Large Dams: What is their role in a brave, new, greener world?

Prof Mike YoungThe Environment InstituteThe University of Adelaide

Investment phases

After World Bank 2007

Global water use

70% Agriculture, 20% Industry & 10% Urban

After Molden 2007

General messages

1. By 2030, over half the world’s population is expected to be living in a water stressed region.

2. Failure to provide reliable access to water and sanitation services is one of humankind’s greatest failings.

3. Demand is growing and costs rising.4. The aggregate affect of climate change on water supplies is

expected to be negative.5. By 2030 child malnutrition is predicted to increase by 20%.6. The rate of change and structural adjustment necessary to resolve

existing challenges and cope with the new ones expected as a result of climate change and a larger more affluent global population is an order of magnitude faster than has been achieved in recent times.

Global water scarcity

After Molden 2007

Water stress

After OECD 2009

Water scarcity gap

After 2030 Water Resources Group

Cost issues1. The recent financial crisis means there is a has brought

attention to the need to bring greater economic discipline to water investment and management decisions.

2. Donor willingness to pay for the provision of water infrastructure appears to have declined.

3. A larger proportion of the money needed to finance the necessary investments is going to have to come from user charges.

4. Whilst administratively more challenging, the least cost solution to the resolution of water supply and sanitation challenges is around four times cheaper than those usually proposed.

5. Considerable policy and governance reform is necessary.

Pricing arrangements1. The public and more importantly national leaders need to be made

more aware of the consequences of not charging the full costs of water use.

2. Lack of economic discipline is crowding out the innovation and investment needed to solve water scarcity and investment challenges.

3. This raises the cost of solving water supply problems and decreases the rate of economic development.

4. In many cases, the poorest of the poor would be better off paying the full cost of supply rather than exposing themselves to the extremely high cost of obtaining access to water from other sources a central source and the impact of unsanitary conditions on them.

5. When considering the case for the provision of water at subsidised prices to the poor, it is important to understand influence of this practice on the likelihood that services will be maintained.

6. The more targeted cross-subsidies are the better. Blanket subsidies should be avoided.

Entitlement and planning systems1. Most entitlement systems are not designed to reward

innovation and facilitate rapid adjustment as conditions change.

2. One of the secrets to solving water supply problems is to define entitlements and make allocations in a manner that has hydrological rigour and promotes innovation.

3. Adaptive integrated planning approaches to management need to be underpinned by fully-specified entitlement systems.

4. Where possible, entitlement systems should be unbundled.

Returns to investment in entitlement systems & trading

After Bjornlund & Rossini 2007

Enabling conditions1. Parallel investments in governance, the development of taxation

systems, the removal of market distortions and freer trading arrangements for agricultural products.

2. Freer international trading arrangements will significantly reduce the costs of facilitating adjustment and attaining MDG targets.

3. The early introduction of greenhouse gas trading or taxation arrangements in concert with the use of market-based instruments can be expected to reduce the costs of achieving a transition to more sustainable forms of resource use and in particular, encourage greater investment in ecosystem services.

4. Increases in the capacity of a nation to collect income and other taxes will make it easier for nations to transition to full cost pricing arrangements and, where appropriate, provide rebates to the most dis-advantaged.

International Trade

After Hoekstar & Chapagain 2007

Governance

1. There is a need for a much more disciplined approach to the management and administration of water resources.

2. The development of governance arrangements and political support for processes and mechanisms that promote change and structural adjustment is critical to the development of administrative regimes that can cope with sudden climatic shifts and the rapid emergence of extreme water scarcity.

Enhancing supply and supply reliability

1. In the agricultural sector, water use tends to be very inefficient. This is aggravated by the use of electricity and other input subsidies.

2. Subsidised tariffs promote inefficient water use. 3. The removal of subsidies, the development of water trading and

full cost recovery can do much to increase water use efficiency.4. Throughout much of the world there appears to have been under-

investment in the maintenance of urban water supply systems. 5. Governments have failed to understand that options for

infrastructure finance are inextricably linked to tariff policies. 6. Water flow is conditional upon cash flow.

Finance1. There has been insufficient attention to the economic

scrutiny of proposals to invest in new infrastructure and renew existing infrastructure.

2. Proposals need to take much greater account of likely population shifts and vulnerability to climate variability and change.

3. As economies become greener, the costs of water treatment and flood control can be reduced be making greater use of natural environmental processes.

4. Costs will be less if parallel investments are made in the development of mechanisms to enable widespread use of market based instruments.

5. Greater use of the private sector is possible.

Financing investment (3 T’s)

After Marin and OECD 2009

Millennium Development Goals

• Halve the number people without access to drinking water and sanitation by 2015– Drinking water goal expect to meet– Sanitation will not be met

Flood management

Richest Nations Poorest Nations

Losses %GDP

Economic Losses

% GDPBillion $700

600

400

300

200

100

0

14

12

10

8

6

4

20

Disasters Losses, Total and as Share of GDP, In theRichest and Poorest Nations, 1985 Ğ99 (world watch 2001)

After Delli Pricsoli & Wolf; WWDR

Investment required

• Total cost of replacing ageing water supply and sanitation infrastructure in industrial countries may be as high as $200 billion a year (WBCSD 2005).

• The world is seriously behind on maintenance

Large Dams

• Will always be there supplying water• New sites are becoming harder to find• The shift is clearly towards diversity of supply• Increased demand management• Different types of infrastructure