EN V 0 I1 THE WORLD BANK SECTOR POLICY AND RESEARCH STAFF Environment Department Managing Water Resources to Avoid Environmental Degradation: Policy Analysis and Application Mohan Munasinghe December 1990 Environment Working Paper No. 41 This paper has been prepared for internal use. The views and Interpretations hein are those of the author(s) and should not be attibuted to the World Bank, to its affiliated organizations or to any individual acting on their behalf. THE WORLD BANK SECTOR POLICY AND RESEARCH STAFF ENVIRONMENT DEPARTMENT MANAGING WATER RESOURCES TO AVOID ENVIRONMENTAL DEGRADATION: POLICY ANALYSIS AND APPLICATION MONAN MUNASINGHE DECEMBER 1990 ENVIRONMENT WORKING PAPER NO. 41 This paper has been prepared for internal use. The views and interpretations herein are those of the author(s) and should not be attributed to the World Bank, to its affiliated organizations or to any individual acting on their behalf. This paper has been prepared by Mohan Munasinghe, Chief, Environmental Policy and Rebearch Division, World Bank, Washington, DC. The paper reports on findings that are particularly significant in the context of the overall work program of the Environmental Policy and Research Division. The assistance of Walter Buydens, Joseph Callaghan, "Maas" Manolaysay, Jeremy Warford, and Herman Daly is gratefully acknowledged. Department Working Papers are not formal publications of the World Bank. They present preliminary and unpolished results of country analysis or research that are circulated to encourage discussion and comment; citation and the use of such a paper should take accoint of its provisional character. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. Because of the informality and to present the results of research with the least possible delay, the typescript has not been prepared in accordance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibility for errors. ABSTRACT This paper discusses how population and economic developmental pressures will continue to 'put increasing pressure on the environment, especially on scarce water resources. Meanwhile, large numbers of poor families in the developing countries still lack access to safe water, and despite some modest gains during the International Water Decade, formidable problems relating to financial and manpower resource shortages, as well as institutional weaknesses remain. An integrated water resource planning and policy analysis framework is presented that permits the main issues and alternative options to be systematically considered and prioritized, especially problems arising from groundwater pollution. The basic principles of water resource economics are used to illustrate how the neglect of long-run environmental considerations jeopardizes the availability and quality of groundwater resources in the Greater Manila Area. A novel approach based on a comparison of the desirable versus likely patterns of groundwater use provides estimates of the long run externality costs of aquifer depletion. Finally, comprehensive and practical policy measures are discussed to mitigate the effects of saline intrusion and also help generate additional revenues that will offset the environmental damage. In summary, this paper contains a useful overview of drinking water and sanitation issues in developing countries, presents a policy-oriented analysis of a groundwater problem of great relevance worldwide, and demonstrates how the study conclusions might be implemented practically in a typically constrained third world context. TABLE OF CONTENTS I. WATER SUPPLY NEEDS AND STATUS IN DEVELOPING COUNTRIES ...... 1 1. 1 Introduction ........................... 1 1.2 International Drinking Water Supply and Sanitation Decade ..................................2 II. CONCEPTUAL FRAMEWORK FOR INTEGRATED WATER RESOURCE PLANNING AND GROUNDWATER MANAGEMENT ........................ 6 2.1 Integrated Water Resource Planning (IWRP) and Policy Analysis. ............ . .................7 2.2 Issues inGroundwaterUse.............................9 III. CASE STUDY: WATER RESOURCE MANAGEMENT IN THE PHILIPPINES........................................1 3. 1 The HWSS Background and Groundwater User .............. 14 3.2 ModellingandEconomicAnalysis............... ... l6 3.3 Policy Options........................................25 3.4 Policy Implementation Issues..........................27 IV. CONCLUSIONS..................... .....*000.........00000000. 34 ANNEX 1 : ECONOMIC COSTS OF PRODUCING WATER................37 REFERENCES.. .. . .. ... ...............................4 MAMGING WATER RESOURCE8 TO AVOID ZMVIROMMENTAL DEGRAfDATION: 1?OJjXY ANMIYIB MND APPLIcATIoN Xohan Munasinghe I* WATER SUPPLY NEEDS AND STATUS IN DEVELOPING COUNTRIES 1.21 Introduction The efficient and optimal use of our global natural base, including air, land and water, has emerged as an area of universal concern during recent decades. Major issues vary widely, but for purposes of analysis, one useful classification is by scale or magnitude of impact. First, there are the truly global problems such as the potential worldwide warming due to increasing accumulation of green house gases like carbon dioxide and methane in the atmosphere, high altitude ozone depletion because of excessive release of chlorofluorocarbons used mainly in refrigeration devices, pollution of the oceanic and marine environment by oil spills and other wastes, and overdepletion of certain animal and mineral resources. Second in scale are the transnational issues like acid rain or radioactive fallout in one european country due to industrial or nuclear emissions in a neighboring nation, and excessive downstream siltation of river water in Bangladesh due -to deforestation of watersheds and soil erosion in nearby Nepal. Third, one might identify national and regional effects, for example those involving the Amazon basin in Brazil, or the Mahaweli basin in Sri Lanka. Finally, there are more localized and project specific problems like urban wastes disposal and water pollution in a given city like Calcutta, the complex environmental and social impacts of a specific hydroelectric or multipurpose dam, and noxious effluents from an industrial plant. In this paper, we seek to examine the subset of issues that arise in the area of environment and water resource management within a single country. This narrowing of the focus permits us to deepen the analysis, and address such problems with policy tools available to national level decisionmakers. In the next section, the status of drinking water and sanitation services in the developing countries is analyzed, and future needs (including financial resources) are reviewed in relation to the goals of the recent UN Water Decade. After establishing the critical shortage of water resources, the paper clearly identifies the main policy issues and constraints that hamper the delivery of adequate water services. Next, the basic principles of water resource economics are applied to a case study of groundwater salinization in Manila. A novel approach based on a comparison of the desirable versus likely patterns of groundwater use provides estimates of the long run externality costs of aquifer depletion. Finally, comprehensive and practical policy measures are discussed to mitigate the effects of saline intrusion and also help generate additional revenues that will offset the environmental damage. In summary, this paper contains a valuable overview of drinking water and sanitation issues in developing countries, presents a policy-oriented analysis of a groundwater problem of great relevarce worldwide, and demonstrates how the study conclusions might be implemented practically in a typically constrained third world context. 1.2 International Drinking Water Supply and Sanitation Decade 1.2.1 Background and Current Status In recognition of the worldwide importance of rational water resource development, in 1980, the UN General Assembly proclaimed 1981-90 as the International Drinking Water Supply and Sanitation Decade. Governments were urged to provide all their citizens with clean water and adequate sanitation by 1990 -- a formidable goal. -2- In 1980 some two billion people lacked adequate water and sanitation. Global coverage of water supply (defined as access to a safe adequate water supply) stood at about 40 percent. Sanitation coverage (defined as access to a facility for the storage, transportation, or processing of waste) was lower, at about 25 percent. Coverage was lower in rural areas than in suburban areas and for lower income people wherever they lived [1]. At the end of the Decade, it is becoming clear that the original goals will be reached only by few countries. While there are significant variations among geographic regions, the overall progress has not been encouraging for both water supply and sanitation coverage, from 1970 to 1990 [2]. Recent data show that the level of urban water supply coverage rose from 72% to only 78%, from 1980 to 1988. Greater percentage coverage would have been achieved if not for the rapid rate of urban population increase - which reached almost 60% in Africa and over 25% in the Americas and South and East Asia. It is estimated that an additional 250 million urban residents have gained access to appropriate means of excreta disposal. Despite the rapid urban population expansion, sanitation coverage rose from 54% in 1980 to 66% in 1988, and thus the disparity between water supply and sanitation services in the urban areas has been reduced [3]. For rural residents it is estimated that an additional 310 million received access to an adequate and safe water supply. However, this still leaves approximately 915 million unserved. Nevertheless there has been a rise in the overall level of service coverage over the last 8 years (from 32% to 46%), and certainly compared to 1970 levels (13%), substantial progress has been realized [1]. At the end of 1988 it was estimated that there were still over 1.4 billion people in the rural areas of the developing countries without access to an appropriate means of excreta disposal. This corresponds to a very weak rise in the level of service coverage from 11% in 1970 to 14% in 1980, and to only 17% - 3 - by 1988. A general observation is that the urban sector remains better served than the rural sector for both water supply and sanitation. Coverage for water supply is generally superior, to that for sanitation for both urban and rural sub-sectors. A within region comparison reveals that in Africa, significant progress has been made in extending urban water supply and sanitation. However, less than one million people were estimated to have been provided with access to sewerage facilities, which has not been sufficient to offset the effects of population increase. Urban water supply and sanitation services provide relatively high coverage in the Americas. However, the level of rural supply remains low, and has not been able to cope with population growth. The Asia region (South and East) has had to face the difficulties of rapidly rising urban population. This phenomenon to some extent accounts for the fact that despite the achievement of extending services to an additional 53 million urban residents, urban water supply coverage has risen only 2 percentage points since 1980. On the other hand, the region has managed to increase urban sanitation coverage by 5 percentage points up to 35%. The greatest achievement in the region has been in rural water supply, where coverage rose from 8% in 1970, to 31% in 1980, and to 56% in 1988. This success is largely attributable to India, the Region's most populous country, which reported an increase from 31% to 50%. Progress with rural sanitation coverage has not been so impressive, although it compares favorably with other regions. For the Eastern Mediterranean region, significant progress has been made in reducing the gap between urban sanitation and water supply coverage and needs. Similar progress cannot be reported in the rural sector. Rural water supply has dropped two percentage points since 1980, and the level of coverage in rural sanitation only increased to 10%, the lowest figure for all regions. - 4 - Like the South ard East Asia region, the Western Pacific has hardly been able to provide additional urban water supply services to keep pace with the rate of population expansion. The region reports the highest levels of urban sanitation coverage for the developing world. 'owever, it should be noted that several of the region's most populous countries did not provide statistics especially China and hence the reported 94% is probably too high an estimate. The same caution is needed in interpreting the exceptionally high percentage levels for rural water supply and sanitation 12]. 1.2.2. Outlook for the Future and Major Issues Both financial and physical resource scarcities require future sector strategy to be based on sound economic management principles. By 1990, about US$15 billion per year would be the estimated investment in developing countries to attain their water sector goals. These national target levels are in most cases significantly below the UN coverage targets. By comparison the World Bank loaned only US$3.8, billion, in total, for water and sewerage projects durirg 1982-87. If contributions from all other sources are included, the total foreign aid flows to the water sector in the developing countries would not greatly exceed US$1 billion per year (or less than 10% of the above investment needs). Thus the bulk of the required future investments will have to be mobilized within these often capital scarce countries. Present water sector constraints are generally no different from those of the past, and include funding limitations, poor cost recovery, lack of trained staff, and inadequate operation and maintenance. The key to improvements is better cost recovery, especially since most developing country governments, financially overburdened already with debt and persistent budgetary deficits, are unable to subsidize chronic shortfalls in the water sector. - 5 - These financial shortages are accompanied by physical resource scarcities and rising costs of exploiting new water sources. Increasing demand and discharge of waste threaten the quality of the world's limited water resources. Thus, one important challenge of the 1990s will be the large-scale implementation of sustainable water and sanitation programs to poor communities in cities and rural areas worldwide. Agricultural needs also are competing with potable water. Irrigated land development costs have risen, eg., surface water based project costs per hectare in India have doubled from 1950 to 1980. In USSR, water diversion has shrunk the Aral Sea by 40% since 1960. Thus better physical management of water resources is a global priority. Among the institutional difficulties plaguing developing country water enterprises, undue government interference in organizational and operational matters may be the most pervasive [2]. Such interference, which has resulted in loss of management autonomy, is at least partly responsible for the other problems mentioned above. In order to address these difficulties, an important principle must be recognized -- that given the complexity of water problems and the scarcity of resources and managerial talent in developing countries, each set of issues should be dealt with by that level of decisionmaking and management best suited to analyzing the difficulty and implementing the solution. This hierarchical approach to management corresponds closely to the analytical framework developed below. 1I. CONCEPTUAL PRAMWORK FOR INTEGRATED WATER RESOURCE PLANNING AND GROUNDWATER MANAGEMENT Because of the substantial investments required to accelerate the pace of water supply, government involvement of some type becomes necessary. It is not surprising therefore, that most developing countries are pursuing water supply programs, as a part -6- of their economic development efforts. This in turn implies that water supply issues are examined bes, in the context of overall national policy cbjectives, rather than in isolation. Therefore a multitude of other problems and constraints also have to be taken into consideration. 2.1. Zategrated Water Resource Planning (ZWRP) and Policy analysis Because of the many interactions and non-market forces that shape and affect the water sector, decisionmakers in an increasing number of countries have realized that water sector investment planning, pricing and management should be carried out on an integrated basis, e.g., within an integrated water resource planning (IWRP) framework which helps analyze the whole range of water policy options over a long period of time. It should be emphasized that while policy analysis and planning may be relatively centralized, policy implementation should rely as much as possible on the use of decentralized market forces, especially pricing -- as discussed in the case study [4]. Policy interventions will be required, for example, to internalize external environmental costs such as groundwater pollution, thereby bringing competitive market forces into play, to limit the damage. The need for IWRP type policy coordination applies both to the industrial world and developing countries. Integrated water resource planning (IWRP), policy analysis, and supply-demand management are carried out within a hierarchical framework (41. At the highest and most aggregate level, it must be clearly recognized that the water sector is a part of the whole economy. Therefore, water resource planning requires analysis of the links between the water sector and the rest of the economy. Such links include the input requirements of the water sector such as capital, labor, raw material and environmental resources such as clean air, land and water, as well as the impact on the economy of policies concerning water availability, prices and taxes, in -7- relation to national objectives. The second level of IWRP treats the water sector as a separate entity composed of sub-sectors such as potable water, sewerage and liquid waste disposal, irrigation, hydropower, navigation, flood control, and so on. This permits detailed analysis of the sector with special emphasis on interaction among the different water sub-sectors, and the resolution of any resulting policy conflicts due to competition between different uses of the same water source, e.g., prioritizing drawdown of a multipurpose dam for power, irrigation, or navigation. Water subsectors also interact directly with other sectors, like sewerage with health, and irrigation with agriculture. The third and most disaggregate level pertains to planning within each of the water sub-sectors. Thus, for example, the potable water subsector must determine its own demand forecast and long-term investment programs; and the irrigation sub-sector, its supply sources and agricultural needs. It is at this lowest hierarchical level that most of the detailed formulation, planning, and implementation of water resource projects and schemes, are carried out. In practice however, the three levels of IWRP merge and overlap considerably. Thus the interactions of water problems and linkages at all levels need to be carefully examined. As outlined in the introduction, water resource-environmental linkages are receiving increasing attention, and these issues will cut across all three levels of the IWRP analysis. Explicit consideration of environmental impacts in the IWRP framework will help mitigate undesirable externality costs through both water supply and demand management policies. On the water resource development side, the production decision will be influenced by the inclusion of environmental effects in the least cost analysis, either as a directly estimated cost or a non-quantifiable, judgmental factor. On the demand side, the additional costs to society due to progressive pollution or degradation of water - 8 - resources should be included in the price paid by water users. Thus the use of regulatory and financial measures like pollution taxes or user costs will play an increasingly important role in the future. These aspects are discussed (especially in relation to groundwater pollution), in the next section and further illustrated in the case study that follows. The integrated water resource planning process should result in the development of a flexible and constantly updated water strategy which can meet the national goals discussed earlier. Such a national water strategy may be implemented through a set of water supply and demand management policies and programmes. To achieve desired national goals, the policy instruments available to third world governments, for optimal water management include; (a) physical controls; (b) technical methods; (c) direct investments or investment-including policies; (d) education and promotion; and (e) pricing, taxes, subsidies and other financial incentives. The use of these interlinked tools should be closely coordinated for maximum effect 13]. The chief constraints that limit effective policy formulation and implementation are: (a) poor institutional framework; (b) insufficient manpower and other resources; (c) weak analytical tools; (d) inadequate policy instruments; and (e) other constraints like lack of political will to implement difficult policies. 2.2. Issues in Groundwater Use 2..1. Significance of Groundwater Supplies Groundwater is widely and increasingly exploited for potable water supply in developing countries. In smaller towns and rural areas groundwater is the major source of potable water, because it is normally the cheapest and safest option. In many regions, such utilization involves large numbers of low yielding (0.5 to 5 liters - 9 - per second [1/s]) boreholes, generally drilled on an uncontrolled basis and providing untreated and unmonitored supplies. Much higher yielding (10 to 100 1/s) boreholes are also quite widely used to provide drinking water supplies to cities, including such major urban centers as Mexico City, Lima, Bangkok, Cairo, Manila and Djakarta. Even though the use is for a large metropolitan area, raw water surveillance and treatment is sometimes limited and/or intermittent. [5] 2.2.20 Problems Related to Groundwater Development Three major problems associated with groundwater use are land subsidence, pollution and salinization. First, for urban water supply and industry, overpumping or mining of the aquifer frequently leads to problems of land subsidence, often resulting in the collapse of buildings and other surface structures. Accounts from Japan, Thailand the United States and many other countries are documented [6]. The second issue, groundwater pllution, is a critical one in the industrialized world. So far, however, it has not received much consideration in developing countries, mainly because very slow groundwater movement and resultant pollutant migration from the land surface into the aquifer and the slow routing through the aquifer itself, delays the full impact of pollution, often for decades. Pollution can arise from a number of causes [5], [7]. For developing countries there are three main sources of groundwater pollution. First is contamination by unsewered waste. Although the chemo-physical characteristics of soils are natural purifiers of human and animal wastes, not all soil profiles are fully effective. Thus, there is a risk of direct migration of pathogens to underlying aquifers and transmission to neighboring groundwater. Consumption of such groundwater in its natural state can cause waterborne diseases. A second source of contamination arises from industrial discharges or urban effluents. In some developing countries, small-scale industries (such as textiles, metal - 10 - processing, tanneries, etc.) discharge wastes, such as spent oils and solvents, directly into the soil, where it penetrates over time into the aquifer. The third major contaminant source is agricultural activity, e.g., application of fertilizers and pesticides. The long term effects of groundwater pollution can prevent aquifer use, and rehabilitation of the polluted aquifer may be infeasible due to prohibitive costs, persistence of the contaminants, or the lack of adequate monitoring devices. The third major problem of groundwater resources is salinization. Again there are numerous reasons for an aquifer to become saline and unsuitable for irrigation or drinking water supplies. The reuse of agricultural drainage water for irrigation purposes has led to a build-up of salt in shallow aquifers. Well known examples are the Wadi Bisha alluvial aquifer in Saudi Arabia [8] and the Punjab region in Pakistan [9]. Deforestation at the end of the 19th century, combined with a high evaporative demand caused salinization of vast aquifers in Australia, resulting in the abandonment of millions of hectares of land in the (semi-)arid areas of the country [10]. Mining of aquifers in coastal regions has led to salt intrusion. Numerous examples are available, including the Niger delta in Nigeria [11], the coast of Hermisollo in Mexico [12A] and Peninsular Malaysia [12B]. In the US the problem has been recognized as particularly serious on the coasts of California, Texas, Florida, New-York and Hawaii since the 1960s [13]. Transboundary groundwater impacts and issues that require international agreements and joint policy measures are especially complex -- see [14] for a lucid review involving the US and Mexico. The case study below assesses the short and long term economic effects of groundwater depletion and deterioration of aquifer quality, due to seawater intrusion. The dynamics of saline water intrusion are schematized in Figure 1. A feature of this type of pollution is that there are two distinct bodies of water, which differ in density and are relatively immiscible. There is a - 11 - Fig 1: Schematic Diagram of Salt Water Intrusion In an Aquifer GROUNDWATER EXTRACTION S E A L A ND---- ........ •••SALT WATER INTRUSMON SALT WATER BRACKISH WATER% FRESH WATER %% * *S S~** S % .* * %S% *% * %S%% %~*% *S% %%~S................~S*t% ... . . . . . distinct brackish interface that demarcates the pollution, beyond which there is no migration of salt. Without human interference the intrusion front can move either away, depending on the amount of precipitation over a particular period, although it will do so within rather narrow spatial limits. When the natural equilibrium is disturbed by human activities such as overpumping (i.e., more water is taken away from the aquifer than is replenished by precipitation), the saline water body will move inland, replacing the depleted fresh water -- with the progress of the interface determined mainly by the pumping rate. This scenario contrasts with other types of pollution (e.g., the movement of agro- or industrial chemicals) , which are governed by the physical flow characteristics of the "fresh" groundwater itself and the rate of chemical release, rather than depending mainly on the pumping regime. An economic evaluation of such types of pollution will therefore differ from the one presented in this study. 2.2.3. basic Economics of Groundwater Use Optimal use of an aquifer requires analysis of the effects of current pumping on both the level and quality of groundwater in future periods. This requires that costs to future users be accounted for in current pumping decisions. The marginal user cost or externality cost is the future cost to other users arising from current extraction by any given well-user. In one study, Cummings has broken down the user cost into several components: the marginal value of water in storage, the marginal cost of water use in terms of capital consumption, and the marginal cost of salt intrusion [15]. The marginal costs of land subsidence, and other effects also may be included. However, groundwater has the characteristics of a commonly owned property. When water is pumped by many individuals who act independently rather than collectively, there are strong incentives - 13 - to ignore the marginal user cost. This normally results in economic inefficiencies since too much water is pumped too soon. Therefore the establishment of a regulatory framework that imposes rules on all users so as to offset externality costs, is to the long term advantage of all, provided the costs of regulation are not excessive [16]. 111. CASE STUDY : WATER RESOURCE NAGEMENT IN WEE PRILIPPINE8 3.1. The XW8 Background and Groundwater User [17],[18] The provision of water supply and sanitation services in the Philippines has improved considerably over the past two decades. The current sector ,nstitutions were established and overall objectives, strategies and development plans defined, in 1972. By end 1987, about 63% of the population had access to safe water, including 31% which was served by piped systems. Although absolute service levels are improving, the quality of service in the areas covered is often poor, with low water pressures throughout and rationed service in some areas The National Water Resources Council (NWRC) is responsible for formulating policies for the water supply sector. The Metropolitan Waterworks and Sewerare System (MWSS), established in 1972, for water supply and sewerage systems in or around Metropolitan Manila. The MWSS Service Area (MSA) of about 150,000 ha includes Manila and another 4 neighbouring cities and 32 municipalities. The Local Water Utilities Administration (LNUA) provides technical and financial assistance for water supply and sanitation development to about 730 provincial cities with populations above 20,000 and, since 1987, to rural communities. Both MWSS and LWUA are semi-autonomous corporations under the Department of Public Works and Highways (DPWH). The Health Department has a rural sanitation program and monitors drinking water quality. - 14 - Sector development in Metropolitan Manila is financed through funds self-generated by MWSS, government equity contributions, and foreign or local loans. The Government's general policy is to develop systems on the basis of a community's financial ability and willingness to pay for them. Accordingly individual house connections are usually provided in the larger metropolitan and provincial urban areas, and some standpipe systems on the basis of the willingness to pay for them. Wells with hand pumps are provided in the rural areas. Due to the depressed economic conditions and political changes that occurred during 1984-86, investment in the sector declined, and water and sanitation services remained low. However in 1987, the Government confirmed its commitment to sector development by adopting a Water Supply and Sanitation Master Plan which provides an integrated package of policies, programs and projects to be implemented in two stages : from 1988 to 1993 and from 1994 to the year 2000. Groundwater use in the Manila area has grown so rapidly that for the last thirty years natural recharge was far exceeded, resulting in "mining" of the aquifer. Because of it's geographical location, another devastating effect of this depletion is the encroachment of saline sea water into the coastal aquifer. As mentioned earlier, depletion of groundwater and the concurrent deterioration of water quality constitute a significant economic loss to the society as a whole. Each groundwater user will continue to impose external diseconomies or costs on all other existing and future users [19]. Curtailing the use of groundwater for existing industrial 11sers would have a negative impact on industrial production and employment. The largest users of groundwater in depleted zones have been identified by MWSS, and adequate transmission and distribution facilities would be provided. If these problems persist, especially after adequate piped water is provided by 1994, it would - 15 - be necessary to enact legislation establishing more rigorous controls on water use, and allowing MWSS to charge for the use of groundwater, to reduce its excessive use and contribute to the financinq of expanded water supply facilities in the MSA [18]. 3.2. Modelling and Economic Analysis The purpose of this section is. to calculate the long-run economic costs of groundwater use, over and above the cost of extraction. These are additional external costs imposed by any given existing user on all other potential present and future groundwater users. All costs and prices are in constant mid-1984 terms, unless otherwise stated. 3.2.1. Groundvater Depletion Model The physical model of the aquifer has been described elsewhere [20] and all withdrawals in the GMA are assumed to be made from this common aquifer. For convenience, withdrawals from the aquifer are lumped together with no further spatial disaggregation. As explained earlier and depicted in Figure 1, a more sophisticated approach might involve analysis of a progressively advancing saline intrusion front, and gradual salination of wells in different zones, but the physical data currently available does not permit such discrimination. On the basis of the rather limited data and reasonably realistic assumptions, two scenarios, as shown in Figure 2, are compared, to estimate externality costs. The first or depletion case-(Curve ABEFI) is the base scenario that would prevail if present policies continued [20], [21]. The conservation scenario (Curve AJ.?H) would be the result of a centrally managed groundwater extraction policy. Clearly, other scenarios are possible, but data unavailability does not permit further fine tuning. Nevertheless, the contrast between the above two cases is sharp enough to draw - 16 - Fig 2: Effect of Alternative Groundwater User Tax Policies Pumping Rate (MLD) 800- . -Depletign Intermediate I 400 400-Conseervation bL 200- 0-i 0 6 18 26 Year some valuable policy conclusions. In the depletion case, we start with a withdrawal level of 730 Megaliters per day (NLD) in year 0 (1984), and then the pumping rate is assumed to remain constant until year 6 when the yield declines linearly down to 620 MLD in the year 16. Finally a very rapid decrease sets in with withdrawals dropping to zero by year 26, due to a progressive mining of the potable water. As explained in Annex 1 and illustrated in Figure 3, the average costs of withdrawals will rise linearly from U$0.13 per m3 of water in year 0, to U$0.22 per m3 in year 16, and finally to U$0.27 per m3 in year 26. In contrast to the depletion case, we also explore a quasi-ideal conservation scenario in which groundwater use is controlled to eventually reach safe sustainable levels. The latter reflects a physical equilibrium stage where the sum of natural and artificial recharges equals total withdrawals. Although the conservation case is hypothetical it provides a useful practical benchmark for what might have been achieved with forethought and timely action initiated early enough. In this alternative, extraction rates are assumed to decline linearly from an initial 730 MW in year 0 to 200 MLD in year 16, which is the estimated safe sustainable yield for potable water, based on the physical model of the aquifer. Once the equilibrium stage is reached, withdrawals can continue at this rate indefinitely into the future without mining the aquifer. The costs of pumping are estimated to remain constant at U$ 0.13 per m throughout. (See Annex 1) 3.2.2. Quantification of Economic Externality Costs To compare the two cases, we make use of the fact that the total volume of water to be supplied (from both the aquifer and the MWSS system) is the same in each scenario. Thus, consumption benefits derived by water users in both cases are identical, and - 18 - Fig 3: Long-Run Supply Costs for the Depletion and Conservation Scenarios Unit Cost (U$/m3) 0.3- 0.25 Depletion 1-*.217 ------------------------------------------ 0.2 - 0.15 Conservation 0.1 - 0.05 0 "" t I I I I t I f I I I I 0 8 16 26 31 Year only the costs are different. As shown in Figure 2, the total water supplied is indicated by the area under the curve ABEPH. To meet the total demand, the MWSS system must supplement the groundwater supply with the amount MD (starting in year 23), in the depletion scenario. Similarly, to satisfy the same total demand, MWSS must supply the amount MC (starting in year 0), in the conservation case. The NWSS system draws water from sources other than the aquifer under consideration. In Table 1, the costs of groundwater withdrawals in the depletion case are compared with the costs of pumping in the conservation case, including additional net costs to supplement the groundwater shortfall from MWSS pipeborn supplies -- based on the average incremental cost or AIC of MWSS supply (see Annex 1). The present discounted value of the difference in costs between the two cases is assumed to be a long- run measure of the economic externality costs (EC) incurred by following the depletion scenario, instead of the conservation case. These additional externality costs are incurred because of the consumption pattern followed in the depletion case. The present discounted value of total groundwater withdrawals in this case is also shown in Table 1. The ratio UEC - EC/QD provides an average measure of the long-run externality cost per a 3 of groundwater withdrawn, and also serves as a guideline for a user charge that might be imposed on the depleters, to compensate for the resulting loss of potential benefits (if the conservation scenario had been followed). On the basis of the data available, the long-run externality cost estimate is given by UEC = US$0.012 per a of groundwater pumped. We note that this average value of UEC may be higher if estimated some years later. If UEC increased over time -- as the aquifer became more depleted, this should be reflected in the policy measures discussed below. - 20 - Table 1: Estimation of Economic Externality Costs Due to Groundwater Depletion (1) DEPLETION CASE Present Discounted Value of Costs 406.87 (million US$) of Supplying Water (from Annex Table A.1.) (2) CONSERVATION CASE Present Discounted Value of Costs 377.56 (million US$) of Supplying Water (from Annex Table A.1.) (3) BC Difference in Costs : (1) - (2) 29.31 (million US$) (4) QP Present Discounted Value of Total 2444 (million m3) Groundwater Withdrawal in the Depletion Case (5) UEC Long-Run Economic Externality Costs 0.012 (US$ per m3) Due to Depletion : (3)/(4) - 21 - 3.2.3. Policy Implications While the physical model and groundwater extraction scenarios provide a benchmark value for the externality costs of destroying the aquifer, very little further information is available about the consumption patterns and economic behavior (especially water demand curves) of groundwater users. Nevertheless, it is possible to draw some policy conclusions, starting with a simplified static analysis. The more dynamic aspects introduced later will not change the essential logic of the arguments presented below. A conventional downward sloping (private) demand curve for groundwater is shown in Figure 4. DP represents the aggregate willingness-to-pay of groundwater users -- i.e., consumption volumes per year at various extraction costs -- and the area under this demand curve measures the benefits of water use based on consumer perceptions, excluding environmental and externality costs. Ideally, if there was full information about the future consequences of aquifer destruction and private well-owners had a good awareness of societal implications, the use of groundwater should be governed by a social demand curve, DS. This curve lies below DP because society has to incur an additional economic cost (like UEC, estimated earlier) for every m3 of groundwater extracted under the depletion scenario. The divergence between DP and DS could arise, for example, because a typical groundwater user may be ignorant or unconcerned about externalities. Alternatively, those who deplete most heavily in the early years and enjoy low extraction costs may not be the same persons who have to face the higher costs of pumping from a depleted aquifer in later years. As mentioned earlier, the first best option for society would have been to somehow restrict groundwater pumping and enforce the conservation scenario -- this would result in overall cost savings, UEC - U$0.012 per m3 over the period of analysis. However, such an outcome is unlikely since policy options should have been - 22 - Fig 4: Demand for Groundwater PRICE DS CPE H A EXTRACTION RATE introduced many years ago to achieve this result. Under present policies, the depletion scenario will occur, and in a typical year users will extract a volume OA at a cost CP (Figure 4). There is an economic efficiency cost BE associated with the marginal unit of water used, because the extraction cost exceeds the consumption benefit to society. Ideally, if DS governed water use, the benefit of marginal consumption FH would exactly equal CP. Suppose, as a second best option, that a user tax T = UEC = IF = BE was imposed, raising the private cost to CS = CP + T. Then groundwater extraction would decline by AH, and marginal benefits and costs would be equalized, resulting in economically efficient water use. If we introduce the time dimension, our analysis becomes somewhat more complicated. As shown in Figure 2, the reduced pumping AH will give rise to an intermediate groundwater extraction scenario, resulting in a different value of UEC. Nevertheless, the initial value of UEC is small relative to CP, and if the elasticity of demand is small (steeper slope for DP), this adjustment will be small. Finally, through an iterative process, it will be possible to arrive at a self- consistent set of values for CS, CP, UEC and pumping rate. The efficient (second best) tax, TE, is likely to be somewhat lower than the original UEC. We note that more sophisticated dynamic analysis is possible, since the demand curve DP, the cost CP, and tax T can all vary over time. Furthermore, as the saline front gradually advances inland, greater spatial disaggregation also could be attempted -- if the data were available to determine extraction rates, costs and user charges by zone,. From the viewpoint of public finance, an average user charge of U$ 0.012 per m3 will yield present valued revenues of about U$29.31 million, in the depletion scenario. If UEC increased over time, then revenues would be greater. These resources could be used to develop alternative MWSS water resources to replace the failing aquifer. - 24 - 3.3. Policy Options 3.3.1. General Rationale Legally, all waters in the Philippines belong to the state, and the use of this water is a privilege granted to citizens, by the government. From the socio-economic viewpoint, the water resources of the Philippines are a public good, to be allocated and utilized for the optimal benefits of the entire nation. The government has a special responsibility to regulate water use, particularly where shortages exist or are likely to occur in the future, if the prevailing patterns of use continue unchecked. Groundwater use in the Manila area has grown rapidly over the last 30 years. The extraction rate exceeded the natural recharge many times, resulting in sharp declines of the water table and intrusion of sea water, especially in the coastal areas. Further overpumping will extend the irreversible degradation of the groundwater quality inland, and therefore reduce the benefits available to future groundwater users. The twofold effect i.e. lowering of the groundwater table and progressive salinization of the aquifer, which is a direct result of the first, constitute a significant economic loss to society as a whole, not only because of the increasing pumping costs, but also, even more importantly because of the decrease of the water quality due to salination which will lead to a progressive abandonment of wells. In other words, each current groundwater user imposes external diseconomies or costs on all other existing and future users as long as the actual withdrawal scenario persists. There is therefore, a strong case for the government to adopt rational policies for managing and controlling groundwater in the GMA. A soundly designed package of groundwater user charges and associated water resource management measures would help not only to restrict groundwater use in the GMA, but also to raise revenues - 25 - so that alternative sources of water supply could be developed in the future (especially through extension of the MWSs pipeborn system), to supplement or replace ( in the form of artificial recharges ) declining groundwater availability. 3.3.2* recedents for Groundwater Managenent and Zxisting Measures Groundwater laws exist in developed countries such as the US (24 States), and in several developing countries like Mexico and Mali. Within the Philippines, charges are levied for developing and exploiting other natural resources such as minerals, forest products and water for electricity generation. The imposition of charges for the use of forest products, including timber and fuelwood, is particularly relevant, because like groundwater, forests are a renewable resource which can be damaged beyond the point of recovery through prolonged and uncontrolled over-exploitation. However, there are problems in implementing many of these regulations. In the specific area of groundwater, several water districts like Cebu and Batangas have recently imposed user charges. Existing groundwater management measures relevant to the GMA are described in the PWC (issued by the National Water Resources Council - NWRC) , and the Republic Act No. 6234 of 19 June 1971, creating the MWSS. Thus, there are provisions for drilling and maintaining water wells, protection of water supply sources, filing fees, minimal user charges, and limits on withdrawal rates in relation to the distance between wells. However, the penalties are in general both inadequate and not sufficiently well enforced, to meet the crisis caused by the rapid depletion and salinization of groundwater resources in the GMA. - 26 - 3.4. Policy Implementation Issues Thus, there is a need for a new package of groundwater management and control measures which is consistent with and supplements the existing laws mentioned above. The new measures should include the definition of critical groundwater areas in the GMA, licensing of well drillers, requirements for drilling permits, specifications for construction, maintenance, and sterilization of wells, metering and reporting requirements, user charges, limits on pumping (where necessary), the return of cooling water to the aquifer and contamination controls. Coordinated use of all policy instruments is important to achieve the best results. 3.4.1. Drilling and Licencing Pees All new well-owners ought to be charged a drilling fee to obtain the right to drill. In addition there should be an annual licencing fee, if the well is to be operated. These fees essentially provide a control mechanism whereby all existing and new wells appear on a government list, and their status is verified at least once a year. The approved permit to pump water should specify the construction specifications, allowable volume and the user fee to be paid, based on piezometric head and salt content of the groundwater. 3.4.2. Controls and other Regulations The government should adopt and impose a system for safe well abandonment. This is a difficult objective because it requires knowledge of all active wells. However, if all wells are abandoned properly by filling the bore completely from bottom to top with impermeable material (cement or clay), the protection of the fresh water part of the aquifer will be enhanced by lessening the - 27 - likelihood of new points of downward flow of saline water. Had this procedure been followed since the early days of groundwater development in the GMA, the saline water would have progressed far less than it is the case today. In the critical areas characterized by a low piezometric head and/or a high salt concentration in the groundwater, a surcharge (in addition to the user charge), might be imposed on withdrawals above "normal requirements", if alternative MWSS supply is available. Steps could also be taken to prevent man-made pollution of the aquifer. Rivers and stream channels, which feed the aquifer by percolation from their beddings, are the recipients of waste products from overland runoff, from effluent discharge of industries, city dumps and sanitary landfills. While provisions for pollution control already exist at the national level, regulations more specific to the GMA should be specified and strictly enforced. 3.4.3. Conservation, Redistribution and Recharge MWSS has operated a water development and distribution system based on its policy of conjunctive use of ground and surface waters. Groundwater is used in the outlying areas beyond the Central Distribution System (CDS), and it is used also within the existing CDS to supplement surface water. In 1980-81 it was estimated that groundwater contributed about 40 percent of the supplies for the GMA. In reference [21], it was reported that groundwater extraction in 1982 of 740 mld would be reduced to about 615 uld or less by the year 2000, and that the pumpage pattern would have been redistributed away from the overdeveloped so-called "cones of depression" in Valenzuela and Makati (see Figure 5). The report - 28 - 0 lacan Pr Inc -100 San - 1M Mateo Va nluela -20 -100 Quezon City Mapikina -40 -80 Manila Manila SA a,n -8082- Man luyon BayatI1o -0 2 - a lSig Rizal Pasay Cit .Province T ulg 20 Paraftaque *20 Lgn Cavite city Ba p4s*0 DA e -20 Boar Bay * Kilometers Noveletiii +20 Muntinlupa +0 +0 dro Cavite Leu Province Provine Fig 5: Map of Piezometric Surface (hydraulic head in metres below sea level) for the Manila Bay Aquifer System, Greater Manila Area, in 1982-3 -29 -- further stated that the probable progressive decline in groundwater punpage in the GMA would continue into the next century, possibly stabilizing at a level of 200 m1d. For all practical purposes, the existing depletion of groundwater storage extends over the entire GMA. Figure 5 is a map of the piezometric surface of the GMA for 1982 showing that the surface is below sea level in all but the extreme northeastern portion, which is less than 10 percent of the area. Furthermore, west of the North Expressway, the piezometric surface is from 40 to 100 meters below sea level. Between the provinces of Bulacan and Rizal on the one side and Manila Bay, the piezometric surface lies from 60 to 120 meters below sea level. From Makati to Pasig the level varies 100 to 140 meters below sea level. In most of the GMA the depletion of groundwater is widespread and severe, and the water levels are so low that the salt water intrusion will continue the damage of the aquifer for years to come. Additionally, the withdrawal of groundwater from anywhere west of Laguna de Bay and southward, adjoining Cavite Province has a negative effect on the piezometric surface in the GMA and eventually must be controlled. Serious damage to the aquifer has been caused by salt-water intrusion laterally and downward along the coastal GMA from Valenzuela to Cavite City; in the Marikina Valley, upwelling from depths of 200 meters or more, and more recently, laterally along the boundary of Makati and Mandaluyong. In summary, the withdrawal of groundwater must be reduced and redistributed through the GMA, as soon as practicable. The highest priority areas to receive alternate water supplies and to reduce groundwater pumpage are Cavite City, the so-called Valenzuela cone, the Makati-Mandaluyong cone, Pasay City and Paranaque north of Sucat Road, and coastal Las Pinas. Cavite City will receive water from off- peninsula to the south in Cavite Province, causing a redistribution of groundwater pumpage to a more favorable area for withdrawal in the neighborhood of Noveleta. The other places named - 30 - should be served by the newly developed surface water source, while groundwater pumpage reductions must be made concurrently. Levying a surcharge on the normal groundwater user fee on pumpage above some "normal level of depletion" can provide a strong incentive to the users of large volumes of water to reduce or eliminate groundwater withdrawals and purchase water from MWSS. We conclude this section by examining recharge options [22]. Laguna de Bay is a large area to the southeast, serving as a source of fresh-water recharge to the aquifer, because of favorable differences in piezometric levels. Natural recharge also occurs from the highlands in the south, east and northeast, as well as some reaches of streams that cross the GMA during the rainy season. However, because of the relatively low permeability of the aquifer system in most of the GMA, it is believed that efforts to encourage additional natural recharge to the aquifer would be unsuccessful. It would be worthwhile to experiment with artificial recharge wells in Makati, utilizing cooling water from the high-rise business establishments and apartment buildings, to replenish the aquifer. The used cooling water should be chemically compatible with the aquifer, and unused wells could be used as injection sites. If this experiment turned out to be successful, later experiments could be tried using water from the Central Distribution System (CDS) when it is available. At that time 4WSS wells could be utilized as recharge wells. A similar experiment also could be tried along the coastal GMA to determine if a fresh-water mound or ridge could be built to control the inland migration of salt water. Finally, the government should monitor the water level and its quality in wells within the GRA, as groundwater pumpage is shifted away from the deep cones of depression. - 31 - 3.4.4. Determining and Enforcing User Charges Any realistic pricing framework must incorporate both economic efficiency and equity considerations. On socio-political grounds, there is a good case for distinguishing between household users who would be withdrawing relatively small amounts of water for their basic needs, and industrial and commercial well-owners who would be pumping large volumes of water as an input into a profit-making productive activity. This discrimination would apply only to the user charge -- all well owners should be subject to drilling and licensing fees. At the same time, users in the vicinity of the brackish interface (see Figure 1) have to be more cautious as to their extraction rate of the groundwater. Exceeding a critical maximum pumping rate causes a "sucking upward" or upcoming of salt water, hence terminating the use of the well. The users close to the interface therefore will face an additional externality cost i.e. income foregone associated with reduced pumping to avoid upcoming. Due to excessive pumping by users located at some distance away from the interface, the salt water front will continue to progress inland forcing the closer users to gradually decrease their pumping rates and eventually to abandon their wells. If information were available, spatial price discrimination or zoning (based on distance away from the brackish interface) might therefore be warranted. In the same context, one could argue for a dynamic pricing over time. However, no discrimination in the sense of "zoning" is considered in the present study, due to data limitations. a. Household Users Based on the socio-political argument that all citizens are entitled to their basic water needs, two basic alternative measures - 32 - of relief from user charges for household well owners are proposed: (i) Exemption from the user chargu up to 50 m3 per month per household (based on basic needs allocation of 6 m3 per capita per month, and assuming 8 persons per average household); with the normal user charge being levied on all pumpage exceeding 50 M3 per month. (ii) Exemption from the user charge for all consumption, provided the well casing diameter is below some critical size (say 13 mm). While both measures encourage conservation of groundwater, alternative (ii). would be easier to implement. It eliminates the need for metering, billing and collecting payments from a large number of small groundwater users. b. Industrial and Commercial Users This category of user who would be using the water for profitable activities should be charged the full rate (based initially on US$0.012 per n3, estimated earlier), on all withdrawals. c. Other User Charges Earlier, certain areas were identified as critical zones, based on piezometric head and/or salt content of the groundwater. Therefore an additional surcharge on the normal user charge should be imposed, especially where alternative MWSS supply is available. The level of surcharge should be high enough to encourage the well owners to shift to MWSS supply. Finally, additional charges may be imposed, based on the cost of disposal of groundwater that is pumped, including the actual costs of sewerage (where appropriate) and any other health or environmental costs associated with discharge. - 33 - There are three basic methods of determining the volume of water extracted from wells: (a) a water meter; (b) the electricity consumption; and (c) the pump capacity. Of the three methods, the direct reading of a water meter is the best suited to a water utility like NWSS, where the organization has the trained manpower, local offices and procedures already in place. However, water meters can be tampered with to give erroneous readings, and therefore groundwater users should be persuaded to cooperate through a system of strong legal penalties. Also the decision to meter and the complexity of the installed device should be made after comparing whether the benefits of the metering exceed the costs [4]. The second best method would be power consumption data. This method requires skilled manpower, verified pump data and periodic readings from a dedicated electric meter. The records could be obtained from the power utility on a routine basis, or read directly by a water utility employee. Using pump capacity as an indicator of water extracted entails some practical problems of proper control by the water utility. To compute the pumpage several technical data need to be obtained and requires the cooperation of the well owner. In the case of submerged pumps for instance, it would be impossible to verify anything about the size and horse power of an already submerged pump. This leaves the pump capacity the least attractive assessment method. IV. CONCLUSIONS Population and economic developmental pressures will continue to put increasing pressure on the environment, especially on scarce water resources. Meanwhile, large numbers of poor families in the - 34 - developing countries still lack access to safe water, and despite some modest gains during the International Water Decade, formidable problems relating to financial and manpower resource shortages, as well as institutional weaknesses remain. Nevertheless, our understanding of water resource problems, both from the analytical and practical points of view, have improved significantly during recent decades. The integrated water resource planning and policy analysis framework permits the main issues and alternative options to be systematically considered and prioritized, especially problems arising from groundwater pollution. A good example showing how the neglect of long-run externality costs jeopardizes the availability and quality of groundwater resources, is the case of the Greater Manila Area (GMA) aquifer. For the case when extraction rates exceed the combined natural and artificial recharge rates, the typical private groundwater user tends to be ignorant or unconcerned about the fact that the amount of groundwater that he or she pumps imposes external diseconomies or costs on all other existing and future users,. In the GMA situation not only aquifer depletion, but also its resulting side effect of saline intrusion, worsens the long-term problem. Among the measures that the Metropolitan Waterworks and Sewerage System (MWSS) could take to slow down the overall groundwater extraction rate, and hence safeguard water for future users and purposes, is a system of user charges. The determination of the user charge is based on the recognition that the use of groundwater should be governed by a social demand curve, which explicitly accounts for environmental and externality costs. In order to equalize marginal groundwater extraction costs and marginal consumption benefits to society, a user tax, equal to the long-run externality cost could be imposed per m3 of groundwater withdrawn. A more detailed spatial and temporal disaggregation, considering the geographical advancing of the saline front and the depletion of the aquifer, should allow for a surcharge in addition to the defined user charge in critical zones. - 35 - It is the task of the government as a regulatory agency to systematically exploit and adequately regulate water use, particularly where shortages exist or are likely to occur in the future. In this regard, the imposition of taxes based on user charges should be only part of a combination of various groundwater demand management and control measures, in order to be effective in cutting down the groundwater use. A soundly designed package of groundwater resource measures would in addition help to raise revenues to develop alternative sources of water supply in the GMA to supplement or replace declining groundwater availability. - 36 - AINX 1 t ECONOMIC COSTS OF PRODUCING WATER Tables A.1 to A.5. provide detailed information on the production costs for (a) groundwater (depletion and conservation cases); and (b) the MWSS public water supply. The general approach used to estimate unit economic costs of water produced is to calculate the average incremental cost (AIC) of Papply -- see reference [16] for details. Present value of incremental costs of producing water AIC ---------------------------------------- Present value of volume of incremental water produced - 37 - Table A.1. Groundwater Withdrawals and Supply Costs 1984 730 0 0.131 95.9 0 95.9 730 0 95.9 0.0 95.9 85 730 0 0.137 100.1 0 100.1 697 33 91.6 7.6 99.2 86 730 0 0.142 103.8 0 103.8 664 66 87.3 15.4 102.6 87 730 0 0.148 107.9 0 107.9 631 99 82.9 23.0 105.9 88 730 0 0.152 111.6 0 111.6 598 132 78.6 30.6 109.2 89 730 0 0.159 115.8 0 115.8 565 165 74.3 38.3 112.6 1990 730 0 0.164 119.4 0 119.4 532 198 69.9 46.0 115.9 91 719 0 0.169 121.7 0 121.7 499 220 65.6 51.1 116.6 92 708 0 0.174 123.4 0 123.4 466 242 61.2 56.2 117.4 93 697 0 0.180 125.4 0 125.4 433 264 56.9 61.3 118.2 94 686 0 0.185 126.9 0 126.9 400 286 52.6 66.4 119.0 95 675 0 0.191 128.7 0 128.7 367 308 48.2 71.5 119.7 96 664 0 0.196 129.9 0 129.9 334 330 43.9 76.6 120.6 97 653 0 0.201 131.5 0 131.5 301 352 39.6 81.7 121.3 98 642 0 0.206 132.5 0 132.5 268 374 35.2 86.9 122.1 99 631 0 0.212 133.9 0 133.9 235 396 30.9 91.9 122.8 2000 620 0 0.217 134.6 0 134.6 200 420 26.3 97.5 123.8 01 558 0 0.223 124.4 0 124.4 200 358 26.3 83.1 109.4 02 496 0 0.228 113.0 0 113.0 200 296 26.3 68.7 95.0 03 434 0 0.234 101.4 0 101.4 200 234 26.3 54.4 80.6 04 372 0 0.239 88.7 0 88.7 200 172 26.3 39.9 66.2 05 310 0 0.244 75.7 0 75.7 200 110 26.3 25.6 51.9 06 248 0 0.249 61.9 0 61.9 200 48 26.3 11.1 37.4 07 186 14 0.255 46.0 3.3 49.3 200 0 26.3 0.0 26.3 08 124 64 0.260 32.2 14.9 47.1 200 0 26.3 0.0 26.3 09 62 138 0.266 16.5 32.1 48.6 200 0 26.3 0.0 26.3 2010 to INF 0 200 0.271 0 46.4 46.4 200 0 26.3 0.0 26.3 11) Unit cos of Production is 0.217 USS per M3 for Groundwater Withdrawal (Depletion Case in year 2000), from Table A.3. (21 Unit coat of Production is 0.132 USS per a3 for Groundwater Withdrawal (Conservation Case), from Table A.2. (3) Unit cost of Production is 0.23 USS per a3 for MWSS Supply, from Table A.4. Remark: Output is the same in both Depletion and Conservation cases Table A.2. Initial Pumping Costs and Well Output in 1984 0 92,857 9,400 179,050 1 0 2 0 3 5,100 4 0 5 5,100 6 2,607 7 5,100 8 0 9 16,900 10 0 11 7,707 12 0 13 5,100 14 0 15 5,100 16 2,607 17 5,100 18 11,800 19 5,100 9,400 179,050 Psnt Valus 121,044 80,025 1,523,200 I Yr Zro (rfufl ote~ at 10%) Uit Cost: [121,044+ 80,025] 1,523,900 - .132 US$ m3 Based nExcan Irat u 1984: 1US $ - 14 Pso Wal ch1acistics ib id-1984: Dupth = 183 m Pumping rat~ - 0.454 cubio meter /mi Total Dynamic H~d (TDH) -76 m Effciency : 0.6 Capacity Faår : 50 % Life Tim - 20 yrs -39 - Table A.3. Depletion Scenario: Pumping Costs and Well Output in 2000 0 92,857 12, 14 179,050 1 0 2 0 3 5,100 4 0 5 5,100 12,614 179,050 Pmusnt Valus 99,855 47,818 678,740 in Yr Zro (Dw~ at 10%) Unit Cost: [99,855+ 47,8181 /678,740 - .217 US$ / m3 Bsdo Exchoa rate I1 ue 1984: 1 US $- 14 Pos We characteiutics in mid-200: Depth - 183 m (projerdedBlgwa) Pumping ratt - 0.681 cubic metr /mn Total Dynumic H~d (TDH) - 116 m Effioc~y: 0.6 Cap*ityaor : 50% Lif Tim -5 yra Reark: Effects of gromdwater depletion are: lowrd water tab& (in*rased TDH) highr salinity (reduced lifetime) - 40 - Table A.4. Average Incremental Cost (AIC) of MWSS Water Supply The present values of production costs and volumes (from Table A.5.) discounted to 1984 at a rate of 10 percent per year, in constant mid-1984 prices, are as follows: 1. Capital costs (million US$) 632 2. Operating costs (million US$) 77 3. Value of power and energy sales 59 (million US$) 4. Net present value of costs (1+2-3) 650 (million US$) 5. Water produced (million cubic meters) 2,801 6. AIC of water produced (USS/cubic meter) 0.23 -41- Table A.S. MWSS Costs and Production 1982 4.04 83 11.88. 84 11.59 85 41.06 86 80.88 87 161.94 88 185.76 89 122.86 1990 43.26 4.86 9 91 52.08 6.14 80 92 56.97 7.53 160 93 53.84 9.04 247 94 52.54 10.53 336 95 56.39 12.16 439 96 43.30 13.89 541 97 35.68 15.66 648 98 34.70 16.61 697 99 - 16.61 697 2000-2030 - 16.61 697 - 42 - (1) The World Bank, "Water and Sanitation : Toward Equitable and Sustainable Development - A strategy for the Remainder of the Decade and Beyond," Washington D.C., 1988, p.16. (2] M. Munasinghe, "Water Supply Policy and Issues in Developing Countries," Natural Resources Forum, vol. 14, Jan. 1990, pp. [3] World Health Organization, "Review of Progress of the International Drinking Water Supply and Sanitation Decade, 1981 - 1990 : Eight Years of Implementation," Geneva, 1988, p.3. [4] M. Munasinghe, "Contemporary Water Supply Efficiency and Pricing Issues in Developing Countries," Paper Presented at the International Conf. on Cost and Price of Water in Urban Areas, Paris, Dec. 6-8,1988. [5] S.S.D. Foster, "Getting to Grips with Groundwater Pollution Protection in Developing Countries," Natural Resources Forum, Vol 10, 1986, pp. 51-60. [6] C. Chuamthaisong, "Economics of Groundwater Development in Thailand," International Water Ouality Bulletin, 14, 1989, pp 24-30. (7] J.W. Lloyd, "Aspects of Interaction between Groundwater and the Environment," in S. Awadalla and I.N. Noor (Eds), groundwater and the Environment, Proceedings of the International Groundwater Conference, Euala Lumpur, Malaysia. June 1987, pp 1-25. [8] BRGM (Bureau de Recherches Geologiques et Minieries), Water, agriculture and soil studies of the Saq and overlying aquifers, Report to the Ministry of Agriculture and Water, Riyadh, Saudi - 43 - Arabia, 1985. [9] A.Q. Rathur, "Groundwater Management to Eradicate Waterlogging and Salinity in the Upper Indus Basin, Punjab, Pakistan," in S. Awadalla and I.M. Noor (Eds) , Groundwater and the Environment, Proceedings of the International Groundwater Conference, Kuala Lumpur, Malaysia. June 1987, pp G.96-G.107. [10]J.J. Jenkin , "Dryland Salting in Australia," Water Research Foundation Symp., Soil Conservation Authority, Kew, Victoria, 1981. [11] M.A.O. Busari and U.M.P. Amadi, "Water Quality of Coastal Aquifers in Southern Nigeria," International Water Quality Bulletin, 14, 1989, pp 31-35. 112A] C.W. Busch, W. Matlock and M. Fogel, "Utilization of Water Resources in a Coastal Groundwater Basin," J. Soil Water Conservation, 21, 1966, pp 163-169. [12B] S.C. Peng, "Salt Water Intrusion in Groundwater in Peninsular Malaysia - An overview," in S. Awadalla and I.M. Noor (Eds), Groundwater and the Environment, Proceedings of the International Groundwater Conference, Kuala Lumpur, Malaysia, June 1987, pp E37-E50. (13] D. Todd, "Seawater Intrusion of Coastal Aquifers," Paper presented at 6th lecture on hydrology, American University of Beirut, Beirut, Lebanon, May 5th, 1967. [14] R.D. Hayton, and A.E. Utton, "Transboundary Groundwaters: The Bellagio Draft Treaty," International Transboundary Resources Center Paper, Univ. of New Mexico, New Mexico, 1990. [15] R.G. Cummings, "Optimum Exploitation of Groundwater Reserves with Saltwater Intrusion", Water Reg. Res., 7 (6), 1971, pp 1415-1424. - 44 - 116] M. Munasinghe, Water Supply Economics and Environmental Management, World Bank, Wash. DC, 1991. [17] World Bank, Metropolitan Manila Water Distribution Project, Staff Appraisal Report No 5903-PH, The World Bank, Wash. D.C., February 1986. 118] World Bank, Angat Water Supply Optimization Project, Staff Appraisal Report No 7801-PH, The World Bank, Wash. DC, June 1989. [19] M. Munasinghe, "Rationale and Economic Basis for a Groundwater User Charge Mechanism and Legislation," Metropolitan Waterworks and Sewerage System (MWSS) - Final Report, Manila, June 1984. [20] NWSS, Groundwater Development MWSII Final Report (GWD), Metro. Waterworks and Sewerage System, Manila, March 1983. (21] NWSS, MWSII Water Demand and Tariff Study, MWSS, Manila, January 1983, pp.61-3 [22) H.J. Vaux, Jr., "Economic Aspects of Groundwater Recharge," (Ed. T. Asano), Artificial Recharae of Groundwater. Butterworths Press, 1985, pp 703-718. - 45 -