Presentation by Mr. Leflaive, OCDE, Workshop on Water allocation, water economics and eflows in River Basin Management, 14-15 september 2016

1. India-EU Water Partnership
Workshop on Water Allocation, Water Economics and Eflows
In River Basin Management
14-15 September 2016, New Delhi

2. WATER ECONOMICS,
WATER ALLOCATION,
ECOLOGICAL FLOWS
Xavier Leflaive, OECD Environment Directofate
EU – India Water Partnership
14 September 2016

3. • The OECD – An economic organisation
– 34 member countries (4 accession countries, 5 “key partner” countries)
– Economics-based, multi-sectoral
– Forum to share experiences and derive policy lessons, source of
comparative data
– Secretariat: 2500 staff, based in Paris
• OECD work on water - Managing water for growth
– Water-related risks
– Allocating water among competing uses
– Managing water quality
– Financing investments in water for growth
– Water governance
– Working in partnerships
3
OECD on water

4. • The economic case for water security
• Allocating water for sustainable growth
– A policy framework
– Economic instruments for water allocation
– A survey of current practices
– Specific issues related to groundwater
allocation
• E-flows
• A state of flux
Outline

5. • Expected global flood damages from
urban property alone: USD 120 billion/
year
• Water risks cost irrigators USD 94 billion/
year
• Inadequate WSS cost USD 260 billion/
year
The economic case for water security
Selected figures

6. The economic case for water security
How water-related risks affect growth
Source: Securing Water, Sustaining Growth, report of the OECD/GWP Task Force

7. The economic case for water security
Linking economic growth, hydrological variability and investment
Investment
Hydrological variability
Copingwiththecurseoffreshwatervariability
Hall,J.W.,etal.Science346.6208(2014):429-430

8. The economic case for water security
Competing demand for water
Source: OECD Environmental Outlook to 2050; output from IMAGE

9. • Increase in water demand: +32% by 2050
• Per capita water availability (m3/year)
– From 5,177 (in 1951) to 1,140 (in 2050)
• Water intensity of energy production
The economic case for water security
Competing demand for water in India
Source: IEA (2012), World
Energy Outlook, OECD
Publishing

10. • A development strategy that factors water-
related risks
• Water allocation regimes that translate the
strategy into water flows
• The capacity to finance water-related
investments (i.e. WSS)
• Institutions and policies that drive
innovation
• Robust data sets
The economic case for water security
A policy framework

11. • Allocate water where it is most needed
• Adjust to shifting conditions, at least cost
for society
• A balance between competing requests
– Water security for water users
– Flexibility for water managers
• Account for the distinctive risk profile of
water users
Allocating water for sustainable growth
An OECD approach

12. • Set priorities
– A political process
– Who takes part in the conversation
• Optimise allocation in practice
– A range of technical options
Selected requisites
– Knowledge (availability, use, uncertainty)
– Transparency
– The capacity to adjust to shifting conditions
Allocating water for sustainable growth
A two-step process

13. • Market instruments
– Trading mechanisms (quantity, quality)
• Non-market instruments
– Abstraction and pollution charges
– Water pricing
– Payment for Ecosystem Services
– Certification / eco-labelling
– Insurance schemes
Allocating water for sustainable growth
Economic instruments

14. • Signal water scarcity
• Allocate water
• Allocate risks
• Promote flexibility
• Save investment costs
• Stimulate private investment
• Stimulate the diffusion of innovation
Allocating water for sustainable growth
In principle, economic instruments …

15. • Tax on the abstraction of water resources
• Tax for storage in low water periods
• Tax for the protection of aquatic environments
• Tax on water pollution
• Tax for modernisation of the wastewater drainage
• Tax on diffuse agricultural pollution
• Tax on obstacles on rivers
• Tax on sealed surfaces (optional)
Allocating water for sustainable growth
8 taxes to manage water in France

16. Allocating water for sustainable growth
A review of current practices
Respondants which reported some
form of an abstraction charge (%)
Out of which: abstraction charges
that reflect scarcity (%)
Source: OECD (2015), Water Resources Allocation: sharing risks and opportunities, Paris

17. Allocating water for sustainable growth
Abstraction charges in OECD countries
Source: OECD (2012), A Framework for Financing WRM, Paris

18. Allocating water for sustainable growth
A review of current practices
Source: OECD (2015), Water Resources Allocation: sharing risks and opportunities, Paris
% of regimes allowing some form
of transfer of water entitlements

19. • Specific physical characteristics
• State of knowledge
• Ease and costs of access
• Often considered a common pool resource
• Legal status
• Governance
Allocating water for sustainable growth
Zooming on groundwater - why

20. Allocating water for sustainable growth
Co-management of groundwater and energy
in India (Gujarat)
• High levels of groundwater use
• de facto ownership
• Jyotigram scheme
in China (North China Plain
aquifer)
• Privatisation of well ownership
• Informal groundwater markets
• Price reflects scarcity (metered
electricity consumption)
• Enhanced access
• Efficiency and innovation
• Depletion
• Equity issues
• Opportunity for regulation through
pricing

21. Managing ecological flows
Impacts of stream inflow reduction

22. Managing ecological flows
A survey of current practices
Source: OECD (2015), Water Resources Allocation: sharing risks and opportunities, Paris
% of examples according to type of
limit of water abstraction
% of examples that define ecological
flows

23. Allocating water for sustainable growth
In a state of flux
Countries with recent or on-going reforms of water allocation regimes
Source: OECD (2015), Water Resources Allocation: sharing risks and opportunities, Paris

24. Allocating water for sustainable growth
Drivers of reforms
Source: OECD (2015), Water Resources Allocation: sharing risks and opportunities, Paris

25. • Engage in a policy dialogue
• Take opportunity of droughts, other reforms
• Be ready for an iterative process, over time
• Determine a sustainable baseline
• Compensate potential « losers »
– Financial transfers
– Enhanced security
– Permits to build storage infrastructure
Allocating water for sustainable growth
Lessons from successful reforms

26. Xavier.Leflaive@oecd.org
www.oecd.org/water
For further collaboration