Water Sector Challenges Water Sector Challenges and and

Climate ChangeClimate Change…………Moving Moving Forward the WSSForward the WSS

AgendaAgenda

Jamal SaghirJamal SaghirDirector Director

Energy, Transport and WaterEnergy, Transport and WaterThe World BankThe World Bank

WSP Council MeetingWSP Council MeetingLondon London

June 12, 2008 June 12, 2008

OutlineOutline

The Big Picture and Challenges to the Water Sector

Climate Risks and Development: The “Poor Countries’ Danger”

What it means to the Water Sector?

What it means to The World Bank?

What is The World Bank doing?

Key Messages

Global WarmingGlobal WarmingTransforming People

Life

Confronting Confronting CorruptionCorruption BasicBasic

SanitationSanitation

Water SupplyWater SupplyAccessAccess

UrbanizationUrbanization& & WaterWater

Rainfed Rainfed agriculture agriculture

managementmanagement

Macroeconomic & Macroeconomic & Fiscal issuesFiscal issues

WaterWater &&GenderGender

PeriPeri--urban urban agricultureagriculture

WaterWater& Energy& Energy

WaterWater SecuritySecurity DeforestationDeforestation

Natural Natural Resource Resource

ManagmentManagmentLarge Large

IrrigationIrrigationsystemssystems

Floods Floods & &

drainagedrainage

LandLandmanagementmanagement

LeveragingLeveragingPrivate SectorPrivate Sector

Aid ArchitectureAid Architecture

HydropowerHydropower

Investments Investments andand

MDGSMDGS

Utility Utility management management & governance& governance

GlobalizationGlobalizationTransforming PeopleTransforming People

LifeLife

IWRMIWRM

WaterWaterAnd And

AdaptationAdaptation

Large WaterLarge WaterInfrastructureInfrastructure

Sustainable WaterSustainable WaterManagementManagement

Transforming PeopleTransforming PeopleLifeLife

Sustainable Sustainable Infrastructure Infrastructure

Transforming PeopleTransforming PeopleLifeLife

Emerging Infrastructure Global Challenges

MICsIncreasing access to capital markets alters the demand profile of MICs

Changing Aid ArchitecturePrivate flows experienced modest recovery, while remarkable growth in MIC assistance to poorer countries

Renewed action on harmonization among donors under aegis of MDGs to maximize effectiveness

Rising Energy Prices

Oil prices

Increased focus on energy security

Premium on energy diversification, end use efficiency, and spatial planning

Globalization

Skyrocketingworld trade to almost $10 trillion in 2006.Transport & trade logistics critical for sharing in growth.Efficient and equitable management of shared water and energy resources

UrbanizationUnprecedentedspeed of demographic transition > Urban populat projected to grow to 4.9 b by2030

Climate Change

"Most of the observed increase in globally averaged temperatures since the mid-20th century is very likely due to the observed increase in anthropogenic greenhouse gas concentrations.” IPCCGrowing consensus on need for action in climate change mitigation

Understanding spatial Understanding spatial implicationsimplications

Shifting Demand and Shifting Demand and Supply for ODASupply for ODA

Climate ChangeClimate ChangeEnergy SecurityEnergy Security

Rising Food

Prices

80% increase in overall global food prices over 36 months leading up to to Feb 2008

Increased focus on Food security

Food SecurityFood Security

Challenges and Key Drivers to the Water Sector

MDG ChallengeClimate Change and the need to bring back water into this agendaIncreased globalizationIncreased UrbanizationFinancial/fiscal profile of our clients is changingChanges in the financial and aid architectureBut there is much more

Climate Risks and Development: The “Poor Countries’ Danger”

What it means to the Water Sector?

What it means to The World Bank?

What is The World Bank doing?

Key Messages

Climate Risks Are Higher for Poor Countries

Source: World Bank staff.

Six Climate ThreatsTop 12 Countries Most at Risk from Each

Climate Risks and Development: The “Poor Countries’ Danger”

PakistanDenmarkLibyaFijiRwandaIran

EthiopiaVietnamSenegalHondurasBeninKenya

AlgeriaFijiBangladeshChinaVietnamChad

MalawiSenegalMyanmarTongaThailandSudan

IndiaVenezuelaMexicoSamoaSri LankaEritrea

NigerBrazilChina HaitiPakistanMauritania

MoroccoEgyptMauritaniaMongoliaLaosNiger

ZambiaPhilippinesIndonesiaMoldovaMozambiqueMozambique

MaliBangladeshTunisiaVietnamCambodiaIndia

ZimbabweJapanEgyptMadagascarIndiaZimbabwe

SenegalNetherlandsVietnamBangladeshChinaEthiopia

SudanAll low-lying Island States

All low-lying Island StatesPhilippinesBangladeshMalawi

AgricultureCoastal 5mCoastal 1mStormFloodDroughtMiddle IncomeLow Income High Income

Source: World Bank staff

It Will Get WorsePotential Impact on Agriculture — Projected Percentage

Change in Agricultural Productivity in 2080

Note: Scenario: SRES A2.Source: Cline 2007.

It Will Get WorseClimate Change ProjectionsClimate Change Projections

(2080(2080––2099 relative to 19802099 relative to 1980––1999)1999)

LAC

MNAECA

EAP

SAR

AFR

Climate Risks, Poor Countries and WSS MDGs

Population to be served each year to reach WSS MDGs (million people)

Sanitation (rural/urban)

Water supply (rural/urban)24

22

9

37 31 35

39

2410

7

2

Likely Changes — Dependent on MitigationLikely change

already “baked in”

Risk of catastrophic events increases with temperatureSource: Adapted from IPCC 2007.

Likely change with successful

mitigation action

Likely change without significant

action on mitigation

OutlineOutline

Climate Risks and Development: The “Poor Countries’ Danger”What it means to the water sector?

What it means to The World Bank?

What is The World Bank doing?

Key Messages

% change in runoff by 2050% change in runoff by 2050

Many of the major Many of the major ““foodfood--bowlsbowls”” of the world are projected to become of the world are projected to become significantly driersignificantly drierGlobally there will be more precipitationGlobally there will be more precipitationHigher temperatures will tend to reduce run offHigher temperatures will tend to reduce run offA few important areas drier (Mediterranean, southern South AmeriA few important areas drier (Mediterranean, southern South America, ca, northern Brazil, west and south Africa)northern Brazil, west and south Africa)

rainfall variability, Ag GDP and GDP

-100

-80

-60

-40

-20

0

20

40

60

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

-4

-2

0

2

4

6

8

10rainfall variabilityGDPAg GDP

Kenya is highly vulnerable to extremes

Water stress in critical regions will Water stress in critical regions will increaseincrease

Climate change can affect water availability & Climate change can affect water availability & demand patterns and aggravate water stress.demand patterns and aggravate water stress.

OutlineOutline

Climate Risks and Development: The “Poor Countries’ Danger

What it means to the water sector?

What it means to The World Bank?

What is The World Bank doing?

Closing Remarks

Climate change is more Climate change is more than an unprecedented than an unprecedented

environmental challenge. environmental challenge.

It is a massive It is a massive development, economic development, economic

and social challenge.and social challenge.

Need a Complementary Mix of PoliciesWith Appreciation of Different Focuses on Mitigation and

Adaptation

• The more mitigation undertaken, the less adaptationis needed.

• However, without sufficient mitigation there isincreased risk of catastrophic outcomes—a point atwhich the costs are unreasonably high or there is noway to adapt (e.g., the loss of West Antarctic ice sheetimplies a 5–15 meter sea level rise).

• Given increased temperatures “baked into the earth,”adaptation will be necessary.

Complements or Substitutes?

Global Action, Local Impact

• Yet mitigation and adaptation differ:– Mitigation requires global analysis and globalcollective action

– Adaptation must be analyzed locally andaddressed through local action.

• Developing countries need adaptation measuresmost urgently.

How Much Does Adaptation Cost?There Are Some Estimates, but the Ranges Are Wide and Uncertain

Developing Countries — Estimated Cost of Adaptation by 2030• The implied change in temperature is 1.5º C for 2030

• Cost estimates based on expert opinion

• Wide range of possible infrastructure costs due to information gaps

1. Specialized fundsAdaptation Fund (2% tax on CDM and voluntary contributions): forecasted US$80–300 million per year between 2008–2012GEF adaptation programs: US$279 millionGlobal Facility for Disaster Risk Reduction (multi-donor): US$15–20 million per year

2. Mainstreaming platformsIDARegional Development BanksBilateral financing (e.g., EU climate partnership)

3. Mitigation financing with adaptation benefitsPilot carbon funds (e.g., Forest Carbon Partnership Facility)Bilateral financing

4. Sustainable development financing with adaptation benefits

GEF (e.g., Land Degradation Operational Program)Financing ecosystems and sustainable land management

Sources of FinanceFiscal

Revenues

1. Increase financial flows to governments—eliminate counterproductive subsidies (e.g., energy and water)

2. Reduce reliance on government budgetCountry risk insurance such as catastrophe bonds (e.g., Mexico) or risk insurance facilities (e.g., Caribbean)Development of private insurance markets

International Financing

21

OutlineOutline

Climate change is here

What it means to the water sector

What it means to The World Bank

What is the World Bank doing?

Closing Remarks

BankBank’’s Approach to Climate Changes Approach to Climate Change

Climate change must not come at the cost Climate change must not come at the cost of developmentof development•• need to find and support ways to reconcile the growth need to find and support ways to reconcile the growth

needs of developing countries with addressing CCneeds of developing countries with addressing CC

Must do both: Must do both: mitigationmitigation——to avoid the to avoid the unmanageable, unmanageable, adaptationadaptation——to manage the to manage the unavoidableunavoidable

Resource mobilization in addition to the Resource mobilization in addition to the current ODA levelscurrent ODA levels

24

Pillars of Strategic Framework for Pillars of Strategic Framework for Climate Change (SFCC)Climate Change (SFCC)

Make effective climate action Make effective climate action –– both adaptation and both adaptation and mitigation mitigation -- part of core development effortspart of core development efforts

Address the resource gap through existing and Address the resource gap through existing and innovative instruments for concessional financeinnovative instruments for concessional finance

Facilitate the development of innovative market Facilitate the development of innovative market mechanismsmechanisms

Enabling the environment for private sector finance Enabling the environment for private sector finance

Accelerate deployment of existing and development Accelerate deployment of existing and development of new climateof new climate--friendly technologiesfriendly technologies

StepStep--up policy research, knowledge management up policy research, knowledge management and capacity buildingand capacity building

On Water and Climate ChangeOn Water and Climate ChangeAccelerate and broaden current reforms and Accelerate and broaden current reforms and investments in water resources investments in water resources managementmanagement and and developmentdevelopment

Focuses on adaptation, but also mitigation where Focuses on adaptation, but also mitigation where relevantrelevant

Example: renewable resources Example: renewable resources ---- HydropowerHydropower

Develop effective menu of adaptation optionsDevelop effective menu of adaptation optionsKnowledge and capacity buildingKnowledge and capacity buildingTechnologyTechnologyInfrastructureInfrastructurePolicies, InstitutionsPolicies, InstitutionsMechanisms for riskMechanisms for risk--sharingsharingMechanisms for financingMechanisms for financing

DecisionDecision--making process under uncertaintymaking process under uncertaintyWater services delivery and resource managementWater services delivery and resource managementAssessing impacts and vulnerabilityAssessing impacts and vulnerability

““Hydropower is the Hydropower is the big brother of renewablesbig brother of renewables””Deputy Minister (Energy), Norway (2008)Deputy Minister (Energy), Norway (2008)

Hydropower:accounts for 88% of renewable energyis a mature technologyhas ancillary benefits, such as system stability, peaking capabilitycan store energy

Multi-purpose Hydro:contributes to a minimum

platform of infrastructure for water securitycan help mitigate extreme

events (droughts and floods)

MITIGATIONMITIGATION

ADAPTATIONADAPTATION

Our work on Water and Climate Change

Designed to support Bank operations and the client countries in making water investment decisions that account for climate variability and change.

Address the following key questions: • What are the impacts of climate variability and

change on water systems; water supply • What are adaptation strategies to reduce

vulnerability of water systems to these impacts; and

• How can the Bank assist client countries in making informed decisions regarding adaptation options in their water investments?

But …Water Systems respond to Climate Change differently

World Bank Water Investments (Fiscal Year 2006-2009)

11

16

2373

1616

54

32

43

134

29

35

92

11

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Irrig

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dD

rain

age

Urb

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SS

Rur

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SS

Floo

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ontro

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Agr

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Wat

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Wat

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Wat

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Man

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Mul

tipur

pose

Faci

litie

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US$

mill

ion

0

10

20

30

40

50

60

70

80

90

100

No.

of P

roje

cts

FY06/FY07 Actual Lending

FY08/FY09 Projected LendingWater Systems

Resource Management

Service Delivery

WSS and climate change

Improve understanding of the operational Improve understanding of the operational implications on provision of water and implications on provision of water and wastewater services by urban utilities.wastewater services by urban utilities.

Establish an analytical framework to assist Establish an analytical framework to assist utility managers and sector practitioners in utility managers and sector practitioners in assess exposure and utility vulnerabilities.assess exposure and utility vulnerabilities.

Identify adaptation measures to increase Identify adaptation measures to increase resilience and to manage costs of providing resilience and to manage costs of providing water service.water service.

On adaptation

Its all about managing uncertainty

Strategies• No regret• Low regret• win-win

Options• Supply side• Demand side

Adaptation Measure Regrets Cost Technical Difficulty

Supply Side

Diversification of water sources Low High Medium

Construction of additional reservoirs Medium-High High Medium

Improve Watershed Management/Source

Protection Win-W in Low Low

Implement advanced water treatment

technologies, water recycling or use of sea

water

Low High Medium

Reduction of non-revenue water Low Medium Medium

Demand Side

Water metering Low Low-Medium Medium

Low Use Water Appliance

Low Medium Medium

Consumer Behavior Change Low Low Low

Strategy-options matrix

Key Areas of Further WorkKey Areas of Further WorkImproving estimates of adaptation costs and benefits by sector aImproving estimates of adaptation costs and benefits by sector and nd type of risk. type of risk.

Developing innovative tools for:Developing innovative tools for:•• Rapid assessment of vulnerabilities and prioritiesRapid assessment of vulnerabilities and priorities•• Decision making under uncertainty Decision making under uncertainty

Identifying innovative ways and building local capacity for Identifying innovative ways and building local capacity for mainstreaming adaptation in development mainstreaming adaptation in development

Innovative technological solutions for climate resilient investmInnovative technological solutions for climate resilient investmentsents

Advancing instruments for financing adaptationAdvancing instruments for financing adaptation•• Insurance for different risks and customers, notably the poorInsurance for different risks and customers, notably the poor•• Understanding and designing incentives for private sector investUnderstanding and designing incentives for private sector investmentsments•• AdaptationAdaptation--mitigation winmitigation win--wins supported by financingwins supported by financing•• Mix of instruments to meet financing needs in a countryMix of instruments to meet financing needs in a country--specific contextspecific context

OutlineOutline

Climate change is here

What it means to The World Bank

What it means to the water sector

What is the World Bank doing?

Closing Remarks

Key Messages

All countries are vulnerable to climate change and All countries are vulnerable to climate change and instability in weather patterns, but the poorest countries instability in weather patterns, but the poorest countries and the poorest people are most vulnerable.and the poorest people are most vulnerable.

Adaptation and mitigation must go hand in hand, Adaptation and mitigation must go hand in hand, although one is based on local knowledge and action, although one is based on local knowledge and action, and the other must be addressed globally.and the other must be addressed globally.

There are mitigationThere are mitigation--adaptation synergies, especially in adaptation synergies, especially in low income countrieslow income countries

For developing countries, climate change is todayFor developing countries, climate change is today’’s crisis, s crisis, not tomorrownot tomorrow’’s risk: adaptation matters for development s risk: adaptation matters for development and has to start now.and has to start now.

Key Messages

Adaptation will require both “no-regret” and “climate-justified” actions.

Adaptation will require a range of coordinated actions:

• risk management, knowledge and capacity building, technology, infrastructure investment, and strengthening governance, policies, and institutions.

Adaptation requires expanding the availability and access to financial resources.

Existing international financing sources help bear the costs—but much more is needed.

Thank You