Transcript Water problems

Water pricing and other economic implications
of using poor quality waters in
irrigated agriculture
Workshop on Safe and High Quality Food Production using
Low Quality Waters and Improved Irrigation Systems and
Management (EU project SAFIR),
Brussels, 20 September 2006
Ingo Heinz
University of Dortmund
Institute of Environmental Research (INFU)
Germany
Water problems
• Cities and industries are confronted with water shortage
due to limited water resources and / or pollution
• Farmers are confronted with water shortage due to
insuffient rainfalls
• In agriculture water use might be reduced through
modern irrigation technologies, better water storage
facilities and use of poor-quality water
Key subjects
1.
2.
3.
4.
Important economic principles of water use
Challenges concerning the use of poor-quality waters
Water policies
Research topics
Important economic principles of water use
Cost-effectiveness:  ci
Cost-benefit: Cj – Bj
Min !, i = measures to reduce
water use
Max ! , j = measures to reallocate
M water resources among users
The true economic value of water (€/m³):
fc: infrastructure cost,
ec: environmental cost,
rc: resource cost
v = fc + ec + rc
The concept of resource costs
Total marginal benefit of users i: iMBi
Resource cost
v: marginal
economic
value of
water
marginal
cost of
infrastructure
P*
W*
Infracture Limited water
cost
availability
v = p* > p
p
p+
W
W+
Water
over-use
Water supply
Challenges
• The costs of treating poor-quality water in agriculture to
comply with limit values for toxc substances (WHO,
FAO) and further costs should be compared with the
benefits of intersectoral water tranfers, such as cost
savings in water treatment, development / conveyance of
remote water resources for cities and industries.
Costs (C) < Benefits (B)
C = Costs of treatment/transport of poor quality waters – costs savings
• Costs of treatment of municipal effluent: CTME  0
B = Cost savings in water treatment and in using remote water
resources for cities and industries due to the released freshwater
C = Costs of treatment/transport of poor quality waters
– costs savings
Cost savings due to: e.g. • reduction of groundwater pumping,
• less use of synthetic fertilizer, etc.
,
Challenges (continued)
• The costs of using poor-quality water must be compared
with the costs of alternative options for the farmers, such
as application of modern irrigation technologies,
development / conveyance of remote water resources,
change of cropping pattern, etc.
Total costs of improved water availability
Min !
cpq (cost of poor-quality water)
=  cir (marg. cost of more efficient irrigation)
=  ctr (marg. cost of water development / transport)
=  c ...
Water policies
• Water pricing: the cost recovery principle requires water
prices that covers not only the cost of infrastructure but
also the environmental and resource costs
• Measures i in agriculture include applying more
efficient irrigation technologies in using freshwater (e.g.
sprinkler), developing remote water resources and using
poor-quality waters
• The true economic value v or p* may exceed the costs
of measures i needed to reduce water use in agriculture:
Water pricing ...
 cpq (marg. cost of poor-quality water) =  cir (marg. cost
of efficient irrigation) =  ctr (marg. cost of water
development) =  c ...
<
v (= p*)
In this case, there would be economic incentives
for farmers to use poor-quality waters
Water policies (continued)
Negotiations between farmers and other users, such as
cities and industries:
If the economic benefits (B) of cities and industries
resulting from receiving more high-quality water exceed
the costs (C) of measures to reduce fresh water use in
agriculture:
B–C
B
Max
=  cpq (marg. cost of poor-quality water)
=  cir (marg. cost of more efficient irrigation)
=  ctr (marg. cost of water development)
=  c ...
Negotiations ...
B>C
C – B = NB
Net benefits (NB) resulting from intersectoral water transfer
These net benefits could be used to
compensate farmers for using poorquality waters (e.g. to cover their costs)
Use cases needed
• From the farmers viewpoint
• From the cities and industries viewpoint
• From the viewpoint of a comprehensive water mangement
Purpose:
To develop efficient strategies in
watersheds / river basins
Use cases needed (continued)
• Cost of irrigation, including reservior, pumping, network,
sprinkler, etc. (France 1997): approx. 0.33 – 0.45 Euro/m³
These costs is increasing due to raising costs of developing new
water supplies.
• Cost of using poor-quality waters:
Unit and marginal costs (cpq and cpq) of treatment and
conveyance depends on the site- specific situation and cropspecific quality requirements. If treated sewage is used, the costs
may be less than the costs of conventional irrigation technologies
• Cost of drinking water (average): F: 1.02 , G: 1.46 Euro/m³
Research topics (1)
1. Determine the true economic value of water !
Do the costs and water prices payed by farmers, cities
and industries cover fully the economic value of water?
In some regions even the costs of infrastructure are
not fully passed on the users (e.g. Spain?).
Often, the resource or scarcity costs are not
considered. However, regions with water shortage should do
this!
Research topics (2)
2. Compare the true value of water per m³ (v) with the
costs of using poor-quality waters in irrigated agriculture
(e.g. costs of treatment, water transport, etc.) !
If v or p* > cpq (cost of poor-quality water) it would
be worthwhile to replace fresh water by poor-quality water
The value of v or p* might be found by determination
of that water price by which no over-use of water
resources occurs (e.g. by using water markets, models...)
Research topics (3)
3. Compare the costs of using poor-quality water
in irrigated agriculture
... with the economic benefits from intersectoral
water tranfers !
Research topics (4)
4. Decide how to finance the costs of using poor quality
waters in irrigated agriculture, provided this option is
economically efficient !
Should farmers pay fully the costs of infrastructure and
the resource costs in watersheds (so that using poor-quality
waters would pay)? Abstraction charges may be levied.
Should cities and industries that benefit from using
poor-quality waters in irrigation compensate the farmers?
Which role can water trading play (even between farmers) ?
Research topics (final)
How far should the use of poor-quality waters
financially supported from agri-environmental programs
(e.g. EU CAP reforms)?
In situations where water shortage in agriculture
prevail: How far does the use of poor-quality waters pay
in terms of the revenues realised in agricultural markets?