Climate Change Impacts on Water Sector in Albania: Economic Evaluation

1. The effect of Climate Change on the water sector with a case study of Albania: An economic perspective Elona Pojani, University of Tirana, Faculty of Economics Tirana, ALBANIA Matilda Tola University of Tirana, Faculty of Economics Tirana, ALBANIA

2. The Problem: Climate Change is having major impacts on: • the economic performance of developing countries • the livelihoods of millions of poor people around the world. • the increase of weather extreme events, which might to lead to natural disasters.

3. Public awareness and perception on Climate Change • Awareness of Global Warming - the lack of basic awareness has many important implications ranging from the lack of political pressure to potential long term vulnerability. • Seriousness of Global Warming – the risk perception of the public is insufficient to motivate individual or collective response; climate change remains a relatively low priority globally • How could Climate Change pose a threat to me and my family -Developing countries tend to believe that CC would be a direct threat; in developed countries the CC threat is perceived as distant • How much do we worry about GW - Varies between countries; surveys show relatively low levels of concern • Do we understand GW –Still there is little understanding of the human activity effect on climate change.

4. How can we prepare ourselves to such disastrous events? • Climate change management • Risk assessment • Mitigation • Adaptation • An appropriate evaluation of the costs of natural disaster • Securing financing sources for different countries

5. DDI- building effective policies Disaster Deficit Index (DDI): measures the economic loss a country would suffer when a catastrophic event takes place, and implications in term of resources needed • To develop a Financing Strategy it is necessary to: • Measure risk in terms of Physical Economic damages; • Social and Institutional adaptation • Measure economic resilience

6. Climate challenges and disaster risk in Albania • Albania is affected by a significant number of natural disasters, effects of which are amplified by human activity and demographic movement • The most common phenomena: • Floods • Mudslides of soils • Fires • Rise of frequency is related to climate change

7. Climate challenges in the water sector in Albania Characteristics of water resources in Albania Surface Water • Seven main rivers; most discharge into the Adriatic Sea (95 %), 5% into the Ionian Sea • Ground Water • Mainly depends on precipitation • The drinking water supply comes from underground resources • The networks of drinking water provide water for both domestic and industrial use • Marine Water • The Albanian coast consists of the Adriatic and Ionian sea coasts. • Monthly variation in sea level is caused by non uniform influences on the hydro-meteorological factors. Max level (November – December) Min ( July – August) • Strong winds blow from sea to land and vice versa

8. Flood Risk and history Figure 2: 100 years return period of the maximum flood potential map Flood events in Albania in the last 50 years Source: Disaster risk Assessment in Albania, UNDP, 2003

9. Case Study – Consequences of the January 2010 Flood in North Albania Overview of the events • During 25.12.2009-10.01.2010, the country experienced weather with continuous precipitation accompanied with relatively high temperatures • The precipitations and snow melting caused the fast increase of feeds in Drini’s cascade; discharges in Vau i Dejes river plant reached the level of 2500m3/second • During 25 December 2009 -6 January 2010, the coastal areas around the city of Lezha were flooded as result of: • 170mm precipitation • rising of sea level due to an abnormal tide • strong winds and high waves • Following these events, the Albanian Government declared “The Status of Civil Emergency” putting in The emergency plan [1] Ministry of Interior

10. Evaluation of Damages • There is still an ongoing process due to new floods in the region • Direct costs of the flood include: • Reparations for flooded families & businesses • Complete/partial destructions of physical infrastructure • Indirect costs • Damages in future agricultural and industrial production of the region • Costs related to rehabilitation of the region • Social consequences

11. Adaption measures

12. Some figures related to the events

13. Impact in Macroeconomic Indicators

15. Financing Issues • Funds available: • Civil Emergency Fund (607 million ALL) • Council of Ministers Special Fund (800 million ALL) • Voluntary contributions • local governments (municipalities, districts and county) • non-profit organizations • private businesses and individuals

16. Financing Options • Insurance & Reinsurance Payments (Air Model) • Products related to CC insurance • Higher risk; higher price • Risk distribution through reinsurance payments • The case of Albania: • Low level of private insurance due to tradition • Low income/capita in high risk regions

17. Air Model

18. Financing Options • Financial Markets • Catastrophe bonds • Weather derivatives • The case of Albania: • Such instruments might be very expensive • Currently, financial markets are contracted • How will the contract be regulated?

19. Financial Derivatives Summary

20. Other Financing Options • Aid and donations – not always predictable in size; not a sustainable resource • New taxes – very sensitive measure, requires analysis of the whole tax system • Budgetary relocations – most difficult option; depends on public priority ranking.

21. Budgetary allocations on risk management and environment protection

22. Recommendations • Consideration of climate change consequences in government programs and policies. • Restructuring of the present legal systems and institutions responsible for land use and management policies. • Implementing adaptation measures and preparing a strategy to assess and manage the risk of more frequent extreme weather events in the future. • Designing a national finance strategy of natural disasters, including insurance policy modifications. • Making property insurance obligatorily in areas at higher risk from extreme weather events. • Encouraging environment and climate education among the population.