The role of Water Economics in Food Security

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The role of Water Economics in Food Security

  1. The role of Water EconomicsTitle-slide (44 pt Security in Food green text ongreen line; 2nd line below it) Coffee morningAuthor: (28 pt white text) Petra Hellegers CTA, 13 April 2012
  2. Story in four parts1. Trends that affect future water demand2. Water productivity gains from specialisation,basin cooperation and water reallocation3. Water allocation is a societal question4. Limited role of economic instruments
  3. Trends that affect future water demand Population growth, urbanisation, dietary change Climate change Rising energy prices
  4. Population growthProjected growth: from 7 billion people today to more than 9 billion in 2050
  5. UrbanisationBy 2050 more than 70% of the population is expected to be urban
  6. Dietary changeMore vegetables, fruits, meat, dairy and fish
  7. Possible impacts of climate change on water Rising temperatures  Irrigation requirements of crops increase  Affect size of snowpack & timing of release Changing precipitation patterns  More frequent & intense droughts/floods Sea levels rise  Salt water intrusion Global water cycle Other, e.g. pollution
  8. Rising energy prices- Triggers demand for alternative energy sources:hydropower and biofuels- Makes extraction, conveyance and purification costly Many water problems could be solved, if only energy would not be so costly
  9. Availability of water We only make use of a tiny portion of the available water
  10. Who is the main user of water?Agriculture is responsible for 70% of all water used and 90% of all water consumed40% of our food is produced on irrigated land, which is 17% of the world’s cropland
  11. Global water gap 2030– assuming no efficiency gains
  12. Unit costs ($/m3) of measures to bridge the gap
  13. Demand versus Supply of water Demand for water with a low water productivity increases  The value of water for staple crops varies 0.05 - 0.15 $/m3 Costs of making water available increase with quantity supplied Desalination for irrigation of staple crop is currently not feasible  The current costs of desalination are 0.50 $/m3
  14. Alternative efficient coping strategies To import cereals  Importing countries are vulnerable to rising global market price To acquire foreign land for own food production  Countries have descended on fertile plains across Africa.  The contracts are not only about land, but also about water
  15. Securing food by securing waterThe contracts are not only about land, but also about water!
  16. Part 2 Water productivity gains from specialisation,basin cooperation and water reallocation
  17. Globalisation and trade liberalisation Offers opportunities for specialisation inlow-value staple crops in rainfed areas and in high-value cash crops in irrigated areas
  18. When countries in the Nile Basin cooperate, the Basin can be food self-sufficient in 2025However, if irrigated area in Sudan expands by 1 million ha 20 BCM less water for Egypt 30% less land use revenues in Egypt 10% less hydropower revenues Less revenues for the basin as a whole due to low water productivity in SudanChristian Siderius
  19. WIBIS tool to assess implications of a socially desirable allocation By combining remote sensing and economic analysis able to assess the water productivity (in terms of kg/m3 and Rand/m3), downstream water availability, employment, food security etc.
  20. Spatial planning and integrated policy required
  21. Role of water economics Provides insight into the water productivity gains ($/m3) of reallocation water among regions, users, generations and population groups
  22.  Part 3 Water allocation is a societal question
  23. Other criteria apart from economic criteria Various social objectives:  Poverty alleviation  Equitable distribution of income and risk  Food self-sufficiency  Sustainability Economists show foregone benefits of achieving such objectives
  24. Water is often allocated in a socially desirable way Economists analyse problems – Politicians eventually decide
  25. Difference between financial and socio-economic value Water for staple crops has a low financial value, but a high socio-economic valueHigher wheat price can trigger revolution: Arab Spring
  26. Concluding remarks Water becomes more scarce Economics can show the water productivity gains from specialisation, basin cooperation and water reallocation but also the foregone benefits of not allocating water in the most efficient way
  27.  Part 4 Limited role of economic instruments
  28. Water markets fail, due to special characteristics of water Water is part of a system Usage can be consumptive and non-consumptive Costs of water re-allocation can be high Property rights to water are often unclear Externalities of usage Water is a public good->consequences for water pricing
  29. It is important to distinguish between The value of water The cost of water The price of water
  30. The value of waterThe demand curve for water reflects the maximumwillingness to pay by a consumer for a given water useValue ($) Quantity (m3)
  31. The costs of water The supply curve for water reflects the costs incurred by the supplier in the provision of waterCosts ($) Quantity (m3)
  32. The price of water The tariff actually paid for water use by a user The market-clearing price is where cost of provisions are equal to the benefits of usage The price can also be set by the government at a lower level for instance for social reasons like access to water Price ($) Quantity (m3)
  33. Comparison of the price, costs and value of irrigation water Price < Costs: No full cost recovery Costs < Value: Profitable to irrigate Price << Value: Significant increase in price required to reduce demand
  34. Role of water pricing as an instrument to: Trigger technology adoption To give a signal not to waste water For cost-recovery But not as “the solution” to balance supply and demand for water (use other instruments instead)
  35. Thank you very much!© Wageningen UR
  36. Exchange ideas about the kind of waterrelated projects CTA is working on
  37. So strategies to cope with water scarcity and climatechange will affect food production in terms of what,when, where and by whom food will be producedThe competition for water is taking place in the worldgrain market and it seems that people that are financiallythe strongest will fare best in this competition

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