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Coping with the curse of freshwater variability

Oxford scientists say that institutions, infrastructure and information are the key ingredients for coping with freshwater variability and enabling economic growth, in an article published in Science.

The authors, which include Prof Jim Hall, Prof David Grey and Dr Simon Dadson, say that a key challenge to achieving water security is managing the risks posed by variable and unpredictable freshwater resources. Building resilience to these risks requires a transformation in the way investments are made.

Extreme events such as floods and droughts are hard to predict and future changes in variability are highly uncertain. The article highlights three dimensions of freshwater variability: change within the year (seasonal and monthly), year-to-year, and the unpredictable timing and intensity of extremes. When these three dimensions combine the situation is “most challenging – a wicked combination of hydrology that confronts the world’s poorest people,” say the authors.

The article warns that the inability to cope with variability can place serious burdens on society and the economy. Extreme events such as droughts and floods have ripple effects through the economy. For example, floods in Thailand in 2011 caused $43 billion in losses. Meanwhile in Ethiopia economic growth is 38% less that what would be expected based on average rainfall, due to the country’s complex hydrology.

Countries can do very little about their natural endowment of water: when and where it rains and how much water evaporates, infiltrates into the ground, and runs into rivers and lakes. However for those countries burdened with highly variable hydrology, investment in water management can help buy their way out of water insecurity.

The study’s analysis shows that countries that have achieved economic growth, despite high variability in freshwater resources, have invested heavily to reduce risk. In river basins with complex hydrology where there has been low investment, the economy suffers.

Countries along river basins with less variability are more wealthy, even though investments have sometimes been quite modest. Where the hydrology is highly variable, additional investment is needed to transition from water-insecure to secure, but this is least affordable and hardest to deliver in the poorest countries. Climate change may increase variability further, making water security an even more distant goal for countries already underequipped to cope.

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The authors highlight “the three ‘I’s” as essential for adapting to freshwater variability: institutions and good governance (such as river basin organisations, legal systems, and water pricing), infrastructure (such as water storage, wastewater treatment, groundwater wells) and information (including monitoring, forecast and warning systems, and modelling tools).

Crucially, coping with variability involves a combination of institutions, infrastructure and information – rarely will they generate their full benefits alone.

The article calls for a new approach to investing in water security. A broader and longer-term vision is needed that looks beyond individual projects to the sequence of investments that can create a pathway to water security. Context also matters when it comes to what combination and sequence of investments are needed.

This new approach will focus on risks, trade-offs and uncertainties to enable decision-makers to choose between alternative investment pathways and build a more water secure future.

This research stems from the work of a global Task Force on Water Security and Sustainable Growth, an initiative of the Global Water Partnership and OECD, co-chaired by Oxford University’s Professor Jim Hall and Professor David Grey.

Reference

Hall, J.W., Grey, D., Garrick, D., Fung, F., Brown, C., Dadson, S.J. and Sadoff, C.W. (2014) Coping with the curse of freshwater variability. Science, 346(6208): 429-430.

Developing practical strategies for cooperation in the Nile basin

Kevin Wheeler, DPhil candidate at the Environmental Change Institute, recently presented his work on alternative management strategies of the Grand Ethiopian Renaissance Dam and the effects on the distribution of benefits among the Nile Basin countries of Ethiopia, Sudan and Egypt.

Staff from the Sudan Ministry of Water Resources, Dam Implementation Unit and University of Khartoum learn how to use and develop the Eastern Nile RiverWare model

Staff from the Sudan Ministry of Water Resources, Dam Implementation Unit and University of Khartoum learn how to use and develop the Eastern Nile RiverWare model

He presented both at a workshop on Sustainable Hydropower in the 2014 World Water Week in Stockholm (31 August to 5 September) and was a panellist at the HydroVision International conference in Nashville Tennessee (22-25 July) in a session on ‘Sharing water across borders’.

This work followed from Kevin’s 2013 dissertation research for the MSc in Water Science, Policy and Management, in which he conducted interviews in Cairo Egypt, Khartoum Sudan, and Addis Ababa Ethiopia. He taught RiverWare modelling courses in each country to water ministry officials, university academics, sub-basin organisations and private consultants. Together with these stakeholders, he developed various management scenarios for the operation of the contentious Ethiopian Dam, which is currently being constructed on the Ethiopian-Sudanese border.

The MSc research, which was awarded the Water Conservators’ Prize for Best Dissertation, demonstrated how benefits and costs are distributed under different dam management practices and highlighted the tradeoffs associated with these practices. More importantly, this work empowered stakeholders within the basin by teaching them a practical tool that can be used to facilitate the ongoing negotiations between the countries.

Kevin is continuing this work in his DPhil to examine both theoretical and practical mechanisms of collaboration through dam operations under various hydrologic conditions and the implications on trans-boundary water security across different populations.

More information on issues surrounding the Nile Development can be found at:
http://www.scidev.net/global/energy/multimedia/ethiopia-millennium-dam-science-controversy.html

China in the Mekong: building dams for whose benefit?

A new policy brief from the Oxford University Global Economic Governance Programme discusses the controversies of Chinese investment in hydropower in the Mekong. It calls for action by governments and Chinese hydropower companies to ensure responsible water governance and safeguard livelihoods and biodiversity in the basin.

China is a “hydro-superpower”. How it harnesses the resources and energy potential of the international rivers flowing through its territory can have a significant – and at times, irreparable – impact not only on the complex ecosystems sustained by these rivers, but also on local communities both within and downstream of its borders. In mainland Southeast Asia, Chinese-led hydropower schemes are transforming the region’s landscapes and waterscapes. Designed to meet growing Chinese and regional power demands, these dams often become a “necessary evil”: necessary to national and regional development, but harmful to important rivers like the Mekong, Irrawaddy and Sesan, and the livelihoods that are tied to their natural ebbs and flows.

The policy brief make the following recommendations:

The Chinese government must enforce its domestic regulations for investments overseas and encourage Chinese firms to comply with indsutry standards.
Chinese hydropower companies must mainstream social and environmental impact assessments in the early stages of project development and engage directly with affected communites.
Governments in the Mekong basin should institutionalise participatory mechanisms in formal decision-making and provide public access to information on project development.

The policy brief is written by Dr Pichamon Yeophantong, Global Leaders Fellow currently based in the Niehaus Center for Globalization and Governance, Woodrow Wilson School of Public and International Affairs, Princeton University.

Lake Turkana under threat from hydropower dam and irrigation development

Lake Turkana in the Kenyan Rift valley is the world’s largest desert lake but could shrink dramatically due to a hydropower dam being built upstream and plans for large-scale irrigation. This could be another Aral Sea disaster, says a new Oxford University study

The Gibe III hydropower dam is currently under construction on the Omo River which supplies 90 per cent of Lake Turkana’s water. Due for completion in 2014, the dam will permanently alter the flow of the river which will have devastating impacts on floodplain ecology, the productivity of the Lake’s fisheries and the livelihoods of the local population.

By regulating the flow of the river, the dam will also enable massive irrigation schemes in the Lower Omo. Irrigation development being planned by Ethiopia could abstract up to 50 per cent of the river’s inflow into Lake Turkana. The research shows that this could cause the lake to drop from 30 metres to under 10 metres in depth, being reduced to two small lakes.

This study, written by Dr Sean Avery for Oxford University’s African Studies Centre, is one of the outcomes of the AHRC-funded project, ‘Landscape people and parks: environmental change in the Lower Omo Valley, southwestern Ethiopia’, run by Oxford’s Professor David Anderson and Dr David Turton between 2007 and 2010.

View the illustrated booklet ‘What Future for Lake Turkana?’

Read the full report

Grant won to investigate the resilience of water infrastructures

A team of Oxford researchers have been awarded funding to study how resilient water infrastructures are to natural and man-made threats. The project is a collaboration with the University of Massachusetts and Sandia National Laboratory in the United States.

The Oxford team is led by Professor Jim Hall and includes the researchers Drs Dustin Garrick and Raghav Pant, and DPhil candidates Edoardo Borgomeo and Scott Thacker.

Together with engineers in the United States, the team will develop methodologies for assessing risks to water security and modelling the resilience of piped water networks at a national scale. This research will provide new knowledge to inform the planning and design of water supply systems. It help target measures to increase the resilience of water infrastructures.

The project has been awarded funding from ‘Clean Water for All’, a new trans-Atlantic collaboration which brings leading water engineers from the United States and the UK together to tackle problems of providing clean, sustainable water supplies. Five projects have been funded, with support from the Engineering and Physical Sciences Research Council (EPSRC) and the National Science Foundation (NSF) in the USA.

Read the EPSRC Press Release

The business case for water investments: could multinationals find the cash?

Alex Money, in Environmental Finance

Might multinationals be persuaded to invest in water infrastructure in the growth markets of the future? It might make sense for them as well as for their potential customers, suggests Alex Money.

As a factor of production water is unique: essential, irreplaceable, without substitute and in limited supply. And, while unlike oil, copper, pork bellies or other traded commodities, there is no global clearing price for water, its value – from an economic, environmental, social or political perspective – is increasingly appreciated. But underinvestment risks water supply crises – identified for the first time this year as one of the top five risks by the World Economic Forum in its annual Global Risks report.

The business of water abstraction, treatment, storage and distribution requires large capital investments. In general terms, there is a greater per capita deficit of this infrastructure in the emerging markets than in the developed world. However, it is in these emerging markets that great economic potential lies. The dramatic expansion of mass consumer markets in the South provides burgeoning opportunities for globalised businesses that can combine sophisticated supply chain management with deep marketing budgets. And if the emerging markets were attractive before, then the 2007-8 financial crisis and its aftermath, which has pushed the locus of global growth further towards the South, has only amplified this trend.

Furthermore, the demographic dynamics of the industrialising South have dramatic implications for water scarcity and food security. For instance the population of Africa, which is currently a little over one billion, is expected to double in the next 35 years. Meanwhile, statistics from the UN suggest that urbanisation has increased from 30% in the 1950s to over 50% today, and is likely to be 60% by 2030. Over nine-tenths of this growth in urbanisation will occur in emerging countries. Coupled with the population expansion, this implies a dramatic increase in the strain on their urban water and sanitation infrastructure networks, which are in many cases already buckling.

In addition, the environmental risks of climate change certainly do not need to be rehearsed here, but it is worth pointing out that the resulting changing in patterns of precipitation – and likely increases in extreme weather events – places further strain on water infrastructure, particularly in terms of storage, which is typically one of the most capital-intensive components of the network.

“The globalised companies that are best positioned to benefit from emerging market consumption are also sufficiently capitalised to make the investments required in water infrastructure”

Meanwhile, economic growth and the emergence of mass consumption in the emerging markets present attractive opportunities for globalised businesses, especially when contrasted with the anaemic outlook for the post-industrial world. However, the water infrastructure networks in these emerging markets, which typically require years of substantial capital investment, are already under strain. Population growth and migration will only increase the pressure, while climate change presents a potent additional risk.

The obvious solution would be to expand water infrastructure in emerging markets, as the expected returns from this investment should be attractive, given the outlook. Indeed, a recent report for HSBC from Frontier Economics found that, on average, a $1 investment in promoting universal access to water returned just under $5 – and $16 in Latin America.

The problem, however, is that in the post-financial crisis world, there is a funding gap. Sovereign balance sheets are insufficiently capitalised to prioritise this investment, while risk aversion and uncertainty appears to impede private sector lending at the scale required.

However, embedded in this challenge is great opportunity. The globalised companies that are best positioned to benefit from emerging market consumption are also sufficiently capitalised to make the investments required in water infrastructure. The question is, what will induce them to do so?

The answer lies in the investments themselves, which can create value beyond their pure financial return, such as improving health outcomes for citizens, raising national productivity and so on. If national authorities recognise this ‘positive externality’ that their country could benefit from – which is often actually much easier to quantify than the value of water itself – and are willing to share this value with the investing company, for example by offering them fiscal incentives, this could catalyse investments that would not otherwise take place.

Companies could moreover justify their capital expenditures to shareholders not just from the direct benefit, but also from a shared value creation perspective. After all, the citizens whose quality of life they will undoubtedly help improve will likely be the customers of the future.

What is needed are two fresh perspectives. First, governments need to revisit environmental supply-side economics from a post-crisis viewpoint. Facilitating investment in supply through incentives and liberalisation may be more effective as a policy tool than demand management through control and regulation. Second, companies need to think about their water costs less in terms of the profit and loss, and more in terms of the balance sheet. A meeting of minds is then surely possible. EF

Alex Money is a researcher in the School of Geography and the Environment at the University of Oxford, with a focus on corporate water risk. E-mail:alex.money@ouce.ox.ac.uk.

The University of Oxford will be hosting the Re¦Source 2012 event in Oxford on 12-13 July, a forum to bring together policy-makers, business people and investors to address natural resources issues. See www.resource2012.org