Valuing ecosystem services linked to river flows in Lower Zambezi basin, Mozambique. Safa Fanaian, Susan Graas, Yong Jiang & Pieter van der Zaag

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1 Valuing ecosystem services linked to river flows in Lower Zambezi basin, Mozambique Safa Fanaian, Susan Graas, Yong Jiang & Pieter van der Zaag WaterNet conference Dar es Salaam, 31 Oct 2013

2 Content Introduction Problem statement Research Objective & Research questions Methodology Data analysis Economic value Service suitability Curves Service Provision Index Results Limitations and advantages Conclusion Q&A

3 Introduction Ronco et al., 2010

4 Background Flow in m3/sec m Cahorra Bassa dam constructed in 1974, with an installed capacity to produce 2075MW. The dam produces base load power; is owned by the Govt of Mozambique and run by Hidroeléctrica de Cahora Bassa (HCB) through a concession. Flows at the Cahora Bassa gorge Unregulated ( ) Post Kariba dam ( ) 2000 Kafue gorge+ Kariba dam ( ) Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Post Cahora Bassa dam ( )

5 Problem Statement Operating policy of Cahora Bassa dam caters to maximize hydroelectricity production Changing operating policy= Less power = lower economic return This leads to uniformity in flows of the river and removes seasonal high and low flows Uniformity has caused changes in ecosystems downstream. At present there is no collective economic value of ecosystem services in the Lower Zambezi Basin There is not enough information to compare or derive trade-offs between regulation for hydropower or peaks for environment.

6 Concepts Ecosystem service approach Ecosystem goods Economic value Environmental flows

7 Research Questions Link flows of the Lower Zambezi river, with the ecosystem goods to estimate their economic value. Assess the economic trade-offs between the goods that are provided by the ecosystem service in the Lower Zambezi basin as flows change:? What are the ecosystem goods provided by the water flows downstream of Cahora Bassa dam?? How are these goods defined and dependent on the flows of the Zambezi River?? What are the economic values of these goods?? What is the trade-off between the dam operating flows for environment and those for hydropower production?

8 Challenges and Innovation 1. Not to double count ecosystem services UK NEA (2010) 2. To assign a value to a flow regime rather than a specific flow or volume Korsgaard (2006)

9 Methodology UK NEA (2010) ecosystem classification approach used for Identification of Ecosystem Goods Korsgaard et al. (2008a, b) method to link economic value to flows Calculated Service Suitability Curves Application of economic valuation Calculate Service Provision Index Six Scenarios Value goods for different scenarios Analyze trade-offs

10 Identification of ecosystem goods Ecosystem processes/intermediate services Primary production Nutrient cycling Soil formation Water cycle Final ecosystem services Water for subsistance Commercial Fish/shrimp/crab Medicinal plants Commercial agriculture Chemical water quality Physical water control Ground water replenishmnet Invasive species regulation Erosion control Carbon trapping Biodiversity conservation wildlife services and goods Cultural /religious / historical actvities Good(s) Drinking water Fish/shrimp catch Energy (hydropower) Subsistence crops & fishing commercial crops Recreational fisheries/ hunting Flood damage avoided Invasive species damage livestock Tourism navigation Carbon sequesteration timber Biodiversity existance value Mining

11 Goods: Hydropower Fisheries Irrigated Agriculture Wildlife Tourism (Marromeu complex) Flood damage avoided Identification of ecosystem goods

12 Application of economic value Goods Valuation method used Information used Sources Hydropower Fisheries Irrigated agriculture Adjusted market price Adjusted market price Adjusted market price -Power generated/ yr -Sale price/yr -Costs -Catch rate -Current Market price -Hectare under cultivation -Average Yield/ha -Production cost HCB annual reports (2008, 2010) Discussion IIP, IDPPE (2007 fisheries survey), Mafuca (2007) Source data Sena sugars, Discussions with planters Wildlife tourism (Marromeu Reserve) Flood damage avoided Adjusted market price Cost avoided Wildlife stock Hunting permits & tourism -Area flooded -Infrastructure, agricultural, housing asset damage Guveya and Sukume (2009) World Bank (2010)

13 Service Suitability curve (Korsgaard et al. 2008)

14 , Service Provision Index where: i = period identification SS i (q) = Service Suitability of period i; q = flow available for a period (m 3 /s); j = service/good identified; n = total number of periods; W i = weightage of period i subject to the constraint The final economic value is

15 Scenarios Flows m3/s Dec Jan Feb S1 = Pre-dam era flows Mar Apr May Jun S2 = post-dam average flows ( ) S3 = December high flow of 6,200 m 3 /s S4 = January high flow 5,250 m 3 /s S5 = Jan and Feb high flows of 3,300 & 5,400 m 3 /s S6 = High flow in February of 8,250 m 3 /s Jul Aug Sep Oct Nov S1 S2 S 3 S 4 S 5 S 6 Baseline 2010

16 Assumptions The calculated values are temporally limited to the same year. Spatially, the benefits are calculated for only the lower Zambezi basin. The valuation is purely financial and does not take into account existence, option or bequest values. Future market dynamics are not taken into consideration in scenario calculations.

17 Data analysis Actual Economic Value for year 2010 Good Net value (million USD) % of total Production per good Hydropower % 14,662 GWh Irrigated agriculture 53 18% 10,850 ha Fisheries (Lower Zambezi Basin ) 33 11% 23,339 tons Average values /unit 11 USD/MWh 4,890 USD/ha 1,403 USD/ton Fisheries (Cahora Bassa lake) 47 16% 24,017 tons 1,941 USD/ton Wildlife tourism 6, (Marromeu delta) 2% 11,000 km 2 USD/ km 2 Flood damage avoidance 4.5 2% - - Total value 296

18 Data analysis Suitability Service Suitability Curves SS curve for Hydropower (Normal year) Flow ranges Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

19 Data analysis SS curve for Agriculture suitability Service Suitability Curves Oct 0.2 Aug 0.1 Jun 0 Apr Feb Dec Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov flow ranges

20 Data analysis SS curves for fisheries Suitablity Service Suitability Curves Dec Feb Oct Aug Jun Apr Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov flow ranges

21 Data analysis Suitability Service Suitability Curves SS curve for Flood damage avoidance Feb Apr Oct Aug Jun Dec Jan Feb Mar Apr May Jun Jul Aug Sep Dec Oct Nov Flow ranges

22 Results Service Provision Index for the year 2010 Hydropower: 1.0 Fisheries: 0.38 Irrigated agriculture: 0.77 Flood damage avoided: 0.62 Wildlife tourism: 0.40 The current flow regime maximises hydropower generation only

23 Results Service Provision Index for the year 2010 Sensitivity analysis Hydropower Economic Value (million MZN) Max Min Actual Fisheries (shrimp) Shrimp value (*Million USD) Max Min Actual

24 Results Million USD per year Calculated Economic Values based on scenarios Flood damage avoidance Wildlife tourism Fisheries (CB lake) Fisheries (LZ) 50.0 Agriculture 0.0 Baseline (2010) S1 S2 S3 S4 S5 S6 Scenarios Hydropower

25 Conclusion The total economic value for 2010 is 296 million of which hydropower is 52%. Service suitability curves have shown that: hydropower and irrigated agriculture love uniformity of flows fisheries, wildlife tourism and flood damage avoidance require peaks to be sustained Scenario 5 (Jan & Feb high flows of 3,300 & 5,400 m 3 /s) gives highest global benefits, with downstream users benefiting a lot (55 Million USD/yr) and hydropower losing less (-7 Million USD/yr) So trade-offs are, in theory at least, feasible.

26 Conclusion Strengths Utilizes the flow regime rather than marginal value per volume of water Avoids double counting of ecosystem services Workable even in data scarce region Total economic value is likely to be higher, since some services were not included Challenges Conceptual: ecosystem goods vs. services Variation in values over the years Range of SPI values with large uncertainties The SPI method is limited, as damages occurring in one months are not carried over to the next month

27 Future considerations Once the annual flooding events are implemented it is necessary to monitor how the ecosystem responds, in order to check and improve the current model. What if hydropower generation capacity (HCB left bank; Mpanda Nkuwa) would be increased significantly?

28 Thank you!

29 References Guveya, E., & Sukume, C. (2009). The economic value of the Zambezi Delta: WWF. Korsgaard, L., Jonch-Clausen, T., Rosbjerg, D., & Schou, J. S. (2008). The Service Provision Index (SPI): Linking Environmental flows, Ecosystem Services and Economic Value. Water and Energy Abstracts, 18(1), Ronco, P., Fasolato, G., Nones, M., & Di Silvio, G. (2010). Morphological effects of damming on lower Zambezi River. Geomorphology, 115(1-2), World Bank. (2010). The Zambezi River Basin: A Multi-Sector Investment Opportunities Analysis (Vol. 1-4): The World Bank, Washington, D.C Zambezi Atlas. (2011). Atlas for the Preparation for and Response to Disasters in the Zambezi River Basin- Mozambique: National Institute for Disaster Management (INGC), UEM Geography Department, and FEWS NET.

30 Sensitivity Sensitivity test???? 60,000,000 50,000,000 40,000,000 Present value (MZN) ,000, ,000, ,000, Annex 1 Hydro-power Shrimp high low Actual

31 Annex 2 ( max-min values) Min Max Flood damage avoidance Toursim in Delta (Biodiversity) Flood damage Fisheries avoidance (CB) Toursim Fisheries (LZ) Fisheries (CB) Fisheries (LZ) Agrciulture Agrciulture Hydropower Hydropower