A scenario approach to demand forecasting

The Environment Agency's 2001 national water resources strategy, Water resources for the future, provides a secure framework for the management of water that protects the long-term future of the water environment while encouraging sustainable development. Underpinning the strategy are a suite of scenario based forecasts developed to explore the impact of key drivers of demand within different sectors of water use across England and Wales. This paper explains the approach used to produce these forecasts, summarises how the individual components of demand were considered and highlights opportunities for future application and development of this approach. Using the premise that total water demand can mask conflicting trends between sectors, it is essential to consider each sector and its micro-components independently to understand the specific drivers of demand and consequently determine how these might best be managed. Four scenarios reflecting different possible futures of socio-economic and governmental structure were created to test “how”, “why” and “where” these water demands may change by 2025. Such an approach provides an opportunity to test the implications of macro drivers of demand, such as, economic growth and regulatory reform, on the micro-components of water use, linking disparate sectors to a common set of assumptions about the future.