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Economic and financial instruments in groundwater management

Economic and financial instruments in groundwater management. Learning objectives. Understand the difference between financial and economic instruments. Appreciate how to apply financial and economic instruments for better groundwater management, e.g. Cost recovery; Behaviour change;

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Economic and financial instruments in groundwater management

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  1. Economic and financial instruments in groundwater management

  2. Learning objectives • Understand the difference between financial and economic instruments. • Appreciate how to apply financial and economic instruments for better groundwater management, e.g. • Cost recovery; • Behaviour change; • Address equity and the poor; • Environmental protection.

  3. Why are economic considerations important in groundwater management and protection? To manage competition To improve efficiency and sustainable use Because groundwater is expensive to manage Others?

  4. Peculiarities of groundwater and EFIs High cost and complexity of assessment Dispersed resource gives high monitoring costs Resource invisibility and time-lags of observing resource impacts Highly variable aquifer vulnerability to contamination Near irreversibility of aquifer contamination

  5. Economic instruments • Economic instruments are used to obtain changes in behaviour. Their purpose is not to recover costs. • For example: • Increasing charges will reduce use; • Decreasing charges will encourage more use. CAN YOU GIVE MORE EXAMPLES?

  6. Economic instruments

  7. Financial Instruments • Mechanisms used to raise money to finance activities such as: • Investment in infrastructure; • Cost recovery for operations. • Implementation of the polluter pays principle or the user pays principle.

  8. Economic and financial instruments • The instruments may be the same: • The tariff for drinking water may include the costs of treatment and delivery (financial) plus an extra charge to discourage wastage (economic). • Or different: • A subsidy may be available to encourage people to install water saving devices.

  9. Value of Water • The value of water in alternative uses is important for the rational allocation of water. • Value is related to availability and expected benefit. Should water be sold to the highest bidder?

  10. Water is both an Economic and Social Good

  11. EFIs and water management functions

  12. Practical considerations for introducing EFIs • Political and social acceptability. • Poacher and the gamekeeper. • Think through the options • Centralised or Decentralised? • One step at a time. • Devolve responsibility? • Feasibility • costs versus benefits • institutional capacity for administration, monitoring, enforcement.

  13. Remember • Economic and financial tools are essential to groundwater management. • Cost recovery is both a component of equity and critical to effective water management institutions. • Good application of these instruments can assist service development.

  14. EXERCISE • Economic and Financial Instruments (EFI) • Purpose: To identify the barriers and opportunities for applying economic and financial instruments in groundwater management. • Activity: 90 mins – 60 mins group work, 30 mins report back and discussion. • Group 1: Discuss how to apply financial instruments for cost recovery in groundwater on the basis of your experience. In particular: • What groundwater management costs need to be recovered and who should pay. • What conditions need to be in place before payment systems can be applied; • How would you apply the payment system in practice. • Group 2: Discuss how to apply economic instruments to change behaviour. • What behaviours do you want to change? • How can you apply economic instruments to change the behaviour? Is it feasible? • What other mechanisms can you use to change the behaviour and get the result you want? • Report back:

  15. Role play.Stakeholder consultation on water charges. • ‘Management’ (5 senior water experts) want to introduce fees to reduce water wastage and implement water pollution control. • Stakeholders (commercial agric., subsistence agric., urban, utilities, industry, mining, environment, energy etc) are to be consulted about the proposals. • Take 15 mins to organise your statements/ questions. • Conduct the consultation. 45 mins.

  16. TASK – to consult on proposed charges for GW management. • The “water managers” will present to stakeholders a proposed scheme to charge for GW use, monitoring and pollution management. • The “stakeholders” will respond with questions and comments on the proposals according to their specific interests. (commercial Agric; subsistence agric.; industry; municipal; utility; household user; etc) • 15 minutes to organise yourselves and your ideas; 30 mins consultation. • 15 mins debriefing.

  17. IWRM task – make management proposals on issues. • Two groups. • group the issues raised on day 1. • Discuss and make specific and justified recommendations for action to solve the issues to the Ministry of Agriculture and Water. • Present the recommendations to the Directorate (plenary) who will assess feasibility of the proposals.

  18. GROUNDWATER REGULATION AND GROUNDWATER ALLOCATION Purpose: • To share experience on groundwater legal and regulatory systems • To recommend appropriate groundwater allocation systems Duration: 45 Minutes Activity: Break into two groups and discuss: Group 1: Describe how to implement a groundwater allocation system and the mechanism of enforcement Group 2: Discuss the groundwater legislation in your countries: • Give an example of effective regulation of GW • Is GW legislation separate from other water legislation or combined? • What legislation or regulations are missing?

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