Economic Study on the Impacts of Low Water Levels on the Saint-Laurent River and Adaptation Options

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1 Economic Study on the Impacts of Low Water Levels on the Saint-Laurent River and Adaptation Options Adaptation Canada April 13th 2016 Ottawa Nicolas Audet Claude Desjarlais, Caroline Larrivée & al. 1

Context 70% of Quebec s population along the Saint-Laurent Freshwater for

maritime transport, hydroelectric production, boating and tourisme,

Ecosystems, wetlands, habitats Very low water levels ( 1999, 2001, 2010,

2 Context 70% of Quebec s population along the Saint-Laurent Freshwater for 40% of population Socio-economic activity : Urban water management, maritime transport, hydroelectric production, boating and tourisme, fishing, agriculture, industries, riverbank properties, etc. Ecosystems, wetlands, habitats Very low water levels ( 1999, 2001, 2010, 2012, ) International Joint Commission and LOSL regulation plan Quebec Maritime Strategy Climate change

3 Project objectives Assess the economic costs of the potential impacts of climatechange-induced low water levels on the Saint-Laurent River Cost-benefit analysis (CBA) of adaptation options Cross-sectoral analysis 3

4 Study area Fluvial portion of the Saint-Laurent River between the Ontario-Quebec border and Trois-Rivières

5 Sectors Maritime Transport Municipal Water Supply & Wastewater Discharge Ecological Services and Fishing Recreational Boating & Tourism Hydropower Generation Waterfront Property Values

6 Approach and assumptions 1. Characterisation of sectors and impacts of past low water levels 2. Hydroclimatic scenarios on a 50 years horizon : Potential impacts of future low water levels and their costs 4. Adaptation options for some sectors 5. Cost-benefit analysis of adaptation options 6. Cross-sectoral analysis Collaboration with experts and consultation of stakeholders and users Assumption of socio-economic status quo Discount rate of 4% (with sensitivity analysis at 2% and 4%) Canadian $

7 Hydroclimatic scenarios Annual average flow at Sorel for the historical period (black), and what-if scenarios 1 (blue) and 2 (red). A reference scenario based on data from 1953 to 2012 at Sorel. Two what-if scenarios for the period. 7

8 Hydroclimatic scenarios What-if scenario 1 is characterized by a diminution of the flow rates including a few years period with very low flows. It is similar to the warm and dry scenario (CGCM2 A21) of the International Joint Commission(IJC). What-if scenario 2 reproduces the reference scenario but with greater seasonal variations year to year. It is based on net basin supply (NBS) calculated from the output of the MRCC 4. Saint-Laurent River flows at Sorel corresponding to reference (black/grey) and what-if scenarios 1 (blue) and 2 (red). 8

9 Sectoral Studies 9

collaboration of Hydro-Québec Beauharnois (1,853 MW) and Les Cèdres

10 Hydroelectricity Production P.I. : Claude Desjarlais (Ouranos) and Laurent Da Silva (Ouranos) with collaboration of Hydro-Québec Beauharnois (1,853 MW) and Les Cèdres (103 MW) are two run-of-theriver hydroelectric power stations on the Saint Laurent River operated by Hydro-Québec. 10

11 Hydroelectricity Production What is the impact of reduced flows on power generation capacity? Power generation capacity (P) measured in megawatt (MW) as a function of head (H) and flow (Q). Impact of climate change over hydroelectric production Flow Head Production M³/S % Reference 7,266 Scenario 1 6,854-6% +1% -3.2% 11

12 Hydroelectricity Production What is the economic impact of the reduced power generation capacity? Total impact of production changes at Beauharnois-Les Cèdres (in millions of 2012 $) Scenario What-If # 1 undiscounted 4% Average replacement cost (3.74 / kwh) -742,6-44,6 Marginal replacement costs (7.5 / kwh ) -1,489,1-89,5 Export prices -902,9-30,5 Scenario What-If # 2 undiscounted 4% Average replacement cost -76,9-26,1 Marginal replacement costs -154,3-52,2 Export prices 33,2 20,9 12

13 Hydroelectricity Production Even with limited reduced flows, climate change could have a significant economic impact on energy production from the Saint-Laurent. As the energy replacement cost increases, the value of this loss is expected to grow over time. Beauharnois-Les Cèdres being a run-of-water power station, few immediate adaptation measures are available. Energy efficiency is a way to reduce the impacts by postponing the recourse to more costly investments. Other measures could include construction of new hydroelectric power capacity (reservoirs and plants) or windmill parks. 13

It can impede access to marinas and boating areas, and increase risk of damages to boats.

14 Recreational Boating and Tourism PI : Michel Archambault, Stéphanie Bleau, Kate Germain, Chaire de tourisme Transat, UQAM and Pierre Lefebvre UQAM Low water levels can be a nuisance for boating and cruise-ships. It can impede access to marinas and boating areas, and increase risk of damages to boats. 3 types of boating considered: Recreational boating (48 marinas + public and private ramps; ) Inbound cruises (16 active operators) International cruises (ports of Montréal and Trois-Rivières) 14

Recreational Boating and Tourism Focus on recreational boating Interviews with marina administrators and surveys with recreational boaters : Infrastructures, boats, expenditures, impacts of past low

15 Recreational Boating and Tourism Focus on recreational boating Interviews with marina administrators and surveys with recreational boaters : Infrastructures, boats, expenditures, impacts of past low water levels, adaptation strategies, intention to practice boating in future, willingness to pay, etc. Economic impact based on two indicators 1. Nbr of boating days lost (based on what-if scenarios and assumptions) 2. Willingness to pay (consumer surplus) for boating Assumptions Days with a reduction of water levels of more than 10 cm : 100% are lost. Days with a reduction of water levels of less than 10 cm : 50% are lost. 15

16 Recreational Boating and Tourism In the 48 marinas the nbr. of boats (motor and sailboat) is estimated at 9,162. On average, a motor boat is used 50 days/year, and a sail boat 59 days/year. Around 488,000 boating days during the 2014 season in the study area. Under scenario 1, the number of lost boating days is 433 in the Montreal zone, 246 in the Sorel region, and 142 in Lake Saint-Pierre. (nbr. of days lost) x (nbr. of boats) x (consumer surplus value) = economic impact Reference scenario (4% discount rate) What-If scenario #1 (4% discount rate) Costs of impacts (in M 2012 $) (129 65) What-If scenario #2 (4% discount rate) 77 (142-65) 16

17 Waterfront Property Values P.I. : Unsal Ozdilek (UQAM) Objective Estimate the economic impact of low water levels on real estate values of waterfront properties Data Estimated value in property assessment role (1 km from water) : 150,272 units Observed sales prices between 2000 and 2015: 53,821 transactions Units classed in three categories : No view / no access (136,088 units) With view / no access (9,893 units) With access to water (4,291 units) 17

18 Waterfront Property Values Property Assessment Observed Sales prices Number of units No view / no access Avg. value Difference Added value in proportion View only % Access % Number of units No view / no access Avg. value Difference Added value in proportion View only % Access % 18

19 Waterfront Property Values Price is a function of a set of physical and geographic variables : type of habitation, surface, garage, municipality, etc. Multi-linear regression of prices from the sales on observed stream flow. The model suggests a strong correlation between price and access. When a property with access is sold, the model suggests a premium of around $ 15.2 per m3/s of additional water flow. Property values are depreciated when water flow rates are lower. For Scenario 1, with a discount rate of 4%, the economic impact for the 4,291 properties with access would be of - $72.5 M. This represents a -2 % negative impact in the total value of these properties. 19

20 Conclusion All sectors would bear economic impacts, most of them in the tens or hundreds of millions $ on a 50 year horizon. Greatest economic impact would be on ecosystems services of Lake Saint-Pierre. Sectoral adaptation options have been identified and analysed for maritime transport, municipal water and ecosystem services. Some options would be economically relevant. This study is an important step forward but remains exploratory. Limits and challenges regarding study area, diversity and probability of scenarios, assumption of socio-economic status quo, data and methodology, impacts and adaptation options considered. Need for further research, monitoring, adaptive management, technical studies Climate change impacts on Saint-Laurent River are not limited to low water levels : flooding, erosion, water quality, etc. 20

21 Thank you! Sectoral reports and synthesis will soon be on-line 21

St. Lawrence Action Plan Presentation to the Great Lakes and St. Lawrence Cities Initiative. Québec City June 28, 2012

St. Lawrence Action Plan Presentation to the Great Lakes and St. Lawrence Cities Initiative. Québec City June 28, 2012 St. Lawrence Action Plan 2011-2026 Presentation to the Great Lakes and St. Lawrence Cities Initiative Québec City June 28, 2012 1 Canada/Quebec cooperation on the St. Lawrence River PHASE I 1988-1993 Conservation