1. The Economic Value of Seawater Desalination –the Case of Israel
Dr. Ruslana Rachel Palatnik
NRERC, The University of Haifa
Yezreel Valley College, Israel
Thank for the opportunity to adress this distingushed audience

2. Water Economy, Israel 2015 (2169 Million Cubic Meters – MCMs)
Oceans and seas constitute natural capital that provides important services whose economic impacts are often unrecognized or underestimated. One of these services is seawater desalination which can provide an economic value that exceeds its direct costs.
In the decades to come, seawater desalination is expected to be an important source of potable water in water-stressed countries bordering oceans and seas, in particular in regions with fast population growth where further decline of natural freshwater availability is expected due to climate change.
Israel, being part of the "thirsty Middle East region”, faces serious water scarcity. This has led to an ever-growing reliance on alternative water sources, where seawater desalination has been the main source for addressing the shortages. The Israeli water economy entered a stage of energy intensive seawater desalination in 2005 with facilities built on the Mediterranean coast. Desalination plants, developed through public-private partnerships, currently provide about a quarter of the potable water supply with plans to expand the desalination capacity if required.
1.Exploitation of alternative water sources is expected to grow in water-stressed countries with fast population growth, especially in regions where a further decline of natural freshwater availability is expected due to climate change.
2. Increasing utilization of non-freshwater
3.usually leads to salinity build-up in fields and water sources as well as accumulation of various pollutants - both having a considerable impact on the suitability of non-freshwater for irrigation due to constraints associated with crop salinity tolerance and food safety regulations.

3. Valuing the Sea as the source for desalinated waterPw
Swn
Value of Desalination A
Pwn B
PwDes
SwDes
So generally speaking, if we have an aggregate demand curve D that represents the demand for water by all the sectors in the economy, households, nature and neighbor countries, and we have the aggregate water supply step function that aggregates natural water, treated and saline water sources, then the equilibrium quantity is according to the accumulate capacity of all those sources, and the price is defined according to the capacity constraint much higher than the marginal cost of the most expansive water source. We can refer to this difference between equilibrium price and the marginal cost as the scarcity rent of water.
Alternatively, if a sufficiently large desalination capacity is installed, then the equilibrium quantity of water is defined where supply equals demand and the price equals marginal cost of water and its marginal benefit. No scarcity rent.
The value of desalination in this case is the value of increase in consumer surplus
this paper, we assess the economic value of seawater desalination that stabilizes the water supply and diminishes the effects of natural freshwater shortages. The analysis employs the Israeli computable general equilibrium (CGE) model – IGEM, which estimates the benefit of desalination gained by avoiding water shortages that cause an economic loss with impact on the entire Israeli economy. D
Qwdes Qw
Qwn

4. Water-Energy-Food General Equilibrium
CGE – Computable General Equilibrium Analysis
IGEM
(Israeli General Equilibrium Model)
About 12% of the total energy used in the state is related to water (Water plan update 2013).
5.Computable general equilibrium (CGE) models are most suitable for analyzing the distributional impacts of policies whose effects may be transmitted through multiple markets. diffusion of policy effects through indirect links between water economy and other economic players.
6. Most CGE-based studies have difficulties adequately representing water due to the lack of an explicit economic value which is commonplace in water-abundant countries.
Analyzing these impacts with CGE models requires an adequate representation of the water sector; particularly capturing the correct substitutability between all water types that differ in their salinity levels and other relevant qualities.
We developed a linked CGE - farm-level model of a water economy with representation for multiple water types characterized by different qualities.
We estimated the Constant Elasticity of Substitution (CES) rates between different irrigation water types used in agriculture. This mechanism accounts for the effects of salinity on yields and takes into consideration food safety regulations for irrigating crops with treated wastewater.
11. We employ the model to assess the impact of water shortage on the Israeli economy, where a steadily growing water scarcity is leading to an increasing utilization of alternative water sources.
Source: WBCSD

5. Water Shortage Scenarios (IWA, 2015)
Shortage of Potable Water (%, MMY) at Desired Supply Reliability Level of Potable Water
Natural Fresh-water
MCMY
Desalination
Year
Scenario
100%
95%
90%
75%
MMY %
520 31
320 22
220 16
1,140
280
2020 1 50 4 -
750 2
720 40
620 36 33
420 28
1,080
2030 3
250 19
150 12
1320 56
1220 54
1120 52
1020
1,020
2050 5
850 45 42
650 39
550 35 6
Based on Water Master Plan (IWA, 2015)

6. Results – 2050: Changes in Main Indicators
Desired Supply Reliability Level of Potable Water
Indicator
Desalination
MCMY
Scenario
100%
95%
90%
75%
165.8
158.4
144.6
132.1
Price of potable water
280 5
-19.7
-19
-17.7
-16.4
Agricultural production
7.4
7.1
6.5
5.9
Price of agricultural products
-2.5
-2.4
-2.3
-2.1
GDP
105.2
91.6
79.7
65.7
750 6
-13.6
-12.1
-10.7
-9.1
4.7
4.1
3.6
2.9
-1.8
-1.6
-1.4
-1.2

7. The Economic Value of Seawater Desalination
The results reveal that the stabilization value of desalinated seawater due to its role in eliminating natural freshwater shortages far exceeds its supply cost. Our analysis demonstrates that the economic value of services provided by oceans and seas might be underestimated if evaluated based on their cost or market price.

8. “When the well is dry, we know the worth of water.”
Benjamin Franklin
So the key insight here is that the Sea plays an important role in the sustainable development of the Mediterranean countries, not only as the provider of food, of ecosystem services, of recreation services, but also as the source of potable water. As Phoebe explained in the panel she chaired yesterday, when we make decisions for sustainable development we must take into account not the direct cost of desalination, not even the social cost of desalination that includes externalities, but the value of the sea as the preventer of water scarcity
key messages for NRERC we conduct research on the topics of
meet Phoebe and Stella? Monaco foundation 2018, H2020
Fill free to approach me when the session ends
Baum Zvi, Palatnik, Ruslana Rachel, Iddo Kan and Mickey Rappaport-Rom "Economic Impacts of Water Scarcity under Diverse Water Salinities" (2016) Water Economics and Policy (WEP), Special Issue on Economics of Salinity Impacts and Management. WEP 02(01).