECD, 2021[56]).
Effective water governance, including water allocation frameworks, groundwater regulations, and water pricing schemes, is also key to improving irrigation efficiency. These measures can prevent over-extraction and ensure equitable and efficient water use, particularly during droughts, while incentivising farmers to adopt water-saving technologies and practices (see Section 4.3.1). For example, well-designed water pricing schemes promote conservation by reflecting the true value of water, ensuring its sustainable use in agriculture and other sectors. Examples of policy support in this area include the establishment of water markets in Australia, which has improved irrigation efficiency at the farm level (OECD, 2019[145]; Kirby et al., 2014[146]), and Colorado’s (United States) compensation programme for farmers who permanently forgo irrigation water rights in designated areas (USDA, 2017[147]).
Emerging digital tools can further enhance irrigation efficiency by enabling precise water management. Remote sensing technologies provide real-time data on soil moisture, crop health, and water distribution, optimising irrigation practices, while Internet of Things (IoT) devices – such as smart sensors and automated valves – monitor and regulate water use dynamically, reducing water waste. Additionally, weather-based scheduling systems leverage meteorological data to adjust irrigation timing and volumes, ensuring alignment with actual crop water needs. Policy instruments that support the adoption of these tools, such as subsidies for smart irrigation systems or data-sharing platforms, can accelerate their implementation. For instance, in France, regional subsidies are available for technologies aimed at improving environmental performance, including water efficiency, as part of several Plan Végétal Environnement (Nouvelle-Aquitaine, 2021[148]). Similarly, in Hungary, irrigation subsidies are contingent on meeting water saving targets (OECD, 2021[56]).
Despite recent advancements, more robust enforcement of water efficiency requirements and better-aligned incentives are needed. For example, in the EU, exemptions from requirements for water withdrawal authorisation allow the agricultural sector to over-abstract water, while CAP funds are often allocated to new irrigation projects rather than improving existing systems’ efficiency (European Court of Auditors, 2021[64]). These exemptions and misaligned incentives risk exacerbating pressures on already stressed water resources, undermining efforts to enhance sustainability in agricultural water use. Moreover, improving irrigation efficiency without proper safeguards can lead to a rebound effect, where water savings are offset by expanded irrigation or increased water consumption. Additionally, the integration of climate change considerations into agricultural water management lags behind, with only a minority of OECD countries having increased their focus on climate adaptation in the last decade (OECD, 2021[56]).
Enhancing the resilience of farming systems to drought Enhancing the resilience of agri-food systems to drought is essential for safeguarding food security and rural livelihoods amid increasing climate variability. By adopting drought-tolerant crop varieties, adjusting cropping calendars, improving livestock management, and diversifying income sources, farmers can reduce vulnerability, maintain productivity, and ensure the sustainable use of resources (Table 4.9).
Governments have actively supported the adoption of practices that improve crop and livestock resilience to drought through incentives, public investments, and information campaigns. In the EU, the CAP promotes eco-schemes to support the cultivation of less water-intensive crop varieties and adjustments to planting and harvesting schedules (OECD, 2024[46]). Recent estimates suggest that the use of drought-tolerant crops in the EU could save up to 50% of water use (EEA, 2021[47]). Sectoral agencies, as well as international research organisations, have also played relevant roles in research and development. For example, the Drought Tolerant Maize for Africa project has significantly enhanced the adoption of drought-tolerant maize varieties in sub-Saharan Africa, achieving yields up to 40% higher than conventional varieties during drought years while performing similarly in non-drought years (Shiferaw et al., 2014[149]). Efforts to improve livestock management practices have been implemented in Tajikistan through the Livestock and Pasture Development Project, which provides partial grants and capacity building to communities. These initiatives have resulted in co-benefits such as enhanced food security and increased household incomes, among others (IFAD, 2022[150]).
Some countries have also encouraged farmers in drought-prone areas to diversify their livelihoods, with a view to stabilising incomes and reducing vulnerability (UNDRR, 2021[126]; De Boni et al., 2022[151]). Measures include incentives for diversifying agricultural production as well as for engaging in non-agricultural activities such as agri-tourism. Governments have supported these efforts with financial incentives, training programmes, and market access initiatives. For example, in Australia, government programmes provide trainings and resources to support farmers in diversifying their income sources beyond traditional agriculture (Department of Agriculture, n.d.[152]). Agricultural insurance programmes in some countries further encourage income diversification (see Section 4.4.3). For instance, the United States’ Whole-Farm Revenue Protection insurance programme ties premium rate discounts and subsidies to farm revenue diversification and only offers its highest coverage levels to farms cultivating at least three commodities (USDA, n.d.[153]; Kokot et al., 2020[154]).
Despite these efforts, significant challenges remain. For example, as of 2024, only two EU countries provide funding for drought-resilient crops as part of their national strategic plans on agriculture (EEA, 2024[41]). Moreover, some CAP incentives continue to support water-intensive crops and livestock expansion without adequately considering water efficiency, potentially exacerbating drought vulnerability (WWF, 2023[48]). While exposed and vulnerable farmers are increasingly aware of drought risk (Durrani et al., 2021[155]; van Duinen et al., 2015[156]), adopting drought-resilient practices often entails trade-offs with other pressing concerns, such as the labour intensity of new practices, potential income reductions, missing value chains for rotation crops, or the need for investments in specialised machinery. Thus, addressing these barriers requires providing financial incentives, developing infrastructure development, and strengthening value chains, ensuring that financial support encourages proactive resilience measures and long-term drought adaptation while avoiding the reinforcement of maladaptive practices that inadvertently increase vulnerability.
Source: Author’s own.
Promoting soil health and water retention for enhanced resilience
Sustainable land and water resource management in agricultural areas is critical for enhancing drought resilience and supporting long-term agricultural sustainability. Strategies such as agroforestry, natural water retention systems, and sustainable soil management practices conserve natural resources, safeguard biodiversity, and improve soil quality and water retention (Table 4.10). These practices contribute to increasing soil organic carbon, which drives improvement in soil water retention capacity, infiltration properties, and overall soil health, while also serving as a powerful carbon storage mechanism and a biodiversity hub for microorganisms. By adopting these practices, farmers not only enhance resilience to climate variability but can also achieve higher crop yields and often maximise benefits even during non-drought years (UNCCD, 2019[157]).13
Countries are increasingly supporting agroforestry and water retention systems through incentives and education programmes aimed at promoting sustainable land use and improved water management. In the EU, the CAP finances agroforestry and supports the afforestation/restoration on over 60 0000 hectares (European Commission, 2022[158]). The new CAP requires that 25% of national funding for farmers target eco-schemes designed to support sustainable agricultural practices (EEA, 2024[41]). In France, the education initiative Enseigner à Produire Autrement fosters drought resilient agricultural practices by integrating adaptation and sustainability considerations into agricultural education (OECD, 2025[3]).
Governments have also advanced policies to promote soil conservation practices, such as mulching, conservation tillage,14 and crop rotation, to improve soil health, water retention, and overall drought resilience. These practices are particularly effective in enhancing soil organic carbon, further improving soil’s ability to retain water and nutrients. For instance, the United Kingdom’s Sustainable Farming Incentive compensates farmers for adopting sustainable practices like no-till farming and companion cropping, while also providing guidance for implementation (UK Government, 2024[159]). Similarly, Ireland’s Results-Based Environmental Agri Pilot reward farmers for achieving measurable improvements in soil health and water retention (Government of Ireland, 2021[160]). In the United States, programmes like the Environmental Quality Incentives Program and the Conservation Reserve Program prioritise practices such as crop rotation, conservation tillage, and cover cropping through subsidies and annual rental payments (OECD, 2024[46]; USDA, 2017[147]). The latter has seen higher enrolment in drought-prone areas (controlling for other regional differences), suggesting drought resilience as a key driver for participation (USDA, 2017[147]).
These land and water management practices have been linked to improvements in drought resilience, water efficiency, soil health, and productivity, though their effectiveness varies depending on local climate, environmental and socio-economic factors.15 For example, in Spain’s Segura river catchment, mulching and conservation tillage reduced water stress and improved soil moisture (UNCCD, 2019[157]), while earth-banked terraces in Murcia enhanced water infiltration (WOCAT SLM Database, 2011[161]). In southern Africa, crop rotation increased soil water infiltration by 70-238%. Drought-resilient practices have also boosted productivity in some regions. In Zambia, agroforestry increased maize yields during drought years by up to 12 times compared to non-agroforestry systems (UNCCD, 2019[157]). Similarly, in Mexico, sustainable farming practices like conservation and precision agriculture, improved maize and wheat yields by 20.5% and 2.8% respectively (CIMMYT, 2024[162]).
Despite progress, significant barriers remain in scaling up these practices. Limited capacity and engagement among private stakeholders often hinder adoption, particularly in regions where smallholder farmers face immediate financial constraints (UNCCD, 2019[157]). The medium- to long-term benefits of sustainable land management practices may not align with the short-term needs and constraints of low-income farmers. Addressing these challenges requires stronger incentives, targeted capacity building, and financial support as well as further research to ensure broader adoption of drought-resilient agricultural practices.
Source: Author’s own.
Ensuring continuity in river transport
Drought conditions can severely disrupt inland waterway transport by lowering water levels, which in turn reduce ship capacities, cause delays, and increase transportation costs (see Chapter 3). To address these growing challenges, governments have developed policies and initiatives to upgrade fluvial infrastructure and maintain navigability during drought periods. Key strategies include the development of new river channels and dredging, deepening, or widening of existing ones, as seen in the Rhine (Germany) and Mississippi (United States) basins (Gobert, 2023[163]; Guo, 2023[164]). Investments in reservoir lakes, locks and pumping stations to regulate water flows during drought also play a key role, as observed along the Seine river (France) and the Rhine-Meuse-Scheldt river system (Belgium, the Netherlands) (OECD, 2025[3]; Climate-Adapt, 2016[165]; Havinga, 2020[166]) (Table 4.11).
In parallel, some countries have introduced or adjusted regulatory frameworks to adapt vessels and shipping operations to changing water levels. For example, in Germany, regulations set limits on vessel draft based on water levels to ensure safe navigation on the Rhine River (Vinke et al., 2024[167]). A federal funding programme also supports the modernisation of inland vessels to optimise ship operations during low-water conditions (PLATINA3, 2022[168]). Similarly, Austria has launched a subsidy scheme to enhance the efficiency of inland vessels (BMK, 2022[169]).
Despite these advancements, the effectiveness of current policies and investments is often limited by the evolving nature of drought risk under climate change. Many measures and strategies rely on historical drought trends and only few account for yet unprecedented or future drought conditions. This is exemplified by Germany’s experience with the Action Plan Low Water Rhine (Aktionsplan Niedrigwasser Rhein) released after the 2018 drought. While the plan includes long-term low-flow forecasting and projection services that were activated in the years 2019 and 2020, other measures of the plan – such as infrastructure measures – were not yet in place when the next severe low-flow event occurred in 2022 (OECD, 2023[19]). To address these limitations, policies and strategies must be grounded in forward-looking risk assessments based on a range of climate scenarios to improve preparedness. Furthermore, wetland restoration and riverbank reforestation are effective options for maintaining navigable water levels during droughts (see Section 4.3.2). These measures also provide co-benefits, such as enhanced biodiversity, water quality, and socio-economic resilience.
Source: Author’s own.
Preventing risks to physical assets from clay shrinkage and land subsidence
Prolonged drought conditions and excessive groundwater abstraction contribute significantly to clay shrinkage and land subsidence, causing structural damages to infrastructure and buildings.16 In France alone, clay shrinkage and swelling caused nearly EUR 2 billion in damages between 1995 and 2019, with annual costs averaging 1.5 times higher than those of floods (DRIEAT, 2023[170]; CCR, 2020[171]). Across Europe, drought-induced subsidence has increased substantially in recent decades and is projected to rise further under climate change (Swiss Re, 2011[172]). Additionally, subsidence can permanently reduce the storage capacity of aquifers, further exacerbating drought risk (OECD, 2025[3]).
Governments have adopted various regulatory measures to strengthen asset resilience in areas prone to clay shrinkage and subsidence. In some cases, construction is restricted in high-risk areas and mandatory soil analyses are often required to identify clay content and shrink potential before development. Building codes in affected areas sometimes include requirements for deeper foundations, ground stabilisation techniques, or building materials that can accommodate land movements. Many of these measures have been implemented in France (DRIEAT, 2023[170]), which has also integrated damage from clay shrinkage into its national compensation system (see Table 4.13). The European Commission has issued guidelines for adapting buildings to climate change impacts, including clay shrinkage and subsidence (European Commission, 2023[173]).
Efforts have also been made to maintain soil moisture levels and facilitate groundwater recharge in areas prone to soil shrinkage or drought-induced subsidence. For example, Tokyo has implemented bans on groundwater abstraction to reduce land subsidence (Cao et al., 2021[174]), while regulations promoting practices like planting vegetation17 farther from buildings to maintain constant soil moisture levels are in place in France (DRIEAT, 2023[170]). Nature-based solutions that support aquifer recharge and soil water retention (see Section 4.3.2 and Table 4.12) can also help mitigate clay shrinkage and subsidence while delivering additional environmental and policy benefits.
Source: Author’s own.
Creating the enabling conditions for effective drought risk prevention is indispensable to drive the adoption of policies, practices, and investments that strengthen resilience. Achieving this requires establishing institutional networks that promote policy alignment and stakeholder engagement within and across national borders (Section 4.4.1), ensure adequate financial support for resilience-building measures (Section 4.4.2); and promote private stakeholder resilience through insurance schemes (Section 4.4.3).
4.4.1. Strengthening collaboration for drought resilience
Institutional co-ordination within national borders
To address growing drought risk, many countries have developed coordination mechanisms that facilitate policy alignment and collaboration across authorities, sectors, and levels of government. For example, in the United States, the Drought Resilience Interagency Working Group brings together 14 federal departments to facilitate coordination and a whole-of-government approach (White House Drought Resilience Interagency Working Group, 2022[175]). Its work is complemented by the National Drought Resilience Partnership, which coordinates federal resources and information to support state, tribal, and local efforts on long-term drought resilience (NIDIS, n.d.[176]; NDRP, 2019[177]). In Kenya, a permanent body for drought management (i.e. the National Drought Management Authority) was established to improve coordination across national, sub-national, and international levels (FAO, 2021[11]). In Australia, the National Soil Action Plan promotes coordinated efforts to protect and improve soil health, e.g. by supporting collaborative frameworks for soil monitoring, promoting policy alignment, and enabling joint investment in soil initiatives. This approach ensures that national priorities are addressed while responding to regional and local conditions (Australian Government, 2021[178]).
Institutional collaboration at the river basin level has also advanced, facilitating the shared management of freshwater resources and mitigating drought risk and impacts downstream. Co-operation mechanisms include river conventions and river basin management plans. River conventions are binding agreements among governments (domestic or cross border; for the cross-border discussion, see next subsection) that outline long-term objectives for shared water resources. For example, Canada’s Mackenzie River Basin Transboundary Waters Master Agreement establishes a cooperative framework for sustainable water management among the federal government and the provinces and territories that are part of the basin (Government of Canada, 1997[179]). River conventions are sometimes supplemented by non-binding river basin management plans, which provide technical guidance for managing shared water resources within the basin, often addressing drought and water scarcity. This is the case in Mexico, where 26 basin-level drought prevention plans were developed as part of the National Program Against Drought (Deltares, 2022[20]). These plans support coordinated water allocation (e.g. preventing over-abstraction upstream, ensuring minimum flows), infrastructure investments (e.g. water storage), and drought prevention measures. However, rising drought risk due to climate change calls for periodic assessments and updates of existing agreements and plans.
Despite progress, significant gaps remain in institutional frameworks. Responsibilities for drought management are sometimes unclear or fragmented, complicating co-operative efforts and in some cases leading to misaligned policies and incentives. Cross-agency and intersectoral collaboration mechanisms are often weak, even within key sectors such as water management, as observed in Chile and France, among others (OECD, 2024[54]; OECD, 2025[3]). To strengthen drought resilience, it is fundamental to reinforce coordination mechanisms and other co-operative frameworks that promote collaboration and alignment across sectors and government levels.
Addressing drought risk across borders
With a large share of the water resources being transboundary, the growing threats posed by drought present complex management challenges that go beyond national borders. These challenges are expected to intensify as climate change exacerbates water scarcity and variability (see Chapter 2). Developing coordinated approaches to water allocation and abstraction, infrastructure management, risk assessment and monitoring, and ecosystem management may significantly help address these issues. Such an approach may reduce water availability and quality issues in downstream countries and facilitate the equitable and effective utilisation of transboundary waters among riparian countries (IDMP, 2022[13]; UN Water, 2024[180]).
Cross-boundary agreements, plans, and initiatives have been established to facilitate cooperation at river basin level, mirroring similar approaches used within national borders (see subsection above). Examples include the Danube River Convention in Europe, as well as the Nile River Basin Management Plan in Africa, which regulate transboundary water governance, aiming to enhance water sustainability and reduce drought risk under changing climatic conditions (Slovenian Environment Agency, 1994[181]; Nile Basin Initiative, 2023[182]). Bilateral agreements – such as those between Portugal and Spain, or Mexico and the United States – regulate flow regimes and co-operation at the basin level (UNECE, 2009[183]; Interreg España Portugal, 2024[184]). In the EU, the River Basin Management Plans developed under the Water Framework Directive also play a role in addressing drought risk and ensuring sustainable water management across transboundary basins within Europe (Box 4.6).
Developed by EU Member States and managed by dedicated river basin commissions, RBMPs define common frameworks for riparian countries to coordinate water resources and ecosystem management at the basin level. Each RBMP outlines measures to achieve the objectives of the EU Water Framework Directive (WFD), including managing water availability, maintaining water balances,18 and ensuring ecological flows. To support effective planning and implementation, RBMPs must include assessments of the WFD’s objectives for the relevant water body, including evaluations of their quantitative status.
RBMPs often acknowledge the increasing risk of drought and its pressures on water resources in the context of climate change, though they rarely include dedicated strategies to address this issue comprehensively. Although RBMPs often incorporate sectoral scenarios for managing water availability and use, these are not always consistent with the timeframes of widely accepted climate projections. In the second RBMP cycle (completed in 2021), 16 countries reported significant pressures from water abstraction on surface or groundwater resources in parts of their territories. However, only eight countries reported having a dedicated DMP for the affected basins, and the level of detail and comprehensiveness of existing DMPs varies significantly (see Section 4.2.1). Finally, in various instances, drought conditions have justified exemptions from existing requirements on the ecological and quantitative status of water bodies, allowing for the temporary deterioration of ecological flows.19
To better meet the WFD’s objectives regarding water availability and minimum flow requirements, future RBMPs must more prominently incorporate drought adaptation measures. Good practice examples can be found in Belgium’s Flanders, Wallonia, and Brussels regions, where climate impacts have been integrated into river basin management plans. Notably, Brussels has made adaptation to climate-induced drought risk a core priority in its water management strategy.
In some cases, basin-specific drought management and adaptation initiatives are also in place. For instance, the Danube River Basin has developed a dedicated drought management strategy and a climate adaptation strategy, ensuring climate resilience considerations are integrated into river management across riparian countries (Danube Transnational Programme DriDanube, 2019[185]). In Africa, the Volta Basin Flood and Drought Management Project promotes the integrated drought and flood management across six riparian countries, also fostering co-operation and resilience at the basin level (UNCCD, 2023[103]). These initiatives highlight the potential for transboundary co-operation to address shared drought risks effectively.
Supranational initiatives can also go a long way in fostering knowledge exchange, disseminating best practices, and advancing innovative approaches to drought management. Several cross-border efforts have supported joint risk assessments, data-sharing monitoring systems, and the development of early warning systems. For example, the European Drought Observatory, managed by the European Commission's Joint Research Centre, collects and shares data on drought conditions, including precipitation and soil moisture, across EU member states, providing a unified understanding of drought risks and supporting informed decision-making. The Mediterranean Drought Information System facilitates cross-border collaboration among Mediterranean countries, enabling the sharing of drought-related data and the development of early warning systems. In addition to these regional initiatives, several global initiatives for drought resilience have also emerged (Box 4.7). Altogether, these efforts have strengthened collective capacity to address drought challenges and implement sustainable solutions at scale.
Several international initiatives on drought management and resilience are in place to facilitate mutual learning, data sharing, and the scaling up of effective drought resilience strategies. By harnessing peer learning and knowledge exchange, these initiatives provide policy guidance, technical support, and capacity-building to governments and other stakeholders worldwide. Key examples include:
The United Nations Convention to Combat Desertification (UNCCD)’s Drought Initiative, which supports countries in developing national drought plans and strengthening capacity for proactive and integrated drought management;
The International Drought Management Program, jointly led by the World Meteorological Organization and the Global Water Partnership, which provides policy guidance, tools, and capacity-building resources globally, while also operating regional programs (e.g. in Central and Eastern Europe and Western Africa) to address localised needs;
The Food and Agriculture Organization’s Drought Portal, which serves as a knowledge-sharing global platform, providing tools, capacity building resources, and good practices to shift from crisis-driven responses to proactive drought management, with a particular focus on agriculture and food security; and
The International Drought Resilience Alliance (IDRA), which has mobilised political and financial support for drought resilience by creating a coalition of countries and organisations dedicated to proactive drought management. It fosters international collaboration and advances strategies to build long-term resilience to water scarcity and climate impacts.
Together, these initiatives have promoted a transition from reactive drought response to risk-based and adaptive strategies. They have also helped mobilise political and financial support for drought resilience, aligning national and subnational efforts with regional and global policy priorities.
Despite progress, significant gaps remain. Currently, 60% of transboundary river basins lack any formal cross-country agreement on water use. Even where agreements exist, their implementation often lags behind, undermining their effectiveness (UNICEF, 2021[186]). Global initiatives and coalitions also face challenges, including limited funding, uneven implementation, and coordination gaps among national, subnational, and international stakeholders. To address these issues, scaling up coordinated planning and implementation efforts is key to enhance the effectiveness of existing initiatives and mitigate shared risks. At the same time, increasing financial support for drought resilience projects and initiatives is fundamental to achieving lasting results.
Engaging private stakeholders
Engaging private stakeholders can go a long way to strengthen drought management, as they play a central role in managing water resources and implementing practices that can either reduce or exacerbate drought risk and resilience. By collaborating with farmers, industry, citizens, and other private entities, governments can foster efficient resource use and accelerate the adoption of innovative solutions to mitigate and adapt to drought risk.
Voluntary agreements between water users, or between users and governments, are important for fostering collaboration and accountability in managing water resources during droughts. These agreements typically involve commitments to reduce water consumption, adopt sustainable practices, or share resources equitably among stakeholders. For instance, in France, the “contrats de milieu” are agreements aimed at preserving water resources through collective action. These contracts, which also exist at the aquifer level (“contrats de nappes”) bring together farmers, industries, and local authorities to implement measures that reduce over-extraction, ensure water supply, and protect ecosystems (SYMCRAU, 2024[187]). In the United States, significant efforts in California’s Bay-Delta Watershed have sought to establish voluntary agreements to improve water management and ecosystem restoration. These agreements encourage stakeholders to take proactive measures, align resource use with sustainability goals, and promote drought resilience through co-operative action. However, evidence from California shows that prioritising voluntary agreements alone is insufficient for securing consistent action, and is thus better suited as complements to, rather than replacements for regulatory frameworks (Center for Law, Energy & the Environment, 2024[188]). Such agreements encourage stakeholders to take proactive measures, align resource use with sustainability goals, and promote resilience to drought impacts through cooperative approaches.
Involving citizens and local groups in decision making is also integral to effective drought prevention. Bottom-up and inclusive approaches ensure that interventions are tailored to local needs and do not inadvertently exacerbate pre-existing challenges. For instance, in the United States, the government has issued guidance documents to help authorities incorporate Indigenous knowledge on drought and other challenges into research and decision-making across various policy fields (The White House, 2022[189]). Similarly, in Australia, the National Soil Action Plan emphasises bottom-up approaches by supporting regionally tailored projects and promoting collaboration with local communities, Indigenous groups, and land managers to co-design sustainable soil and drought resilience solutions (Australian Government, 2021[178]).
4.4.2. Scaling up finance for drought resilience
Public finance is a critical enabler of building long-term resilience to droughts, as it supports action on both immediate needs and long-term, proactive adaptation measures. These investments – ranging from ecosystem restoration and water infrastructure development to capacity-building and the promotion of climate-resilient agricultural practices – are vital for ensuring sustainable drought resilience (OECD, 2024[9]). Although such measures may not yield immediate financial returns, they are indispensable for protecting communities, ecosystems, and economies in the long run. By prioritising and mobilising public resources for adaptation, governments can address the root causes of vulnerability, reduce future costs, and foster a more resilient and sustainable future.
Adequate financial resources are key to promote effective water and land use, upgrade water infrastructure, incentivise sustainable agricultural practices, strengthen risk assessments, and enhance community resilience against droughts. Recent studies have highlighted the cost-effectiveness of investments in drought prevention compared to reactive approaches. The economic returns of building drought adaptation and resilience can be up to ten times greater than the initial investment. At the same time, prevention can cost up to three times less than response and recovery measures (IDRA, 2024[12]; IDMP, 2022[13]). While cost-effectiveness varies by investment type and based on each country’s specific risk profile and socio-economic context, every dollar invested in drought prevention is estimated to generate 2 to 3 dollars in benefits from avoided losses and recovery costs (IDRA, 2024[12]; UNCCD, 2023[190]; UNCCD, 2021[140]).
The funding landscape for drought resilience varies significantly across countries, with national governments typically serving as the primary providers of finance for drought prevention. In recent years, notable advancements have been made in public drought risk financing. Governments at both national and subnational level have increased resources for drought prevention through dedicated funds, grants, and investments in climate-resilient infrastructure (UNCCD, 2023[190]). For example, the Flemish government (Belgium) allocated about EUR 223 million for investments in NbS such as wetland restoration and green-blue infrastructure, with a view to enhance soil water retention and mitigate drought-induced water scarcity (Interlace Hub, 2023[191]). Similarly, in France, water agencies subsidise the implementation of NbS, in some cases offering higher funding rates for NbS compared to grey infrastructure. In Germany, a national fund finances climate adaptation, including water retention measures in forested areas (European Commission, 2014[192]). In some cases, drought risk assessments are used to inform financing decisions. This is the case of Sri Lanka, whose Climate Resilience Improvement Project integrates drought and flood risk modelling to inform investment plans for major river basins (Ministry of Environment, 2020[193]).
Nonetheless, significant challenges remain in securing adequate public financing for drought prevention. While drought prevention requires sustained funding, some the benefits often take years to materialise. This makes droughts less urgent in the eyes of policymakers compared to immediate disasters like floods or storms. Thus, limited public funds are frequently allocated to more visible hazards or more short-term needs. Additionally, drought prevention spans multiple sectors and activities, complicating budget allocation and coordination across agencies. In addition to a gap in the financing available, misaligned investments can in some cases hinder drought resilience. This was observed in France’s Île-de-France region, where local water management financing is over-shadowed by agricultural sector funding, which has less stringent drought prevention standards (OECD, 2025[3]).20 Altogether, these barriers underscore the need for improved prioritisation and alignment of public investments to enhance drought resilience.
Complementing public finance with private sector resources is key to bridging financing gaps and easing the burden on public budgets. Private sector involvement can be harnessed through mechanisms such as trust funds and public-private partnerships (PPPs). Trust funds, for example, can mobilise sustained funding for conservation, innovation, and infrastructure projects. A notable case is offered by Ecuador’s Quito Water Fund, which successfully secured sustained financing for NbS by engaging private companies, public utilities, and international donors (Browder et al., 2019[130]). Additionally, including climate resilience objectives and water use efficiency conditions in contracts can enhance the effectiveness of these partnerships (GCEW, 2024[22]). PPPs, on the other hand, enable joint investments in water infrastructure, technological innovation, and community resilience. While PPPs are widely applied in sectors like energy and transport, their use in water and agriculture remains limited (UNCCD, 2021[140]). One example of PPPs in agriculture is offered by Zambia, where smallholder farmers have formed liability companies to expand irrigated agriculture, leading to increased income, employment, and rural development (German Development Institute, 2017[194]). By expanding private sector participation through innovative financing mechanisms, drought resilience can be strengthened, and the sources of funding for critical interventions diversified.
4.4.3. Harnessing insurance for drought resilience
Insurance can offer a key tool for enhancing resilience to drought risk in sectors highly vulnerable to water scarcity. By providing payouts for drought-induced losses, it helps mitigate financial risks for private stakeholders, allowing them to recover more quickly and reducing the potential need for government funding in the aftermath of severe droughts (OECD, 2021[195]). Moreover, insurance can incentivise investments in ex ante adaptation and risk reduction by offering benefits such as lower premiums to policyholders who adopt preventive measures. Linking eligibility or premium rates to drought-resilient practices – e.g. the use of drought-resistant crops or efficient irrigation systems – can encourage investments in risk reduction, ultimately reducing vulnerability (Mahul and Stutley, 2010[196]). For instance, in the United States, the government-backed Whole-Farm Revenue Protection insurance programme ties eligibility and premium rates to on-farm commodity diversification, thus promoting adaptive agricultural practices (USDA, n.d.[153]; Kokot et al., 2020[154]).
Yet, the slow-onset, and complex nature of drought makes insurance provision technically and financially challenging for insurers. Assessing the timing and severity of drought is difficult, and the far-reaching and gradual impacts of drought are harder to quantify compared to rapid-onset events like floods or storms. This complicates loss assessments and leads to extended claims processes, besides creating challenges in setting accurate premiums. This has long challenged the sustainability of traditional insurance models (Bielza et al., 2006[197]). These challenges are exemplified by Türkiye’s Agricultural Insurance System (TARSİM), a government-backed insurance programme that has long excluded drought from the range of natural hazards covered. Only in recent years has a drought insurance product been introduced, specifically for wheat (OECD, 2019[198]; Republic of Türkiye, 2022[199]).21
To address these challenges, governments have increasingly stepped in to ensure the availability of drought insurance where private markets alone may not be viable. In some cases, they provide direct coverage; in others, they subsidise premiums for vulnerable stakeholders (OECD, 2015[200]). These schemes typically focus on agricultural losses, though in some countries they also cover other impacts, such as clay shrinkage-induced building damage in France (Table 4.13). Public-private partnerships are used to enhance the affordability and accessibility of insurance products (OECD, 2016[69]), as seen for example in Austria, Mexico, and Türkiye. Notably, Austria’s Drought Index Insurance (Table 4.13) relies on two parameters – water shortages and heat – more accurately capturing the complex nature of drought impacts on crops (Austrian Hail Insurance VVaG, 2025[201]). Broader risk-sharing arrangements can also help address the challenges of drought complexity and limited coverage. An example is the African Union’s African Risk Capacity, a regional insurance pool for drought and food security emergencies that also offers capacity building to its 39 member countries (ARC, 2023[202]). Many of these government-backed initiatives rely at least partially on index-based mechanisms (Box 4.8). However, public support must be carefully designed to promote proactive resilience measures; without such safeguards, subsidies and insurance coverage may inadvertently reduce incentives for farmers to adopt preventive actions.
Source: Author’s own, based on information from Bundesministerium Finanzen (n.d.[203]), Climate ADAPT (n.d.[204]), Maina et al. (2024[205]), DGAL (2023[206]), OECD (2015[200]; 2025[3]), WOCAT SLM Database (2021[207]), FARM-D (2024[208]), Republic of Türkiye (2022[199]), SwissRe (n.d.[209]), Parthiban and Anjugam (2023[210]) and USDA (n.d.[153]).
Despite notable advancements, the availability and adoption of drought insurance remains limited in many countries. Key barriers include affordability issues for smallholder farmers, limited awareness of the potential benefits of insurance, and high transaction costs (OECD, 2016[211]). Designing insurance policies that balance affordability with comprehensive coverage is an ongoing challenge. This is only complicated by the fact that, while improving accessibility, subsidised risk premiums distort price signals, inadvertently reducing incentives for policyholders to invest in preventive measures (OECD, 2021[195]; Mahul and Stutley, 2010[196]). Finally, the technical complexities of setting accurate drought indices present another significant hurdle. Index-based insurance relies on clearly defined weather metrics for payouts, but drought impacts vary widely depending on local conditions, soil types, and regional climate dynamics. This variability complicates the development of reliable indices and can erode trust in insurance schemes if payouts are perceived as misaligned with actual losses. Addressing these challenges remains fundamental for expanding insurance coverage and strengthening resilience to drought risk.
Over the past two decades, advancements in technology, particularly high-quality Earth observation systems, have driven the growth of index-based insurance schemes. Index-based schemes address the limitations of traditional indemnity-based insurance, which compensate farmers for actual losses based on ex-post impact assessments. Instead, index-based schemes provide payouts based on observed changes in weather conditions (e.g. low rainfall levels), regardless of the occurrence or extent of damage. As index-based schemes reduce insurer costs such as underwriting and loss adjustment expenses, their emergence has improved insurance affordability, particularly for low-income farmers or regions where insurance is often inaccessible.
Index-based insurance plays a crucial role in enhancing resilience at the farm level. Unlike indemnity-based models, pay-outs are not tied to actual losses, incentivising farmers to adopt proactive risk reduction measures (e.g. investment in water efficiency). Moreover, these payouts also offer more flexibility to farmers, who can use them to address non-crop and non-livestock damages or recover from indirect impacts, such as disruptions to their livelihoods or farm operations. This adaptability makes index-based insurance an effective tool for fostering resilience in the face of drought.
Governments have widely supported the development and expansion of index-based insurance through public-private partnerships, premium subsidies, reinsurance programmes, and enabling policy and regulatory frameworks. These efforts have facilitated its adoption in several countries, including OECD members such as Austria, Mexico, Türkiye, and the United States. While access to accurate and reliable weather data – essential for calculating indices and determining payouts – remains a challenge in many contexts, some countries have established advanced data systems that support index-based insurance. For example, Austria’s recently established GeoSphere Austria Data Hub provides high-quality data for public, commercial, and research use, including for the Austrian Hail Insurance‘s drought insurance products. As governments continue to scale index-based insurance, further investments in meteorological infrastructure and data-sharing platforms will be critical to ensure its long-term viability and effectiveness.
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← 1. These figures refer to the number of days affected by a “arrêté sécheresse” implying water restrictions (i.e. “Alerte”, “Alerte renforcée”, or “Crise”) for the region’s three major rivers.
← 2. Information on hydrological trends includes data on long-term patterns in water cycles, including rainfall, river flows, groundwater levels, evapotranspiration, and water storage. Information on socio-economic vulnerabilities includes data on the level of dependency (of a region or population) on consistent water sources, the resilience of local water systems, and the availability of alternative water supplies.
← 3. These figures include EU countries, Norway, and the United Kingdom.
← 4. While short-term restrictions on water withdrawal may help overcome temporary water scarcity, they do not contribute to long-term resilience to climate change, as they do not trigger the long-term changes needed to foster adaptation.
← 5. The survey focused on the implementation of the OECD Council Recommendation on Water. It gathered 27 responses received, including from 26 Adherents to the Recommendation.
← 6. This figure is based on five case studies carried out in five European regions in 2017, namely Greece’s Thessaly region; Italy’s Mid-Apennine region; Bulgaria’s Black Sea basin district; Spain’s Júcar river basin district; and Germany’s Weser river basin district (IEEP, 2021[77]).
← 7. For an in-depth discussion on tariff structures, see Leflaive and Hjort (2020[71]).
← 8. This represents the estimated average reservoir recharge considering the maximum capacity of each reservoir.
← 9. Wastewater is used water from households, industries, and businesses, containing waste products such as chemicals, food scraps, and solid waste. Greywater is wastewater generated from household activities such as bathing, washing dishes, and laundry.
← 10. This is confirmed by statistics form the city of Melbourne (Australia), where housing equipped with wastewater reuse systems use on average 30% less drinking water than conventional houses (Van Leeuwen, 2017[215]).
← 11. For example, desalination costs are estimated at USD 0.49-2.86/m3 of water when using reverse osmosis, i.e. the most widely-deployed desalination technique to date. Other technologies, such as multistage flash distillation and multi-effect distillation desalination, achieve production costs between USD 1.00-1.74/m3 and USD 1.40-1.50/m3 respectively (World Bank Group, 2019[216]).
← 12. All these factors influence the response of ecosystems to conservation and restoration efforts. For example, soil conservation efforts may be undermined by intensive farming practices that erode topsoil or increase runoff. The scale of implementation also plays a key role. For example, large-scale reforestation can improve hydrological cycles at regional level, while on a small scale its effects may be limited.
← 13. The results of adopting sustainable agricultural practices such as those described in this section vary significantly depending on the local climate, soil type, and the timeframes considered.
← 14. Mulching is the practice of covering the soil surface with a layer of material to conserve moisture and regulate soil temperature. Conservation tillage minimises soil disturbance by reducing or eliminating the use of tillage and plowing.
← 15. For example, soil characteristics such as texture and moisture retention capacity can determine how well agricultural practices like crop rotation and no-till farming perform.
← 16. Clay shrinkage consists in the reduction in clay soil volume due to the evaporation of soil moisture. Drought-induced subsidence refers to the gradual sinking of the ground surface due to the compaction of aquifer layers. Both phenomena can cause cracking, structural damage, and potentially affect the stability of assets. Subsidence can also increase exposure to floods.
← 17. E.g. restricting the planting of trees with root systems that facilitate soil drying or employing root blocking screens to make trees with deep root systems less likely to deplete moisture around buildings.
← 18. Water balances consist in the equilibrium between water inputs and outputs within a catchment’s area. It considers both surface water and groundwater systems and any interactions between them.
← 19. The EU defines ecological flows as hydrological regimes consistent with the achievement of the Water Framework Directive’s environmental objectives for natural surface water bodies (European Commission, 2015[214]).
← 20. Such mismatch in funding is caused by the fact that the agriculture sector is financed via the EU’s Common Agricultural Policy, while the local water agency is largely financed by revenues from pollution and abstraction charges levied on domestic users and actors from industry and agriculture.
← 21. Natural hazards covered by TARSİM included hail, floods, storms, tornadoes, fires, earthquakes, landslides and frost. A District Based Drought Yield Insurance was introduced for wheat in dry agricultural areas in 2017 and first implemented in 2021.