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

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 AIACC African Workshop Dakar, Senegal, March 2004 ERC Energy Research Centre

The Project Areas… The Gambia The Berg River Basin, South Africa Cape Town AIACC African Workshop Dakar, Senegal, March 2004 ERC Energy Research Centre

The Berg River Basin, South Africa: The 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) AIACC African Workshop Dakar, Senegal, March 2004 ERC Energy Research Centre

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 The Berg River Basin, South Africa: Objectives AIACC African Workshop Dakar, Senegal, March 2004 ERC Energy Research Centre

The Berg River Basin, South Africa: Schematic MANAGEMENT/ INVESTMENT DECISIONS COSTS/BENEFITS AIACC African Workshop Dakar, Senegal, March 2004 ERC Energy Research Centre ADAPTATION OPTIONS

The Berg River Basin, South Africa: Schematic AIACC African Workshop Dakar, Senegal, March 2004 ERC Energy Research Centre

Climate HAD A2* GCM Reference (1961 –1990), Near ( ) and Distant ( ) future time periods AIACC African Workshop Dakar, Senegal, March 2004 ERC Energy Research Centre

The Berg River Basin, South Africa: Schematic AIACC African Workshop Dakar, Senegal, March 2004 ERC Energy Research Centre

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 AIACC African Workshop Dakar, Senegal, March 2004 ERC Energy Research Centre

The Berg River Basin, South Africa: Schematic, cont… AIACC African Workshop Dakar, Senegal, March 2004 ERC Energy Research Centre

The Berg River Basin, South Africa: Economic 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. AIACC African Workshop Dakar, Senegal, March 2004 ERC Energy Research Centre

The Berg River Basin, South Africa: Adaptation 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) AIACC African Workshop Dakar, Senegal, March 2004 ERC Energy Research Centre

The Berg River Basin, South Africa: Schematic MANAGEMENT/ INVESTMENT DECISIONS COSTS/BENEFITS AIACC African Workshop Dakar, Senegal, March 2004 ERC Energy Research Centre ADAPTATION OPTIONS

The Berg River Basin, South Africa: Evaluating 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 AIACC African Workshop Dakar, Senegal, March 2004 ERC Energy Research Centre

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 Conclusions AIACC African Workshop Dakar, Senegal, March 2004 ERC Energy Research Centre

Thank you, for more information contact: Or, please visit: End AIACC African Workshop Dakar, Senegal, March 2004 ERC Energy Research Centre