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Anik Bhaduri Global Water System Project (GWSP)

16th January , 2015

How to Achieve SDGs under Risk?

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Role of Risk in decision making

• Risk -an important factor influencing the decision towards sustainable use of water

• Risk stems from-future farm yield, price uncertainty, water uncertainty

• Probability of adoption water conservation increases for farmers who experience higher variance of profit, and for farmers who face the risk of extreme outcomes-Yaron, Dinar, and Voet (1992), Feder and Umali (1993), Saha, Love, and Schwart (1994), Sunding and Zilberman(2001), Koundouri (2006 )Bhaduri (2013)

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Adoption of efficient irrigation technologies underdifferent levels of variance in water supply

A risk averse farmer may invest more in efficient irrigation technology if the variance in water supply is very high .

BHADURI, ANIK, and UTPAL MANNA. 2014"Impacts of water supply uncertainty and storage on efficient irrigation technology adoption." Natural Resource Modeling 27.1 (2014): 1-24.

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Water Use Efficiency for Equity and Sustainability under Risk

• How to achieve water use efficiency? Cannot be captured in isolation

• New policies and tools are needed to induce water use efficiency:– Financing: Search new sources of financing– Governance: Institutional changes, changes in legal frameworks– Innovation: Stimulate innovation for efficient technology

• Must relate water resource use to the overall net-returns in terms of economic change, behavioural change and societal well-being

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Efficient usage of water• Conservation and efficient usage - critical to

sustainable water management and climate change adaptation.

• Efficiency essential for equitable distribution of water

• Modern(Efficient) irrigation technologies - one of several possible solutions to tackle water scarcity and environmental degradation.

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Water Use Efficiency for Equity and Sustainability under uncertainty

• How to achieve water use efficiency? Cannot be captured in isolation

• New policies and tools are needed to induce water use efficiency:– Financing: Search new sources of financing– Governance: Institutional changes, changes in legal frameworks– Innovation: Stimulate innovation for efficient technology

• Must relate water resource use to the overall net-returns in terms of economic change, behavioural change and societal well-being

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Relationship between the option to store water and investment to save water?

• If farmers invest in water storage capacity then the value of efficient irrigation increases, and the rate of adoption will be higher.

• A complementarity relationship between investment in storage capacity and efficient irrigation techniques.

• The relationship becomes stronger with increasing variance in water supply.

BHADURI, ANIK, and UTPAL MANNA. 2014"Impacts of water supply uncertainty and storage on efficient irrigation technology adoption." Natural Resource Modeling 27.1 (2014): 1-24.

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Flexible water Pricing

a flexible water price can increase the adoption rate of efficient irrigationtechniques by more than 20 per cent for a risk averse farmer.

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Valuing Water• Value water-- Implicit pricing has been

considered to be a powerful tool to induce efficient use of water in agriculture

• Appropriate mechanisms to protect the poor, demand management, institutional changes and transparent and efficient legal framework

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Getting the price right: An incentive based approach• Farmers are willing to pay

higher prices for irrigation water, if the additional money is used to provide non water related social services

• Bundling water fees with other social services can be used as an efficient tool to increase awareness and acceptance of water pricing,

Bhaduri, A, Kloos, J, 2013, Getting the Water Prices Right Using an Incentive-Based Approach: An Application of a Choice Experiment in Khorezm, Uzbekistan,The European Journal of Development Research 25: 680-694

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Water Value Chain

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Water Transfer

• Inter-catchment water rights trading can increase basin-wide benefits by US$ 373–476 million.

• Under intra-catchment trading, gains are still US$ 259–339 million, depending on relative water availability.

• Gains from trade are larger under drier conditions.

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Governance• Decentralization, enabling legal framework through

reform of water laws, property rights, separation of water and land rights

• Strengthening of river basin organizations• Technological and institutional innovation• This knowledge will help to assess the

environmental service innovation potential of the regions and to create options for conserving biodiversity and enhancing sustainable usage of water

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Conclusion• Risk -an important factor influencing the decision

towards sustainable use of water• New policies and tools are needed to induce water

use efficiency• Storage crucial to meet water security under

uncertainty.• Flexible and incentive based water pricing to induce

efficient usage of water.• Institutional changes, changes in legal frameworks

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Thank you