Climate Proofing the Water Sector: Investment and Financing
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Transcript of Climate Proofing the Water Sector: Investment and Financing
CLIMATE PROOFING THE WATER SECTOR: INVESTMENT AND FINANCING
Dr. Justin RamDirector, Economics Department
October 25-27, 2016Trinidad and Tobago
12th High Level Forum (HLF 12) of Caribbean Ministers Responsible for Water
Outline
• Macro-economic environment• Global importance of water• Caribbean context • The economics of water• Next steps• Opportunity for growth
– Water-Jobs Nexus• Financing water investments• The role of CDB
Average growth of 1.5 % over the past 5 years; high fiscal deficits and growing debt (domestic)
2011 2012 2013 2014 2015 2016
4.2
3.53.3 3.4
3.1 3.1
6.3
5.3
4.94.6
4.04.2
4.9
3.23.0
1.3
-0.1
-0.5
1.5
0.9
1.6
2.2
1.4 1.4
GDP GrowthWorld Emerging Markets and Developing Economies Latin America and the CaribbeanBMCs
Source: WEO, October 2016
Average growth of 1.5 % over the past 5 years; high fiscal deficits and growing debt (Domestic)
0
20
40
60
80
100
120
140
Debt to GDP(General Government Gross Debt)
2015 2016
Source: WEO, October 2016
Importance of water
The importance of water to the global economy
Source: Stefan Uhlenbrook, WWAP, UNESCO
3 out of 4 jobs that make up the entire global workforce are water dependent
WATER-DEPENDENT JOBS
Source: Stefan Uhlenbrook, WWAP, UNESCO
Investing in Water – High Economic Returns
Source: Stefan Uhlenbrook, WWAP, UNESCO
Tariff Structure• Low tariff• Subsidised by
Government
State Enterprises• Rigid labour contracts (unions)• Low productivity• Focus on operations and
maintenance not strategic planning
Poor Infrastructure• High inefficiency• High NRW • High demand• Not treated as an
economic good
Factors affecting the level and quality of water services in the Caribbean
An average of 47.5 MLD is consumed (exc. T&T)On average 92% of the population has access to water
Anguil
la
Antigu
a and B
arbud
a
Baham
as
Barbad
os
Belize BVI
Cayman
Islan
ds
Dominica
Grena
da
Guyana
Jamaic
a
Monste
rrat
St. Kitts
and N
evis
St. Luc
ia
St. Vinc
ent & th
e Gre
nadin
es
Trinid
ad an
d Tob
ago
Turks
and Caic
os0
20
40
60
80
100
120
Water Coverage % of Population
Anguilla
Antigua and Barbuda
Bahamas
Barbados
Belize
British Virgin Islands
Cayman Islands
Dominica
Grenada
Guyana
Monsterrat
Jamaica
St. Kitts and Nevis
St. Lucia
St. Vincent & the Grenadines
Trinidad and Tobago
Turks and Caicos
0 100 200 300 400 500 600 700 800 900 1000
3
16
102
145
45
19
19
45
43
34
4
137
20
90
27
1,025
11
Water Consumption (MLD)
An Average of 47.5 MLD is Consumed (Exc. T&T)on Average 92% of the Population has Access to Water
0 10 20 30 40 50 60 70 80
NRW %
Turks and Caicos Trinidad and Tobago St. Vincent & the Grenadines St. Lucia St. Kitts and Nevis Monsterrat Jamaica Guyana Grenada
Dominica Cayman Islands BVI Belize Barbados Bahamas Antigua and Barbuda Anguilla
NRW averages 40-50 percent of water generated; Average tariff of USD1.6 per cubic meter
Anguilla
Antigua and Barbuda
Bahamas
BarbadosBeliz
eBVI
Cayman Is
lands
Dominica
Grenada
Guyana
Jamaica
Monsterra
t
St. Kitt
s and N
evis
St. Lucia
St. Vince
nt & th
e Grenadines
Trinidad and Tobago
Turks and Caico
s0
1
2
3
4
5
6
7
3.67
1.7
2.64
1.24
1.82
2.64 2.5
0.40.78
0.14
0.660.98
0.630.37
0.15 0.27
6.6
Tariff US$/ m³
NRW averages 40-50 percent of water generated; Average tariff of USD1.6 per cubic meter
Economics of Water
Priority areas in water management for investment that will boost the Caribbean’s resilience to climate risks include:
Augmenting / identifying alternative water resources
Treating and using wastewater as a resource
Protecting and restoring watersheds
Flood risk management
Strengthening water infrastructure and networks
Improving water use efficiency
How does the Caribbean compare –Performance characteristics for public water utilities, 2002
BMC Avg. 6,502,587
45.6 1.4 9.6 2.2 89.7 87.1 1.5
Water sector indicators: Caribbean
High water consumption – (90% above industry standard) agriculture, tourism and industrial production
Trinidad Dominica Monsterrat BVI St. Lucia Grenada Barbados0
100
200
300
400
500
600
700
800
Water Consumption l/p/c/d
Rural Standard Urban Standard
High water consumption – (90% above industry standard) agriculture, tourism and industrial production
Antigua & Barbuda
Barbados
Belize
Guyana
Jamaica
St. Lucia
St. Vincent
Trinidad & Tobago
0 5 10 15 20 25 30 35
% of Crop Land Irrigated by Water
Low water productivity; High operating costs
Anguil
la
Antigu
a and
Barb
uda
Baham
as
Barbad
os
Belize BVI
Cayman
Island
s
Dominica
Grena
da
Guyana
Monste
rrat
Jamaica
St. Kitts
& N
evis
St. Luc
ia
St. Vinc
ent & th
e Gre
nadin
es
Trinida
d & To
bago
Turks
& C
aicos
-1
1
3
5
7
9
11
13
15
Water Productivity (Employees/1000 Connections
Developed Standard Developing Standard
Low water productivity;High operating costs
Anguil
la
Antigu
a and B
arbud
a
Baham
as
Barba
dos
Belize BVI
Cayman
Island
s
Dominica
Grena
da
Guyana
Monste
rrat
Jamaica
St. Kitts
& N
evis
St. Luc
ia
St. Vinc
ent & th
e Gre
nadin
es
Trinid
ad &
Tobag
o
Turks
& C
aicos
0
0.5
1
1.5
2
2.5
3
3.5
Working Ratio (<0.70 is prudent)
Industry Average
The basic provision of adequate water, sanitation and hygiene (WASH) services at home and in the workplace enables a robust economy by contributing to a healthy and productive population and workforce, with benefit-to-cost ratios as high as 7 to 1 for basic water and sanitation services in developing countries (OECD, 2011a and 2012a).
Is water a social good or economic good?
United Nations, 2010 (Res 64/292)
Water and gender-equally important for economic growth
Source: United Nations Water Fact Sheet; UN Water.org; (The) World's Women 2010. Trends and Statistics. UNDESA, 2010
Next steps for the Caribbean
Revised Tariff Structures
Investment in Infrastructure (PPP)
Innovation
Financing
Management of Watersheds
Improving Efficiency
Ensuring the Sustainability of Water Resources and
Ecosystems
Strategic Planning
Climate Resilient Water Infrastructure
Training and Human Resource Development in Water Resource
Management
Getting incentives right
• Through Public Water Utilities, most countries subsidise water, creating incentives for overuse and imposing a fiscal burden;
• Subsidies are estimated at approx. 0.6 percent (US$456B) of Global GDP in 2012 (IMF, 2015);
• Water subsidies are inequitable, benefiting mostly upper-income groups in developing countries, (IMF, 2015)
• Water prices in advanced economies tend to be at or close to cost recovery levels (household and industry); some provide subsidised water for agriculture, electricity generation.
The case of a bottled water and willingness to pay
Global water market was valued at US$170 billion in 2014
Market driven by health awareness and changing consumer lifestyles
Demand for clean, hygienic and flavored water; also portability
Bottled water is one of the fastest growing industries in the Caribbean
Bottled water vs TariffsUSD1.03 vs USD0.0003
St. Lucia Barbados Trinidad Jamaica Belize Guyana Antigua Dominica Grenada St. Kitts St. VincentBahamas Cayman Mosterrat0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
0.0000
0.0005
0.0010
0.0015
0.0020
0.0025
0.0030
0.0004
0.0012
0.0003
0.0007
0.0018
0.0001
0.0017
0.0004
0.0008
0.0006
0.0002
0.00260.0025
0.0010
Price of Water (US$ per 1 litre)
Bottled Water Tap Water
Bottl
ed W
ater
Tap
Wat
er
Water pricing reformsTariff structures/ metering
100
96
100
95
28
86
36
70
51
100
4
% of Customers with Meters
Investment in infrastructure development
An estimated US$5.5 billion investment in Water and Sanitation is
required in the Caribbean (CDB, 2014)
Water PPP Experiences in the Caribbean
Country Year Started
Year Ended
Result
St. Lucia 2005 & 2008
2009 Failed
Bahamas 2012 On-going
Positive Results
The Bahamas
PPP of $83m (10-Year Contract)
Goal: Reduce Leaks from The System
Performance-Based Contract
Daily water loss reduced to half and $6.5 M in savings in the first two (2) years
Opportunity for growth???
Source: Texas A&M Energy Institute
Infrastructural investment = Multiplier effect on job creation
Source: World Water Assessment Programme (WWAP) & UNESCO, 2016
The transition to a greener economy enhances opportunity for decent jobs
Source: Stefan Uhlenbrook, WWAP, UNESCO
The Water-Climate Nexus
food
energy environment
urban
water
Climate Finance in the Caribbean
Source: Global Water Partnership Caribbean & Caribbean Community Climate Change Centre (Information Brief 3)
27% of MDB finance allocated to water and wastewater in 2015
Source: 2015 Joint Report on MDB Climate Finance
Financing options
Tariffs, Taxes, Transfers
Government Investment
Donor Funding
Traditional Sources
Climate Funding W/ Water Investment
Carbon For Water
Green Bonds
Social Bonds
Innovative Sources
Sources of financing
Source: Assessment of the Water Sector in the Caribbean: Summary Report, Caribbean Development Bank, January 2015
The role of CDB
Green Climate Fund Accreditation;
CALC Funding; PPP Facility;
Concessional Lending
Leader in Climate Change
and Water Resource
Management
Thank You