Post on 12-Jul-2015
transcript
Economic and Financial
Instruments for IWRM
Water management issues and instruments for efficiency, equity and sustainability, 28-8-7 based on chapter 2 Meine Pieter van Dijk UNESCO-IHE
Learning objectives of the session
1. To make the participants aware of the problems people face concerning water
2. To learn to appreciate that issues have technical, social, cultural and economic aspects
3. To make participants aware that this implies a different approach to water management
4. To understand the difference between economic and financial instruments
5. To clarify the difference between efficiency, equity and sustainability in the case of water related decisions
Outline presentation
The issues: from achieving the MDGs
to involving private initiative p.3-4
Social and economic good: a more
rational use of resources p.4-6
Efficiency, equity and sustainability
Conclusions
Introduction
After the introduction to integrated water resource management (IWRM)in chapter 1 we will now review the issues in the water sector
They invite the use of economic and financial instruments to help to solve the issues
An economic and a financial approach to water issues will be explained
Finally, the use of three important criteria: efficiency, equity and sustainability, will be discussed
water cycle management: cost and revenues at all the points
Water resource
Water intake
Water treatment
Distribution
Use and Re - use Wastewater collection
Wastewater treatment
Urban water cycle management
Major issues in water management 1
1. Achieving the MDGs
2. Anticipating consequences of climate change
3. Pollution of water resources
4. Inadequate distribution of water resources
5. Involving all stakeholders & using private initiatives
6. Water is not sufficiently conserved
7. The physical infrastructure is not in place or poorly maintained
Major issues in water management 2
8. Not sufficient funds available for water management & waterf and sanitation
9. Government agencies are not doing what they are supposed to do
10. Can role of government be limited to an enabling environment & regulating?
11. How are water rights allocated?
12. Floods and droughts
13. What is the best level to deal with these issues: the national, regional or local?
Major forces causing the issues 1
1.Economic growth
2.Population growth and increased urbanization
3.Concerns about the health of the people and about the environment
4.Forces to increase the scale of production & modern equipment
5.Uncoordinated management & development
Major forces causing the issues 2
1. Government failure to deal adequately with the issues
2. Market failure, to pick up the challenges
3. Increasing critique on the poor management of utilities and river basin organizations
4. Achieving economic, environmental and social sustainability
5. Climate change
A more rational use of resources
Water as an economic good?
1. Cost of treatment and distribution?
2. Competing use of water: ind./agric/cons.
3. Economics as dealing with scarcity. Also
Creating an economic environment and using economic instruments
Demand and supply are matched at a certain price
The importance of institutions
Norms and traditions
Legal frameworks and policies
Rules and procedures
FROM below institutions are more effective
PLUS need for social enforcement & control
IF necessary there will be a reform of the
institutions or the creation of new ones
Reform of the institutions: different types
1. Introducing new practices through legal reforms, like decentralization, stakeholder participation, more rigorous cost recovery or private sector involvement
2. A new goal for the organization
3. Rationalizing the production process
4. Redesigning tasks and responsibilities
5. Changing different procedures
Think about it
1. Discuss what is the most important water
related issue in your country and why?
2. Quelles institutions impotantes dans votre
pays controle l’’utilisation de l’eau?
Besides economic there are financial instruments
If Operation & Maintenance necessary
If investments need to be made
If different sources of finance need to be
tapped
If a financial proposal needs to be prepared
YOU NEED BANK SPEAK! To use different
financial instruments & different conditions
Economic and financial elements of water
management
Economic principles: rational use of resources, cost recovery and polluter pays
Economic instruments: taxes &subsidies
Fixing a tariff is based on the market price and some other (social) considerations
Other criteria used for a tariff are: efficiency, equity and sustainability
Financial is what you have to pay in reality!
Economic efficiency = allocative and technical
efficiency
Allocative efficiency refers to the use of inputs in
a way that maximizes total net revenues for firms
or consumer surpluses for consumers
Technical efficiency is related to production and
refers to firms getting a maximum output per unit
of input or use minimum input for a given output
Economic efficiency = technical and allocative
efficiency together
Equity issues
Equity in water is being concerned about the situation of vulnerable groups of society
Do poor people, women and children have access to safe water and sanitation?
Are the cities better off than the rural areas?
What solutions do we have?
Ways of helping the poor
West Africa: Standpipes or mobile water vendors
South Africa and Ghana: Lifeline approach
Santiago de Chile: Municipality reimburses poorest
20 percent the largest part of their water bills
Microcredit for paying connection fees for water
and sanitation
Cross-subsidies to help the needed
Other suggestions?
What is meant by “sustainability”?
A service is sustainable according to IRC when it
is functioning and being used;
is able to deliver an appropriate level of benefits (quality,
quantity, convenience, continuity, health) to all, including
the poorest women and men;
continues to function over a prolonged period of time;
management is institutionalized;
operation, maintenance, administrative and replacement
costs are covered at the local level;
can be operated and maintained at local level with limited
but feasible external support; and
does not affect the environment negatively
Towards the total sustainability concept
Economic sustainability:benefits are bigger than the implied costs
Financial sustainability: an activity can carry on without the need for additional outside financing
Environmental sustainability, an activity which does not go at the expense of the environment (Brundlandt: does not affect the situation for future generations)
Social sustainability: a solution is socially acceptable in a given social and cultural context
Total sustainability: definition & measurement
Total sustainability, the combination of economic, financial, social and environmental sustainability, or total sustainability
However, to measure it, you have to give weights to the different types of sustainability!
Other indicators: operational efficiency, consumer satisfaction, etc.
Conclusions, leading ideas and cliff hanger
1. To improve water resource management it is important to create an appropriate economic environment
2. Economic instruments can be used to achieve the goals formulated for IWRM
3. If investments are necessary it is important to speak the language of the financial world: investment cost, of rates of interest and pay back periods
4. Show projects bring about cash flows because of users paying fees, then bankers can be convinced to provide money
5. Another idea that will be elaborated is that there are many sources of finance with their own procedures & conditions
Cliff hanger: now we go into detail, before coming up with the necessary policies & the role of different actors
Possible role play
We confront two groups with an important
issue and ask them to defend the
traditional sectoral way of dealing with the
issue and ask one group to deal with the
issue in an integrated way (10 minutes)
The arguments for the two approaches are
presented and the differences are
discussed (10 minutes)
Think about it
1. Discuss experiences in your country with a more economic approach to water
2. What would, while respecting the cultural value of water and with an open eye for the social problems in your society, a more economic approach imply in your country?
3. Qu’est-ce que est le plus important pour vous, l’equite ou léfficience et pourquoi?