Water Pricing in Cyprus and the cost of water scarcity Christos Zoumides & Theodoros Zachariadis Water Pricing Workshop Limassol, 24 April 2017
Water Stress Water exploitation index (WEI) is defined as the mean annual total abstraction of fresh water divided by the long-term average freshwater resources. It describes how the total water abstraction puts pressure on water resources. Countries having high abstraction in relation to their resources are prone to suffer problems of water stress. Cyprus ranks as the most water-stressed nation across Europe. Source: Eurostat, 2017
Water Supply - Gov. Water Projects Source: WDD, 2017
Water use by sector Total Water Consumption (Mm 3 ) by Sector [average 2005-2007] Service Within GWP Outside GWP Total Domestic 68.68 11.22 79.90 Irrigation 38.24 105.01 143.25 Sewerage drainage 20.64 20.64 Recycled Water Supply 9.91 9.91 Source: WDD, 2011 Agriculture consumes more that 60% of total water use More than 70% of irrigation outside GWP private groundwater pumping
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 (Mm 3 /yr) Crop production water footprint 600 600 Water Footprint crop production 500 400 300 200 100 214 205 188 195 193 186 180 172 176 204 193 185 176 174 160 500 400 300 200 100 Precipitation (mm) 0 0 CWU blue [IR] CWU green [IR] CWU green [RF] Precipitation Source: Zoumides et al. (2012; 2013)
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Total Blue Water Use (Mm 3 /year) Annual Groundwater Use 200 150 100 50 0 Dams Recycled Groundwater Use Groundwater Overpumping GW contribution to irrigation use Max: 91% in 2008 (159 Mm 3 /year) Min: 66% in 2003 (116 Mm 3 /year) Avg: 81% per year (151 Mm 3 /year) GW overpumping (ρ gw ) Wet: 1.12 13 Mm 3 /year Dry: 1.53 56 Mm 3 /year Avg: 1.45 47 Mm 3 /year Source: Zoumides et al. (2013)
Groundwater Exploitation Rate Source: Zoumides et al. (2013)
Water economic productivity & blue water scarcity index Gross economic value by source of water ( ), based on 2009 crop prices Productivity of water use by source ( /m 3 ) WEP green[ RFIR] GEV WF green[ RF] green GEV WF green[ IR] RF greenir WEP blue[ IR] GEV WF blue[ IR] blue[ IR] Blue water scarcity index related to crop production in Cyprus WF BWSI BWA blue[ IR] crop Blue water available for crops remainder of blue water resources, after subtracting the environmental flows and the annual abstractions per sector other than crop production
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 ( 2009 million) Economic value & productivity in Cyprus Gross Economic Value crop production 400 300 200 100 0 1.25 1.00 0.75 0.50 0.25 0.00 Water Economic Productivity ( 2009 /m 3 ) GEV blue water [IR] GEV green water [IR] GEV Green [RF] Blue WEP [IR] Green WEP [RF+IR] Source: Zoumides et al. (2014)
Water services and uses Services Suppliers Uses Water Sources Water Development Households Domestic Department, Water Boards, Tourism Municipalities and Industry Communities Other uses water Irrigation Sewage wastewater collection & treatment; secondary Recycled water supply; tertiary & irrigation supply Water Development Department, Irrigation Associations, individual farmers Sewage Boards Water Development Department, Sewage Boards of rural communities Crop prod. Livestock prod. Industry Other uses Households Tourism Industry Crop prod. Tourism Other uses Surface water (dams), Groundwater, Desalination, Imported Surface water (dams and streams), Groundwater, Recycled water Effluent from households, Tourism and Industrial units Secondary treated effluent that undergo tertiary treatment Source: WDD, 2011
Water Pricing Policies 1960-2003 A long tradition in domestic & irrigation sector from the 1960s. Volumetric pricing started with the implementation of the first GWP and gradually became the usual practice for all water providers The aim was to recover the projects financial cost, according to the National Law and Loan Agreements for financing the GWP (IBRD). Drinking water pricing (wholesale) Full (financial) cost recovery; based on Balanced Budget method. Irrigation water pricing to individual farmers: the price should reach at least 38% of the cost but not exceed 40% (or 65% under special conditions); based on Present Worth Value method. Irrigation water pricing was subsidized due to the importance of the primary sector, food security, preservation of rural landscape, avoidance of urbanization Private groundwater abstraction was (and still is) not charged. The full financial cost is paid by the well owner; this cost is thought to be high due to the depth of the wells.
Water Pricing Policies 2004 to date The WFD was transposed to national legislation in 2004 (Law 13(Ι)/2004). After the final payment of the loans and in the light of WFD requirements (adaptation preparation), irrigation water pricing from GWP was revised in 2004. prices increased considerably (in some GWP were doubled) but kept at affordable levels a unified price in all GWP Prices for non-agricultural use (e.g. green areas or play courses) are considerably higher, reflecting the financial cost. Overconsumption charges are applied for the quantities exceeding the yearly permissible; multiple of the regular price strong barrier to overconsumption Despite the price reform in 2004 and the considerable price increase no change in the consumers behavior in the GWP could be observed with regard to water usage Prices for recycled water are set to considerably lower levels despite the high cost environmental benefits from the use; enter in the water balance; motives to use.
Recycled Water GWP (Surface & Groundwater) Irrigation Prices (GWP) 2004 to date Description / Use Price ( /m 3 ) To Agricultural Organisations for agricultural production 0.15 To individuals for agricultural production 0.17 For industrial consumption 0.19 For animal husbandry consumption 0.17 For consumption after overflow 0.05 For irrigation of football and golf courses 0.34 For irrigation of other sports places, hotels and house gardens 0.34 For fish breeding 0.17 For over consumption (if quantity exceeds the annual approved by more than 10%) 0.56 Other prices/ rates Fixed yearly rate ( /ha) 17.10 For connection: Water meter ( /meter) 68.00 For connection: Filter ( /filter) 5.00 For reconnection 25.50 To Agricultural Organisations for agricultural production 0.05 To private individuals for agricultural production 0.07 For sports activities 0.15 For irrigation of green spaces, parks and hotel gardens 0.15 For irrigation of golf courses 0.21 For abstraction from groundwater aquifers, which have been enriched with recycled water 0.08
Irrigation Domestic Cost assessment (Art. 9) A special study was undertaken (2008-2010) to re-estimate the total water service cost (financial, environmental & resource costs) Cost Assessment (in 2007 prices) Unit Cost ( /m 3 ) Within GWP Outside GWP Financial 1.17 (96%) 1.00 (89%) Environmental 0.04 (3%) 0.03 (3%) Resource 0.01 (1%) 0.09 (8%) Total 1.22 (100%) 1.12 (100%) Financial 0.34 (76%) 0.30 (61%) Environmental 0.10 (22%) 0.16 (33%) Resource 0.01 (2%) 0.03 ( 6%) Total 0.45 (100%) 0.49 (100%) (100%) Environmental - Resource - SewageFinancial1.21 Total 1.21 (100%) (65%) Environmental 0.08 (35%) Resource - RecycledFinancial0.15 Total 0.23 (100%) Cost Recovery = Revenues / Costs Cost recovery level (2005-2007) Within GWP Outside GWP Domestic 99% 75% Irrigation 41% 61% Sewage* 227% Recycled 38% * High levels of cost recovery due to sewage charges, prepaid by consumers that contribute to revenues. Source: WDD, 2011
Proposed Irrigation Prices in 2011 For GWP keep the two part tariff system: fixed cost plus variable volumetric charge Fixed annual cost to increase 17.10 61.10 /ha Volumetric change to increase from 0.17 /m 3 (41%) in 2010: 0.24 (54%) in 2011 0.26 in 2013 0.28 (72%) in 2015 Same rates for livestock and fish breeding Full cost recovery (i.e. 0.45 /m 3 ) for all other irrigation uses Recycled: introduce two part tariff Fixed cost 0 49.60 /ha Volumetric change to increase from 0.07 0.18 /m 3 (88%) For irrigation outside GWP: Financial cost to the individual (no fixed cost) 54% recovery for environmental and resource cost 0.11 /m 3
In practice On top of the WFD transposition to national legislation (Law 13(Ι)/2004), the WFD s full cost recovery provisions on water pricing were included in Regulation 128/2014 (linked to the above mentioned Law) In practice, the proposed prices have not been activated yet Political cost Economic downturn 2013-2015 Reaction from farmers Decreasing farming activity Technical difficulties Source: Cystat, 2017
Recycled GWP (Surface & Groundwater) New Regulation 48/2017 Description / Use Financial Env& Resource Total ( /m 3 ) To Agricultural Organisations for agricultural production 0.10 0.02 0.12 To individuals for agricultural production 0.15 0.02 0.17 For industrial consumption 0.23 0.02 0.25 For animal husbandry consumption 0.15 0.02 0.17 For irrigation of football and golf courses 0.34 0.02 0.36 For irrigation of other sports places, hotels and house gardens 0.21 0.02 0.23 For fish breeding 0.15 0.02 0.17 For over consumption - agriculture 0.45 For over consumption - other uses Double Fixed yearly rate ( /ha) 24.00 For connection: Water meter ( /meter) 200.00 For connection: Filter ( /ha) 50.00 For reconnection 20.00 To Agricultural Organisations for agricultural production 0.01 0.01 0.02 To private individuals for agricultural production 0.06 0.01 0.07 For industrial consumption 0.15 0.02 0.17 For sports activities 0.10 0.02 0.12 For irrigation of green spaces, parks and hotel gardens 0.15 0.02 0.17 For irrigation of golf courses 0.15 0.08 0.23 For over consumption Double Fixed yearly rate ( /ha) 24.00
New Regulation 48/2017 The new regulation will be implemented as of April 10 th 2017 For GWP, fixed price increased, but volumetric price remain unchanged or lower But, for the first time the type of cost are distinguished (financial, environmental & resource) The new regulation imposes the environmental and resource cost for the first time to private (mostly groundwater) consumers: 0.01 /m 3 for agricultural use, 0.02 /m 3 for gardens, 0.10 /m 3 for industry and hotels If volumes are not metered, charges will be imposed either by area, crop type, or time of irrigation; billing on annual basis Volumes abstracted will require prior approval by WDD relevant also for cross compliance with RDP funds and agricultural subsidies The revised prices do not cover the full cost of water, but can be seen as a step forward.
Smart Irrigation Tehcnologies? Farm Structural Characteristics in EU-27 (2010) Farmers older than 55 y.o. (%) Farmers with agri. training (%) Physical farm size (ha/farm) Economic farm size in (SO/farm) Gross Fixed Capital Formation as % of GVA UAA in LFA (%) 2005 Greece 55 3 5 9,267 21 78 Spain 55 15 24 34,525 26 82 France 38 50 54 98,301 29 44 Italy 61 11 8 30,514 34 51 Cyprus 63 6 3 11,809 4 60 Malta 57 10 1 7,652 37 100 Portugal 71 12 12 15,119 23 92 EU-27 53 29 14 63,144 46 54 Source: Giannakis et al., 2016 Despite the plethora of irrigation scheduling decision support systems that have been developed, there is little evidence of widespread adoption by farmers Structural, institutional and political rigidities impede the adoption of irrigation scheduling technologies in southern European countries EU needs to consider these constraints and pay closer attention to the conversion of knowledge and innovation into successful commercial products
Improve irrigation use efficiency Innovative options for water resources management in the Mediterranean
Summary Cyprus is the most water-stressed nation in Europe Water supply is enhanced by non-conventional resources Groundwater over abstraction and aquifers deterioration is severe. Although easily accessible, it is not anymore a secure water resource. Volumetric water pricing has been used for many decades. Full cost recovery applies to domestic water use high acceptance Irrigation water pricing within GWP is metered and changed but below full cost Private groundwater pumping until now uncharged effectiveness of the new regulation remains to be assessed in practice Although there are water use efficiency measures at the farm level, there is room for improvement smart irrigation technologies, crop diversification, etc. Affordable irrigation pricing further incentives for water savings?
Reference Cystat (2017). Statistical Abstract 2015. Nicosia, Cyprus. Eurostat (2017). Water exploitation index. URL: http://ec.europa.eu/eurostat/en/web/productsdatasets/-/tsdnr310 Giannakis, E., Bruggeman, A., Djuma, H., Kozyra, J., & Hammer, J. (2016). Water pricing and irrigation across Europe: Opportunities and constraints for adopting irrigation scheduling decision support systems. Water Science and Technology: Water Supply, 16(1), 245-252. WDD (2011). Cost assessment and pricing of water services in Cyprus Summary. WDD, Nicosia, March 2010. WDD (2017) Statistical Data. URL: http://www.moa.gov.cy/moa/wdd/wdd.nsf/statistics_gr/statistics_gr?opendocument Zoumides, C. and Zachariadis, T. (2009). Irrigation Water Pricing in Southern Europe and Cyprus: The effects of the EU Common Agricultural Policy and the Water Framework Directive. Cyprus Economic Policy Review, Vol. 3(1): 99 122. Zoumides, C., Bruggeman, A. and Zachariadis T. (2012). Global versus local crop water footprints: the case of Cyprus, in Zhang et al (eds.) Solving the Water Crisis: Common Action Toward a Sustainable Water Footprint. Value of Water Research Report Series No. 60, UNESCO-IHE, pp. 7-27. Zoumides, C., Bruggeman, A., Hadjikakou, M. and Zachariadis, T. (2014). Policy-relevant indicators for semi-arid nations: The water footprint of crop production and supply utilization of Cyprus. Ecological Indicators 43, pp. 205-214. Zoumides, C., Bruggeman, A., Zachariadis, T. and Pashiardis, S. (2013). Quantifying the poorly known role of groundwater in agriculture: the case of Cyprus. Water Resources Management 27, pp. 2501-2514.
Thank You Christos Zoumides Post Doctoral Researcher Energy, Environment & Water Research Centre The Cyprus Institute Tel: +357 99873748 Email: c.zoumides@cyi.a.c.cy Theodoros Zachariadis Associate Professor Department of Environmental Science & Technology Cyprus University of Technology Tel: +357 2502304 Email: t.zachariadis@cut.ac.cy