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Water Research Commission. Water and the economy. by Gerhard Backeberg May 2003. Overview of discussion Explanation of key concepts Water requirements of use sectors Measurement of contribution of water to the economy WRC funded research on water values
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Water Research Commission Water and the economy by Gerhard Backeberg May 2003 • Overview of discussion • Explanation of key concepts • Water requirements of use sectors • Measurement of contribution of water to the economy • WRC funded research on water values • WRC funded research on guidelines for calculation of water tariffs • General conclusions • Emphasis of ongoing research
1. Explanation of key concepts • Value and price of scarce water resources • Charges and tariffs for management, supply and use of water • Water • Consumption good • Input for production • Water use in value adding chain i.e. from raw material to consumer product • Linkages between use sectors • Linkages across river catchments • Linkages across economic regions • Research crosscutting domain • Water resource management • Water use in different sectors • Water-linked ecosystems
2. Water requirements of different use sectors for year 2000 Source : NWRS 2002
3. Measurement of contribution of water to the economy • Value added per use sector (R/m3) • Measures gross production value in relation to water use per sector • Measures value added for water use together with all other inputs • Does not measure backward and forward linkages Example:
Measurement of contribution of water to the economy(Continue) • Total output multiplier per water use sector • Measures forward linkages to processors and service providers • Measures contribution to national or regional economy * Southwestern Free State
4. Research funded by the WRC on the value of water since 1997 • Different river catchments or water management areas • Different water use sectors • Different economic locations • Different research approaches • Analysis of market prices • Modelling of values
Value of water for domestic, agricultural, forestry and environmental use
5. Research funded by the WRC on determination of water user charges and consumer tariffs Guidelines available for • Catchment management agencies • Local authorities • Industrial and commercial use • Urban domestic use Elasticity of demand: Alberton and Thokoza Short-term : -0.17 Long-term : -0.73 Port Elizabeth Long-term : -0.47 10 % increase in tariffs leads to 1.7 % and 4.7-7.3 % reduction in water use over short- and long-term respectively
6. General conclusions • Gross income generated per unit of water is higher for industrial use compared to agricultural use • Value of water for domestic use is higher than for agricultural use • Value for agriculture differs between regions and farming types. Caution: Different methods used in different regions. Problem is not the method but reliable data. • Domestic and industrial use place high value on assurance of supply, little value on more water than is currently used. • In future, water transfers from agricultural to industrial and domestic use are likely.
7. Emphasis of ongoing research • Value of water for industrial use • Value of water for ecological functions • Elasticity of demand for water and payment strategies for different income groups in urban areas • Improving decision support for market transfers: • Hydrological information • Transaction costs • Third-party effects • Institutional security • Regulations in terms of NWA of 1998
