Project A1. Economics Tranche 1

David Pannell, UWA

History

Teams at UWA and Monash Mid 2013 to June 2016, plus prior project carried

over from “Cities as Water Supply Catchments” All milestones completed Currently tidying up loose ends and completing a

couple of analyses that go beyond the milestones

People UWA

– David Pannell (project leader)

– James Fogarty (sub-project leader)

– Sayed Iftekhar– Fan Zhang – Maksym Polyakov– Roslyn Wood (PhD)

Monash– Lata Gangadharan

(sub-project leader)– Paul Raschky– Anke Leroux – Danny Brent – Zack Dorner (PhD)

Research

Case studies estimating the non-market values associated with water-sensitive practices– Hedonic pricing (house prices)– Surveys (choice experiments)

Benefit: cost analysis of particular investments A range of other related economic issues

Non-market values (house prices)

Conversion of drain to “living stream” (Bannister Creek)

Non-market values (house prices) +3.9 to 4.7% within 200 m (eventually)

-$30,000

-$20,000

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Non-market values (house prices)

Rainwater tanks in Perth Savings of water ~$650 over 15 years House price premium $18,000

Non-market values (house prices)

Green space (Joe Rossetti), measured by “enhanced vegetation index”. – 2.6 million transactions nationally over 2000-2009.– One standard deviation in EVI increased housing prices by

8.6 to 15.6%– One standard deviation = difference between Port

Melbourne and Albert Park

Non-market values (house prices)

Valuation of different garden types (low vs high water using)– Part of a broader study on nutrient management– Conversion of some lawn to native can be a win-win– As area of natives grows, the marginal benefit falls

Non-market values (house prices) Rain gardens (City of Sydney & Melbourne Water) Large range of estimated values - conclusions

somewhat unclear

Non-market values (house prices)

Value of street trees 5606 single family homes sold in 2009

in Perth Large verge trees increase property

value (e.g. +$14,000) Decreases value when on own

property or adjacent property near boundary (e.g. −$6,000)

Non-market values (surveys)

Various water-related benefits(Sydney and Melbourne)– improvements in stream health (AU$160 ± AU$77 /year)– reduction in water restrictions (AU$145 ± AU$74 /year)– cooler summer temperatures (AU$53 ± AU$30 /year)– reduction in flash flooding (low values)

Non-market values (surveys)

Waste-water treatment plant: Community preferences for land-use options in buffer zone

Non-market values (surveys)

Wastewater treatment plant results Compared to commercial land use, local

residents would pay about $8 ($5-$11) per year per household for 1% expansion of natural conservation land uses within the buffer zone

$4 ($2-$7) for 1% expansion of recreation areas $1($0-$3) for 1% expansion of agricultural areas

Non-market values (surveys)

Constructed wetlands in Melbourne and Kunshan (bonus study)

Being finalised

Non-market values (surveys)

Ecological values of the Swan River ($/person/yr)

$129-170

$55-113

$55

Benefit: Cost Analysis

Living stream– Substantial cost over several years– Benefits larger in the long run, even allowing for interest on

up-front costs ($5.5 million)– Benefit: Cost Ratio 1.6 to 4.2 (best bet 2.8)

Benefit: Cost Analysis

Rainwater tanks (water supply only)

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5% 7% 9% 5% 7% 9% 5% 7% 9% 5% 7% 9%

BCA ratio

50% roof collection 100% roof collection 50% roof collection 100% roof collection

2kl rainwater tank installation 5kl rainwater tank installation

Benefit: Cost Analysis

House price premium (~$18,000 in Perth) much greater than the costs of installation and maintenance (~$2500)

Even allowing for the cost of time that home owners devote to research, purchase and installation

Benefit: Cost Analysis

Guidelines on ranking water-sensitive projects

Other – water portfolio

Optimal water portfolio shares for Melbourne using historic reservoir inflow and rainfall data

Accounting for costs and risk Over-investment in desal Stormwater harvesting helps with risk hedging Optimal contribution of stormwater is 11-14% Substantial $ savings possible at state level

Other - Least cost solution to Canning catchment’s non-point source pollution

Other – cost of reduced water allocations

Economic impact of groundwater allocation reduction strategy in WA (Department of Water)

$ impact on horticulturalists from 25% reduction 14-22% reduction in net returns

Other – messaging to reduce water use

Effect of moral appeals on actual water use 40,000 residences in Nevada in 2015 Sent out mailers with various messages

– Technical info and tips (had not effect)– moral motivations (compare water use to peer groups)– financial motivations (financial info)

The latter two had impacts on water use, but only small (1-1.5% reduction)

Student projects

Masters: Sonia Mennen (UWA) The most cost-effective ways to maintain public open space with less water in Perth – Six irrigation methods– Substantial differences in cost per kilolitre water saved

Student projects PhD: Roslyn Wood (UWA), Optimising

investment in water quality monitoring for waste water ponds (cyanobacteria in WA)– Paper on “Acute animal and human poisonings from

cyanotoxin exposure”

Student projects PhD: Zack Dorner (Monash), Community

preferences for water sources– Rain-dependent: New dam, Treated stormwater, Pipeline– Less so: Desal, Recycled, Groundwater

Supply risk matters to people Technology risk not