Financing watershed
-
Upload
hemesiri-kotagama -
Category
Environment
-
view
87 -
download
0
Transcript of Financing watershed
A CONCEPTUAL FRAMEWORK FOR A NATIONAL POLICY ON FINANCING WATERSHED MANAGEMENT
IN SRI LANKA
Hemesiri Kotagama
Nimal Gunawardena
Hemesiri Kotagama
THEORY TO PRACTICE
Desire for a commodity - demand – – could be achieved in a market -effective demand – – only if the individual is able to pay for it.
Policies, programs, plans, projects, and strategies to achieve sustainable development would be:
– ineffective expressions of desires, – if not backed by mechanisms to finance.
Hemesiri Kotagama
Integrated Water Resource Management (IWRM)
Biswas, et.al. (2005) noted that the World Summit on Sustainable Development held in 2002 had called for IWRM plans and that:
– “Regrettably, few any of the completed IWRM plans considered how the overarching water governance and management system is to be financed; indeed some did not mention financing at all. … The plans were typically silent on who should raise the funds, for what particular purpose and who should bear the pay back cost”.
Hemesiri Kotagama
“WATERSHEDS’’ IN FINANCING WATERSHEDS
The reports by Camdessus (2003), Gurria (2006) and Rees et.al (2008) are ‘watersheds’ on factually establishing:
– the nexus between sustainable management of water and its financing;
– that financing of the water sector has been neglected; and
– on conceptualization mechanism to finance the conservation of the water sector.
Hemesiri Kotagama
AVAILABLE GUIDANCE
Camdessus (2003) – has addressed the supply of finances, to finance
domestic water supply and sanitation; Gurria (2006)
– has examined the demand for finances for water supplies, by local governments’ and
Rees et.al. (2008) – has examined, overarching issues of financing
water management and governance.
Hemesiri Kotagama
CONCEPTUAL FRAMEWORK ON FINANCING IWRM
An ideal conceptual framework to comprehensively examine the financing of the water sector would be, – to consider the demand and supply aspects of
financing, – at each functional node (where it interacts with
people and provides a service) of the water cycle.
Hemesiri Kotagama
WATER AND FINANCE CYCLES
Financing Climate Change
Financing Mangrove Management
Financing Watershed
Hemesiri Kotagama
OBJECTIVE OF THE CHAPTER
Propose a logical framework to conceptualize a policy on financing watershed management.
Theoretical ideals of economics, experiences and opinions are presented and critically reviewed, as guidance to formulating a pragmatic policy.
Hemesiri Kotagama
EMPIRICAL AND NORMATIVE ASPECTS: The Need
Annual funds required by the water sector would have to be doubled, to achieve the millennium development goals by 2015.
However, global water sector is experiencing ‘decreased, static, or marginal’ changes in finances.
Financing has been biased towards capital investments
Hemesiri Kotagama
EMPIRICAL AND NORMATIVE ASPECTS: National sovereignty
Respecting national sovereignty is a prime requirement of a national policy.
Water is national resource with national benefits, it is best that watershed conservation is nationally financed.
However, in the short-term, developing countries with budgetary difficulties, may be required to depend on foreign finances to overcome cash flow problems.
Hemesiri Kotagama
EMPIRICAL AND NORMATIVE ASPECTS: Endogenous financing
It is ideal if: – finance for environmental conservation is– generated within the environmental sector, – through revenues from resource users.
Hemesiri Kotagama
EMPIRICAL AND NORMATIVE ASPECTS: Market economics
IWRM Principle– ‘water has an economic value in all its competing
uses and should be recognized as an economic good’
If the market economic system is used to allocate water, where it could best be used, and where market failures are rectified, it would enable to conserve water.
Hemesiri Kotagama
EMPIRICAL AND NORMATIVE ASPECTS: Stakeholder participation
Economic: – The market economic system, enables stake
holder participation – participation may be inequitable.
Political: – Trend towards decentralization of governance. – local governments are heavily dependent on
central government finances and often starved for finances
Hemesiri Kotagama
EMPIRICAL AND NORMATIVE ASPECTS: Organizational reform
Neither extremes of combining nor fragmenting of sub-sectors and organizations in the water sector is optimal.– combining organizations may allow cross-
financing. – fragmenting organizations may lead to
constraining financing options.
Hemesiri Kotagama
EMPIRICAL AND NORMATIVE ASPECTS: Sources and mechanisms
3 sources: – water users, – tax payers and – aid donors
Mechanisms of financing– user charges, regulatory fees and levies, payments for
ecosystems services, creation of pollution markets, pollution taxes and abstraction charges etc.
Payments for Watershed Services (PWS) Public funding would remain dominant in water
sector.
Hemesiri Kotagama
THEORY: MARKET FAILURE AND PUBLIC FINANCING: Case of Watershed
The theoretical model:
– Explains the market failure to finance watershed conservation.
– Rationalizes public financing of watershed conservation.
Hemesiri Kotagama
ECONOMIC SIGNIFICANCE OF WATERSHED CONSERVATION IN SRI LANKA
Somarathne (2001)
– Onsite cost due to soil erosion as 953 Rs M/Yr
– Offsite cost due to silting of reservoirs and loss of hydro-power generation 15 Rs. M/Yr
Hemesiri Kotagama
FINANCING WATERSHED CONSERVATION IN SRI LANKA
Mostly foreign financed projects
Financing is discontinuous
Need commitment of national financial allocations
Hemesiri Kotagama
FINANCING WATERSHED MANAGEMENT IN SRI LANKA: Level of financing
Only 1% of the GDP has been spent on environmental related projects,
– a country should spend 2 to 3 % of the GDP on environmental investments to ensure sustainable development.
Theoretically, for development to be sustainable, one view is that investment should be equal to the sum of, rents from natural resource depletion and the environmental damage (Hartwick and Olewiler, 1986)
– The level of investment is below the expected levels of investment for sustainable management of Upper Mahaweli watershed.
Hemesiri Kotagama
FINANCING WATERSHED MANAGEMENT IN SRI LANKA:Sources of Financing
Declining availability of foreign finance Possibilities for environmental sector to be
neglected in public finances– Public financial crisis– Political process
Hemesiri Kotagama
FINANCING WATERSHED MANAGEMENT IN SRI LANKA:Financing Mechanisms
National Level: – Rationalising and earmarking allocations
Provincial Level:– Allowing to generate own financing– Strengthening capacity for above
Hemesiri Kotagama
FINANCING WATERSHED MANAGEMENT IN SRI LANKA:Financing Options
Reducing need Improving efficiency Acquiring finance
Hemesiri Kotagama
FINANCING WATERSHED MANAGEMENT IN SRI LANKA: Acquiring finances
– Who should pay? Foreign vs National (both).
– National: General vs. specific taxes
– How much to charge? – How to charge?
Hemesiri Kotagama
FINANCING WATERSHED MANAGEMENT IN SRI LANKA:Allocation of Finances
Who should allocate? How much should be allocated.
– Provincial environmental accounting.
Hemesiri Kotagama
CONCLUSION
The present level of financing watershed management, in Sri Lanka, is sub-optimal.
Foreign finances, for watershed management investments, is declining. Finances to manage watersheds should be secured nationally.
Watershed management will have to continue to depend on public financing.
Earmarking the allocation of public finance, for watershed management, from the central government to provincial governments and implementing agencies would be required.
Provincial governments must be encouraged and conditions created, to generate finances for watershed management.
Hemesiri Kotagama