Economics of climate change adaptation in the water sector

Policy Brief / Strategy Brief

Economics of climate change adaptation in the water sector



May 2012


This project seeks to undertake pilot economic research that supports climate change adaptation in the water sector of developing countires while building the capacity of developing country economists to contribute to action research.Background: It is widely recognised that climate change will impact upon the water sector of virtually every country in the world. The nature of these impacts are very wide ranging including floods, droughts, saline intrusion and the loss of glaciers. All of these affect the availability of water to households, agriculture and industry. Adaptation to climate change in the water sector is clearly going to be urgently needed in effected countries.Funding for adaptation has been promised by the international community. There are however multiple ways these resources could be used. Complex decisions will have to be made that ensure both that resources are used efficiently, but also that the benefits of adaptation measures are equitably distributed between different stakeholder groups.Furthermore, effective adaptation requires action by multiple stakeholder groups and at different scales. Available actions by householders for example are facilitated both by local economic conditions and government policy. Different groups have different priorities and incentives for action. Methods to facilitate effective communication and negotiation between group will be necessary to prevent the non-engagement of key groups preventing the adaptation of vulnerable groups.It is inevitable that there will need to be a degree of economic assessment and accountability for adaptation funds from national, bi-lateral and multi-lateral sources. To date however the extent of assessment generally demanded by donors has been beyond the capability of most developing countries to fulfil. As such very little adaptation funding has been successfully transferred to developing countries.There is an urgent need for new approaches to economic assessment that:• Balance the need for thoroughness with practicality and speed of assessment.• Allow the interests of different stakeholders, and especially the poor, to be taken intoaccount.• Recognise the reality of economic assessment in data sparse regions.• Recognise the systematic and uncertain nature of assessment of climate change effects.iied's approachiied is working with country based research teams in case study countries to pursue economic analysis using participatory methods. These will representatives of major stakeholder groups together and provide a forum for different interests to be considered and balanced. This approach is being termed Stakeholder based Cost Benefit Analysis.It is hoped that such an approach will support the creation of relevant data sets and allow analysis that takes into account the distribution of costs and benefits in a variety of climate change affected water systems. This should result in better and more equitable adaptation planning with widespread acceptance by effected communities and other stakeholders.Interim update on the climate change and water project from the field by our partnersProject objectives: Develop a stakeholder-foscused cost benefit-analysis methodology applicable to diverse climate change and water situations of developing countriesGenerate the evidence on the actual costs and benefits of adaptation accruing to different stakeholders in five country case studies and test the applicability of the economic method developed under the first objecitveBuild the capacity of developing country economists to apply economic methods to different water adaptation settingsDevelop a simplified guide for applying stakeholder-focused cost-beneft analysis in developing countriesFind out morePublications: Project FlyerReports and papers: Interim updateMoroccoFieldwork has begun. Key stakeholders affected by or involved in the conversion to drip irrigation in the Tadla irrigated perimeter have been identified. Farmers are the main stakeholders group, because water and input use efficiency directly affects their income from farming. Other benefits from water efficiency include gains in leisure time, health benefits and education of young family members. The Oum Rabiaa Water Basin Agency, the institution which regulates the quota of water allocation between all sectors of water users at Oum Rabiaa basin level, is another stakeholder. They highlight the important stakeholder benefits from the conversion to drip irrigation through a decreased pressure on water allocation under more efficient irrigation water use. It is expected that reduced water use for irrigation under a drip irrigation system will reduce agricultural water demand substantially, facilitating easier allocation of water among sectors. Switching to drip irrigation would ensure meeting domestic demands by releasing pressure on groundwater resources. The Regional Office of Agricultural Development in Tadla (ORMVAT) is also an important stakeholder since it is the main government agency responsible for the management of water use in agriculture. It is also the regional executive of the government’s Green Morocco Plan. More efficient water use under drip irrigation system will make the management of scarce water resources under the role of ORMVAT easier.Primary results of stakeholder analysis identified that non-monetary welfare gains were present for all primary stakeholders of the adaptation project. By ranking all benefits that accrue to each stakeholder on a common scale; it was found that groups of private and public stakeholders favoured non-monetary impacts over monetary gain. Smallholder farmers were the most reliant on the non-monetary benefits of adaptation.   MalawiFieldwork in Malawi is complete. Stakeholders were identified in June Stakeholders were categorised into three:- 1) Those directly using the lake and its resources 2) Others using the water in the catchment 3) Regulatory and enforcementThe first group includes fishermen, birds hunters and craftsmen who use reeds. The second includes those involved in irrigation schemes around and along rivers, and the city council using the water for domestic purposes and also as outlet for waste water. The last group includes government departments, fisheries, agriculture and environment and natural resources, NGOs and other organisations. Interesting things that have come out of the preliminary findings are the emergence of bird hunting as an alternative to fishing. Most locals who could not compete in fishing have diversified into bird hunting. Bird species include duck, geese and other smaller birds in the lake. Fishing has also caused a very interesting individualisation of community resources when prices go up or demand increases or when resources decline. There are now cage farms emerging along the lake to make sure that the fish in the cage are not shared. Due to drought, upland crops like maize along the catchment are not doing well. Farmers complained of poor harvest in the last two years. However due to floods from upstream rains, rice along the catchment was doing well. Farmers are not being forced to irrigate much closer to the river or even into the river itself, leading to degradation of the river banks and causing siltation into the lake.  The full CBA is still to emerge on the effects of this. However it is clear that it is not sustainable.  BoliviaKey partners are currently being identified, to initiate a dialogue with stakeholders. At present the Bolivian government (water sector) has plans to expand the water capture system. Some capture areas are outside of the La Paz borders. Both formal and informal consultations are taking place with these stakeholders. It has also been identified that the climate department of the government has a World Bank funded project to assess climate change impacts. Other developments include discussions with civil society groups, tracking and following of the glacier melting, and attempts to bring stakeholders together.  Nepal The first consultation meeting with stakeholders has been held. Leaders of cooperatives, representative of forest users group, local school teachers and government staff from village secretariat attended. The main objectives of the meeting were to identify the real watershed areas of Rupa Lake, which are different from the political (planning) boundaries and primary stakeholders of the Lake. The most vulnerable communities of the watershed and potential risks in people's livelihood and environment during extreme weather conditions were also discussed. A wider stakeholder consultation for the CBA is now to be organised. BangladeshTBC