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A Manual for Implementing Integrated W ater Management : The Economic Perspective.
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DR. PHOEBE KOUNDOURISenior Lecturer in Economics Co-ordinator of ARID Cluster of ProjectsSchool of Business European Commission 5th Framework ProgrammeDepartment of Economics Key Action "Sustainable Management & Quality of Water" UNIVERSITY OF READING Energy, Environment and Sustainable Development http://www.rdg.ac.uk/economics/koundouri.htmlhttp://www.arid-research.netSenior Research Fellow Member Groundwater Management Advisory Team
Department of Economics and CSERGE GW_MATE, The World Bank
UNIVERSITY COLLEGE LONDON http://www.worldbank.org/gwmate
of the river basin
The assessment of the recovery of
the costs of water services
The economic assessment of potential
measures for balancing
water demand & supply
Step1_A. Evaluation of the economic significance of water inthe region.
Step1_B. Identification of key economic drivers influencingpressuresand water uses.
Step1_C. How will these economic drivers evolve over time & howwill they influence pressures?
Step1_D. How will water demand and supply evolve over time & which problems their paths arelikely to cause?
Time & Money Constraints Define the Detail of Step 1!
i. Identification of Sector Water Demands in the Watershed Area
ii. Valuation Techniques for Specific Types of Water Demand
Build scenarios using basic assumptions and quantify the water balance with these assumptions.
Apply step two over time.
Based on steps 1,2,3, imagine a plot that tells the story of the system from now until at least 2030, giving consistency to the assumptions and water balance curves.
‘Good Water Status’
2021How to apply the ‘Baseline scenario’?
Measures to close the gap are needed!
Starting from initial
status it is possible
to elaborate a
The baseline scenario
refers to the situation
anything else than
Date at which ‘Water Balance’
should be met.
Step2_A. How much do current water servicescost?
Step2_B. Who pays these costs?
Step2_C. What is the current cost-recovery level?
Step2_D. Propose cost-recovery mechanisms.
Elements to be investigated:
Potential cost-recovery mechanisms:
Possible subsidies/transfers involved:
- Subsidies to low-income households (mainly for agricultural water use)
- Capital subsidies on investments in infrastructure, irrigation system, etc.
Step3_A. Identify least-cost set of measures.
Step3_B. Assessment of cost of measures.
Step3_C. Assessment of the impact of measures on economicsectors/uses.
Step3_D. Are costs of measures disproportionate?
- Estimate a range of costs along with key parameters influencing costs over time (cost change with developments in sectors).
- Allocate costs of measures to water users and identify winners and losers, in order to potentially feed into the analysis of disproportionate costs to justify derogation (Step3._D).
- non-water related environmental charges/taxes
- changes in environmental quality
- costs of preventiveand mitigation measures
developing countries!Step3_D. Disproportionate Costs/Derogation
Measures to improve water
quality are expensive
Heavily Modified Water bodies
Water bodies substantially changed in character
as a result of physical alterations by human activity.
Economic analysis needs to be integrated with other field expertise (hydrology, geology, engineering, sociology, etc.) and be considered all along the management & decision-making process.
Summary of the
1- Characterisation of the river basin
2- Assess current cost-recovery
3- Identification of measures and economic impact