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Module 4: Cost-effectiveness analysis Example of a twinnng project in Malta Yannick Pochon Istanbul, 2015.

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Presentation on theme: "Module 4: Cost-effectiveness analysis Example of a twinnng project in Malta Yannick Pochon Istanbul, 2015."— Presentation transcript:

1 Module 4: Cost-effectiveness analysis Example of a twinnng project in Malta Yannick Pochon Istanbul, 2015

2 The case of Malta

3 Draft document submitted to consultation, presented and discussed during workshops and updated.

4 Six main issues for groundwater management were identified for Malta groundwater resources.  Over abstraction is problematic for the majority of groundwater bodies in Malta. Tackling over- abstraction requires reducing groundwater abstraction for existing water users.  High nitrate concentrations above drinking water quality standards are recorded. Values 5 times higher than the permitted threshold of 50 mg of nitrate per liter are recorded in some cases.  More significant engagement in groundwater regulation and control is required to meet the environmental objectives of the WFD and to avoid infringement procedure at the European level.  Financing of the water sector is a significant issue. Current high subsidy rates are unlikely to be sustainable over the long term with forthcoming high investments in the water sector. And they are not complying with cost-recovery obligations promoted by the WFD and attached to the use of European funds.  There is limited awareness on groundwater issues at all levels of society in Malta. This hides responsibility while constraining implementation of innovative solutions.  More knowledge is required for supporting effective management of groundwater resources in Malta.

5 Overview of measures (Quantitative)  Promote water saving practices for households, industries, and farmers  Use economic instruments (meters +environmental tax) to reduce groundwater abstraction by private borehole owners (farmers, industries, households)  Increase rain water harvesting (households, industry, farmers)  Increase available water resources: desalination (WSC, hotels) and waste water reuse (households, agriculture, industry)

6 Promote water saving practices Households Industries Livestock farms Distribution of water saving devices (aerators…) 15% reduction water use (flushes, taps) Cost : 1LM/household Adopted by 50% household Tax rebate on water saving appliances (25%) 40% reduction water use (taps/flush/wash.mach) Ad. Cost = 250 Lm/household Adopted by 25% households Water saving contracts: subsidy for equipment, best practices, meter and volume ceiling Large/medium farms (60% =540) Investment 3500 Lm/farm (blisters…) 1800 m3/year/farm saved Best available technologies (changes in industrial processes) + awareness raising and information campaigns

7 Increase rain water harvesting Households Industries FarmsHotels Rehabilitate ancient cisterns 6000 households Invest: 700 Lm Water saved: 60m3/household Construct new cisterns Target: 35% households Uptake: 20% = 5000 households Invest: 3600 Lm Water saved: 60 m3 RWH systems for livestock farms Target: 60% largest farms= 540 Invest. 6600 Lm/farm Water saved: 120 m3 Develop run-off storage for crop farms Installation of meters on wells + subsidy for tank construction (10%) Target: 10% farmers with registered well (= 529) Invest. 12,000 Lm/farm Water saved: 500 m3 RWH systems for livestock farms Target: 90% industries subject to GBR + permits Invest. 12,000 Lm/farm Water saved: 150 m3 RWH systems for hotels. Target: 50% 3 stars (4&5 stars already equipped) = 27 hotels Invest. 8600 Lm/hotel Water saved: 120 m3

8 Increase available water resources Desalination (RO)Wastewater reuse Increase RO at WSC plants no investment 0,225 Lm/m3 15 M m3/year Installation of small RO plants in hotels 4&5 stars + 50% of 3 stars Invest. 40,000 Lm/hotel O&M=0,40 Lm/m3 150 litres/capita/day WW reuse in hotels in hotels 4&5 stars + 50% of 3 stars (50 hotels) Invest. 50,000 Lm/hotel O&M=0,10 Lm/m3 70 liters/capita/day Grey water reuse by households 4&5 stars + 50% of 3 stars Invest. 40,000 Lm/hotel O&M=0,40 Lm/m3 150 liters/capita/day WW reuse in industry In 2-3 industrial area managed by MIP (measure not completely specified) Centralized distribution of TSE for irrigation Effluent treatment with RO & centralized distribution system + boreholes closed Invest. 25 M Lm (?) O&M=0,15 Lm/m3 20,000 m3/day( average)

9 Economic incentives through taxes on private boreholes  Justification of a tax:  Groundwater over-abstraction by private borehole owners generate an environmental cost (sea water intrusion).  This environmental cost can be assessed using the replacement cost method: each cubic meter over- abstracted makes necessary the desalination of one additional cubic meter, at a cost of 1,1 Lm/ m3.  The maximum value of an environmental tax can thus be equal to 1,1 Lm/m3.  Lower values (0,1 to 0,25 Lm/m3) have been assumed but this choice is open for discussion

10 Economic incentives through taxes on private boreholes Households Industries FarmsBowsers Tax = 0,2 Lm/m3 Installation of meters Target: 2000 boreholes Average use 800m3/year 40% water use reduction Tax = 0,1 Lm/m3 Installation of meters Target: 5000 boreholes Irrigating 3500 ha Average GW use 3000m3/year 20% water use reduction Tax = 0,2 Lm/m3 Installation of meters Target: 50 largest GW users Average GW use 20,000m3/year 30% water use reduction Tax = 0,25 Lm/m3 Recording of sales, quality control Access to TSE allowed Target: 25 companies Average GW use 2 M. m3/year 50% water sales reduction, partly replaced with TSE + enforcing groundwater regulation legal framework (REG 1_1) + Waste water reuse in agriculture (QUAN 5_1) Uncertainty on effect of the tax on consumption

11 Cost effectiveness analysis Investment cost (annual equivalent, considering lifetime of equipment) Recurring costs (operation & maintenance) Indirect costs for private actors Administrative costs of measure implementation (inspection, creation of information system, etc. Environmental cost (CO2 emission valued at the rate of 14 €/Ton)

12 Cost effectiveness analysis


14 = 3,4 M. m3 Over-exploitation = 4 Millions m3 (rough estimate) Implement the most cost-effective measures to reduce imbalance Net social benefit = 70 000 Lm /year Total investment cost = 5,8 M Lm Cost for drinking water consummers= 1,38 M Lm Benefit for government (tax payers) = -1,6 M Lm Cost for industry = 0,14 M Lm Environ. cost = 0,012 M Lm Desalinate additional volume of 0,6 M m3

15  Economics do not prescribe which measure to implement, other criteria should be considered  Social acceptance: implement changes progressively (install meters, declare boreholes, levy environmental tax…  Economic impact on economic activities (e.g. agriculture)  Consistency with existing regulatory framework The choice of measures remains a political choice based on multiple criteria


17 Table 13: Sensitivity analysis for the discount rate.

18  Preliminary results  Exploratory approach, all measures considered irrespective of possible technical & social acceptance constraints  Illustration of the methodology: showing the way forward  Intended to promote discussion  On the role of economics in the planning process  Help choosing between alternative options  Assess the total cost and its distribution among actors and sectors  But only one criteria among others to guide policy decision

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