water economics, water allocation, ecological flows - day 1.pdf · water allocation, ecological...
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WATER ECONOMICS, WATER ALLOCATION, ECOLOGICAL FLOWSXavier Leflaive, OECD Environment Directofate
EU – India Water Partnership14 September 2016
• The OECD – An economic organisation
– 34 member countries (4 accession countries, 5 “key partner” countries)
– Economics-based, multi-sectoral
– Forum to share experiences and derive policy lessons, source of comparative data
– Secretariat: 2500 staff, based in Paris
• OECD work on water - Managing water for growth
– Water-related risks
– Allocating water among competing uses
– Managing water quality
– Financing investments in water for growth
– Water governance
– Working in partnerships
2
OECD on water
• The economic case for water security
• Allocating water for sustainable growth– A policy framework
– Economic instruments for water allocation
– A survey of current practices
– Specific issues related to groundwaterallocation
• E-flows
• A state of flux
Outline
• Expected global flood damages fromurban property alone: USD 120 billion/ year
• Water risks cost irrigators USD 94 billion/ year
• Inadequate WSS cost USD 260 billion/ year
The economic case for water security
Selected figures
The economic case for water security
How water-related risks affect growth
Source: Securing Water, Sustaining Growth, report of the OECD/GWP Task Force
The economic case for water securityLinking economic growth, hydrological variability and investment
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Hydrological variability
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The economic case for water security
Competing demand for water
Source: OECD Environmental Outlook to 2050; output from IMAGE
• Increase in water demand: +32% by 2050
• Per capita water availability (m3/year)
– From 5,177 (in 1951) to 1,140 (in 2050)
• Water intensity of energy production
The economic case for water security
Competing demand for water in India
Source: IEA (2012), World Energy Outlook, OECD Publishing
• A development strategy that factors water-related risks
• Water allocation regimes that translate the strategy into water flows
• The capacity to finance water-relatedinvestments (i.e. WSS)
• Institutions and policies that drive innovation
• Robust data sets
The economic case for water security
A policy framework
• Allocate water where it is most needed
• Adjust to shifting conditions, at least cost for society
• A balance between competing requests
– Water security for water users
– Flexibility for water managers
• Account for the distinctive risk profile of water users
Allocating water for sustainable growth
An OECD approach
• Set priorities– A political process
– Who takes part in the conversation
• Optimise allocation in practice– A range of technical options
Selected requisites– Knowledge (availability, use, uncertainty)
– Transparency
– The capacity to adjust to shifting conditions
Allocating water for sustainable growth
A two-step process
• Market instruments
– Trading mechanisms (quantity, quality)
• Non-market instruments
– Abstraction and pollution charges
– Water pricing
– Payment for Ecosystem Services
– Certification / eco-labelling
– Insurance schemes
Allocating water for sustainable growth
Economic instruments
• Signal water scarcity
• Allocate water
• Allocate risks
• Promote flexibility
• Save investment costs
• Stimulate private investment
• Stimulate the diffusion of innovation
Allocating water for sustainable growth
In principle, economic instruments …
• Tax on the abstraction of water resources
• Tax for storage in low water periods
• Tax for the protection of aquatic environments
• Tax on water pollution
• Tax for modernisation of the wastewater drainage
• Tax on diffuse agricultural pollution
• Tax on obstacles on rivers
• Tax on sealed surfaces (optional)
Allocating water for sustainable growth
8 taxes to manage water in France
Allocating water for sustainable growth
A review of current practices
Respondants which reported someform of an abstraction charge (%)
Out of which: abstraction charges that reflect scarcity (%)
Source: OECD (2015), Water Resources Allocation: sharing risks and opportunities, Paris
Allocating water for sustainable growth
Abstraction charges in OECD countries
Source: OECD (2012), A Framework for Financing WRM, Paris
Allocating water for sustainable growth
A review of current practices
Source: OECD (2015), Water Resources Allocation: sharing risks and opportunities, Paris
% of regimes allowing some formof transfer of water entitlements
• Specific physical characteristics
• State of knowledge
• Ease and costs of access
• Often considered a common pool resource
• Legal status
• Governance
Allocating water for sustainable growth
Zooming on groundwater - why
Allocating water for sustainable growthCo-management of groundwater and energy
in India (Gujarat)
• High levels of groundwater use• de facto ownership• Jyotigram scheme
in China (North China Plain aquifer)
• Privatisation of well ownership• Informal groundwater markets• Price reflects scarcity (metered
electricity consumption)• Enhanced access• Efficiency and innovation• Depletion• Equity issues• Opportunity for regulation through
pricing
Managing ecological flows
Impacts of stream inflow reduction
Managing ecological flows
A survey of current practices
Source: OECD (2015), Water Resources Allocation: sharing risks and opportunities, Paris
% of examples according to type of limit of water abstraction
% of examples that define ecologicalflows
Allocating water for sustainable growth
In a state of flux
Countries with recent or on-going reforms of water allocation regimes
Source: OECD (2015), Water Resources Allocation: sharing risks and opportunities, Paris
Allocating water for sustainable growth
Drivers of reforms
Source: OECD (2015), Water Resources Allocation: sharing risks and opportunities, Paris
• Engage in a policy dialogue
• Take opportunity of droughts, other reforms
• Be ready for an iterative process, over time
• Determine a sustainable baseline
• Compensate potential « losers »
– Financial transfers
– Enhanced security
– Permits to build storage infrastructure
Allocating water for sustainable growth
Lessons from successful reforms
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