Capacity Building in Analytical Tools for Estimating and Comparing Costs and Benefits of Adaptation Projects in the Berg River Basin, South Africa

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Capacity Building in Analytical Tools for
Estimating and Comparing Costs and Benefits of
Adaptation Projects in the Berg River Basin,
South Africa
Group AF-47 Daan Louw, Molly Hellmuth, Mac
Callaway, Jabavu Nkomo, Debbie Sparks
AIACC African WorkshopDakar, Senegal, March
2004
ERC Energy Research Centre
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Participating Organisations

• Energy Research Centre, University of Cape Town,
  South Africa
• Department of Water Resources, Banjul, The Gambia
• UNEP- Risø Centre on Energy, Climate and
  Sustainable Development, Denmark

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AIACC African WorkshopDakar, Senegal, March 2004
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The Project Areas
The Gambia
The Berg River Basin, South Africa
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AIACC African WorkshopDakar, Senegal, March 2004
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(No Transcript)
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The Berg River Basin, South AfricaThe Context

• The Berg River basin provides water to both the
  Cape Town urban center and a variety of
  irrigation crops.
• In 1999, the managed demand on the dams of the
  Western Cape System was 457 MCMs/a compared to
  the yield of about 442 MCMs
• Winter rainfall region April September, need
  for storage capacity, farm dams and other large
• The decision to build the Berg River dam is
  controversial is it needed?
• The impact of climate change was not considered
  in the dam feasibility assessment
• The total (holistic) economic impact of building
  new dams not considered
• The impact of the new National Water Act (1998)
  a major push to create water markets in South
  Africa (there is provision for water trading, a
  reserve)

ERC Energy Research Centre
AIACC African WorkshopDakar, Senegal, March 2004
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The Berg River Basin, South AfricaObjectives

• Estimate the potential impacts of alternative
  climate change scenarios on water supply and
  demand in the basin due to changes in runoff,
  evapotranspiration and surface evaporation,
• Translate these physical impacts into monetary
  losses (or gains) for different groups of farmers
  and urban water users,
• Estimate and compare the benefits costs of the
  storage and water market options (adaptations)
  of avoiding climate change damages under
  different climate scenarios
• Estimate the risk of making ex-ante planning
  decisions with different than expected ex-post
  climate outcomes

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AIACC African WorkshopDakar, Senegal, March 2004
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The Berg River Basin, South Africa Schematic
ADAPTATION OPTIONS
MANAGEMENT/INVESTMENT DECISIONS
COSTS/BENEFITS
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AIACC African WorkshopDakar, Senegal, March 2004
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The Berg River Basin, South AfricaSchematic
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AIACC African WorkshopDakar, Senegal, March 2004
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Climate

• HAD A2 GCM Reference (1961 1990), Near
  (2010-2039) and Distant (2070-2099) future time
  periods

ERC Energy Research Centre
AIACC African WorkshopDakar, Senegal, March 2004
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The Berg River Basin, South AfricaSchematic
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AIACC African WorkshopDakar, Senegal, March 2004
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Preliminary Impact Results

• This CC scenario results in a decrease in runoff
  over the basin
• An increase in Potential EvapoTranspiration
  losses
• Higher crop-water use Higher Evaporation
  Potential from Storage

ERC Energy Research Centre
AIACC African WorkshopDakar, Senegal, March 2004
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The Berg River Basin, South AfricaSchematic,
cont
ERC Energy Research Centre
AIACC African WorkshopDakar, Senegal, March 2004
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The Berg River Basin, South AfricaEconomic Model

• Upper Berg River Spatial Equilibrium Model is an
  optimisation model that will simulate
• Competition for water between urban and
  agricultural water use over space and time
• Ex-ante investment in additional reservoir
  capacity
• Ex-post reservoir operation to meet urban,
  agricultural and environmental demands for water
• Objective function is based on economic
  efficiency, but model can also simulate
  alternative allocation systems.

ERC Energy Research Centre
AIACC African WorkshopDakar, Senegal, March 2004
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The Berg River Basin, South AfricaAdaptation
Options

• Consider specifically
• Markets develop a system of water rights
• More storage (at an economically optimal level)
  collective autonomous adaptation by farmers
  and/or government
• Marginal costs of environmental reserve flow
• Scenarios
• Current climate
• Climate Change Scenarios (downscaled GCM, what
  if)
• Partial Adjustment (reservoir capacity and
  institutions fixed, farm and reservoir management
  variable)
• Full adjustment (reservoir capacity and
  institutions are also variable, partially and in
  combination)

ERC Energy Research Centre
AIACC African WorkshopDakar, Senegal, March 2004
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The Berg River Basin, South Africa Schematic
ADAPTATION OPTIONS
MANAGEMENT/INVESTMENT DECISIONS
COSTS/BENEFITS
ERC Energy Research Centre
AIACC African WorkshopDakar, Senegal, March 2004
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The Berg River Basin, South AfricaEvaluating
Costs and Benefits

• COSTS (over 30 year time period)
• Changes in farm production costs
• Changes in investment costs for new capacity
• Changes in administrative costs associated with
  water market transfers
• BENEFITS
• Changes in willingness to pay for water by
  farmers and urban users (PV) efficiency
  increases
• Benefit of delay in new storage

ERC Energy Research Centre
AIACC African WorkshopDakar, Senegal, March 2004
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Conclusions

• The methodology allows us to
• Estimate climate change damage without the
  alternatives (additional storage capacity, water
  markets, both) and
• Estimate benefits and costs associated with
  reducing climate change damages for each
  alternative for each and multiple climate change
  scenarios
• Determine the optimal storage capacity for each
  and multiple climate change scenarios
• Estimate the cost of making ex-ante decisions
  about reservoir capacity, if the climate change
  scenario turns out to be wrong ex-post
• Minimizing the cost of making these mistakes
• Preliminary impacts results indicate an expected
  reduction in runoff, which will exacerbate the
  existing water scarcity

ERC Energy Research Centre
AIACC African WorkshopDakar, Senegal, March 2004
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End

• Thank you, for more information contact
• Jabavu_at_energetic.uct.ac.za
• Debbie_at_energetic.uct.ac.za
• Molly.hellmuth_at_risoe.dk
• Mac.callaway_at_risoe.dk
• Daan_at_dfpt.co.za
• Or, please visit
• http//www.start.org/project_pages/aiacc.html

ERC Energy Research Centre
AIACC African WorkshopDakar, Senegal, March 2004