CONTENTS

1
CONTENTS
35
CONTENTS OF PRESENTATION
2
Objectives
36
OBJECTIVES OF THE WDCS
Address water quality problems Excessive waste
levels of water
Internalise cost of pollution
Recover cost of pollution
Incentive to reduce pollution
Promote sustainable water use

3
Important elements
37
IMPORTANT ELEMENTS Resource economics
Opportunity cost forgone opportunity to use
natural resource for other purpose Mutual
exclusiveness in water containing waste cannot
be used for other purposes Water-stressed
country opportunity cost is high Opportunity
cost paid by polluter
Polluter-Pays Principle
Command-and-control (CAC) regulatory principle
currently in use to manage WQ Economic approach
Incentive towards the prevention of pollution
Approaches topollution control
4
Types of waste constituents
38
TYPES OF WASTE CONSTITUENTS
Indicator
Pollutant type
Total dissolved salts (TDS)
Salinity
Total phosphorous (TP) Total nitrogen
(TN) Nitrates (NO2/NO3) Ammonia / NH4
Nutrients

• Selection criteria
• Represents broad category of pollution
  problems
• Significance of impact
• Universality of measurement
• Measurability

• Acceptance of results
• Cause-effect linkage
• Magnitude of problem
• Variability not too dependent on flow
  conditions

5
Waste load defined
39
WASTE LOAD DEFINED
Waste load Concentration X
Volume
kg (1000)
mg/l
m3
Applications WLC lt AC Discharge and
pay charge WLC gt AC Engage in
abatement With WLC Waste Load Charge AC
Abatement cost (Waste prevention/
Treatment technology)
Principle Charge high enough to serve as
incentive to engage in
abatement rather than to pay charge
6
Basis for setting charges
40
BASIS FOR SETTING CHARGES
Waste Discharge Charge
Pollution Level / Concentration
7
Calculation of charge
41
CALCULATION OF CHARGE
Basic charge independent of pollution level
based on volume of discharges (Tier
1). Load-based charge Proportional charge per
waste load (Tier 2) Deterrent charge
progressive charge per waste load (Tier 3
4) Rebates better quality than abstracted
8
Principle of optimal charge levels
42
PRINCIPLE FOR OPTIMAL CHARGE LEVELS
Marginal Revenue (MR) Marginal Social Cost
(MSC) Water quality objectives pollution
levels fitness for use by downstream users
(river classes) Apply variable basis for
charge setting (different tiers)

• Acceptable impact to economy
• Deterrent objective to prevent
• costs to third parties
• Revenue objective recover water quality
  management
• costs

9
AEMC
43
ATTAINABLE ECOLOGICAL MANAGEMENT CLASS (AEMC)
Median concentration (mg/l)
AEMC A B
C D E
F
Description
Unmodified or nearly pristine
Sustainable range
Few modifications
Moderate modifications
Largely modified
Seriously modified
Unsustainable range
Critically modified
10
Economic assessment(1)
ECONOMIC ASSESSMENT (1)
PURPOSE
To determine the overall impact of charge system
on economy. Implies determining the cost savings
due to reduced pollution.
Cost
Downstream cost
Impact of pollution on downstream abstractors.
Cost increases with increasing waste load.
Waste load
11
Economic assessment(2)
ECONOMIC ASSESSMENT (2)
PURPOSE
To determine the overall impact of charge system
on economy. Implies determining the cost savings
due to reduced pollution.
Cost
Downstream cost
Impact of pollution on downstream abstractors.
Cost increases with increasing waste load.
Abatement cost
Cost to dischargers to reduce pollution increases
as waste load is decreased.
Waste load
12
Economic assessment(3)
ECONOMIC ASSESSMENT (3)
PURPOSE
To determine the overall impact of charge system
on economy. Implies determining the cost savings
due to reduced pollution.
Cost
Downstream cost
Impact of pollution on downstream abstractors.
Cost increases with increasing waste load.
Abatement cost
Cost to dischargers to reduce pollution increases
as waste load is decreased.
Waste load


Total cost
Abatement cost
Downstream cost
13
Economic assessment(4)
ECONOMIC ASSESSMENT (4)
PURPOSE
To determine the overall impact of charge system
on economy. Implies determining the cost savings
due to reduced pollution.
Cost
C1
Downstream cost
Impact of pollution on downstream abstractors.
Cost increases with increasing waste load.
Abatement cost
Cost to dischargers to reduce pollution increases
as waste load is decreased.
Q1
Waste load


Total cost
Abatement cost
Downstream cost
14
Economic assessment(5)
ECONOMIC ASSESSMENT (5)
PURPOSE
To determine the overall impact of charge system
on economy. Implies determining the cost savings
due to reduced pollution.
Cost
C1
Downstream cost
C2
Impact of pollution on downstream abstractors.
Cost increases with increasing waste load.
Abatement cost
Cost to dischargers to reduce pollution increases
as waste load is decreased.
Q1
Q2
Waste load


C1 C2
Total cost
Abatement cost
Downstream cost
15
General national charge ranges
49
TIER 2 CHARGE PER WASTE LOAD (KG )

(Concentration x volume)
TDS (Salts) R0,30 R0,60 TP (Phosphorous)
R2,70 R5,40 NH4 (Ammonium) / NH3 (Ammonia)
R0,60
R1,20 NOx (Nitrogen Oxides) R0,60
R1,20 Basic charge Average R0,04 per m3
depending on

catchment
16
CONTENTS
50
CONTENTS OF PRESENTATION
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Managing the system(1)
MANAGING THE SYSTEM (1)
51

National Department of Water Affairs and Forestry

• Policy and strategy formulation
• Approval of tariffs (Minister)
• Manage Tier 34 revenue
• disbursement
• Monitor Evaluate system
• Effectiveness
• Operational efficiency
• Prevent irregularities

18
Managing the system(2)
52
MANAGING THE SYSTEM (2)

• Determining setting of charge
• Compile CMA Strategy
• CMA Business Plan (revenue targets/budget
  allocation)
• Charge setting
• Submit for approval
• Billing mechanism
• Issue licenses sampling
• Auditing self monitoring system
• Manage Tier 12 disbursement

Catchment Management Agencies
19
Managing the system(3)
53
MANAGING THE SYSTEM (3)

Only non-core activities Not independent of
existingcharge mechanisms Good motivation
required Water Boards as possible agents
Outsourcing
20
Elements of proposed WDCS Billing mechanism
54
ELEMENTS OF PROPOSED WDCS Billing Mechanism
Monitoring spot checks (incident reporting) Use
WARMS system
Financial Management System
Invoicing Accounts Receivable system (three
different accounts for tiers) Electronic bank
transfer Post Offices
Charge collection
Enquiries Appeals
Customer relations
21
WARMS
55
WARMS (Water Authorisation and Registration
System)
INTEGRATED INVOICING
No double counting
Waste Discharge Charge
Certificate of volumetric use
22
Revenue ring-fencing
56
23
REVENUE DISBURSEMENTS of RING-FENCED RESOURCES
57

• Administration management costs (Tier 1)
• Regional treatment facilities (Tier 2)
• Rehabilitation (Tier 3 4)
• Spillage exceedance (Tier 3 4)
• R D (Tier 3 4)
• Transfers, cross-subsidisation compensation

24
TRANSFER/CROSS-SUBSIDISATION
58
TRANSFERS/CROSS-SUBSIDISATION (Ex Urban-Econ
Middle Vaal Salinity Study)
GAUTENG
Saline mine water decanting
KLERKSDORP
Greater cost to downstream users
Transfer payment
Middle Vaal River
Water Management Area A
Water Management Area B
25
CONTENTS
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CONTENTS OF PRESENTATION
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Understanding Economic Impact
60

• Charge has negative and positive impacts on
  economy

• Charge has positive impacts on environment, but
  unquantified

• Economic costs and benefits

27
Relationships between Factors
61
RELATIONSHIP BETWEEN ECONOMIC AND ENVIRONMENTAL
FACTORS
Reduction in downstream costs
ECONOMY
Increase in abatement activities
Reduction in waste discharges
Reduction in production
ENVIRONMENT
Economic status quo
Environmental status quo
Costs Charges
CHARGE SCENARIOS COSTS
28
Economic Impact
62
DETERMINING ECONOMIC IMPACT MAIN ASSUMPTIONS
(Scenario)

• Progressive charge (Tier 3 4) to serve as
  deterrent
• Charge covers partial abatement costs (32
  optimum)
• No partial abatement solutions at firm level
• No non-economic managerial decisions

29
Overall Impact
63
IMPACT TOTAL ECONOMY
Impact
-R258m
WDCS load-based charge
Municipal treatment costs
-R30m
Downstream benefits
R431m
Benefits minus costs
R144m
30
Total Economic impact
TOTAL ECONOMIC IMPACT
Overall impact is positive Is it fair??
Cost
C1
R144m
C2
32
Q1
Q2
Waste load
Economic assessment(5)
31
Operational Cost(1)
OPERATIONAL COSTS (TIER 1 DISBURSEMENT)
Total WQM costs
A. Original WQM costs under CAC (General fiscus)
B. Additional administrative costs under WDCS
Current staff costs
A
Current monitoring costs (travel, sampling)
Current legal enforcement costs
R41m
Auditing, disbursement of funds
Setting charges
Billing, collection
B
Customer relations, appeals
Monitoring (increased during phasing-in period)
Information management
R12m
32
Operational Cost(2)
OPERATIONAL COSTS (TIER 1 DISBURSEMENT)
Total WQM costs
A. Original WQM costs under CAC (General fiscus)
B. Additional administrative costs under WDCS
C. Reduced WQM costs under WDCS
Current staff costs
A
Current monitoring costs (travel, sampling)
Decreased monitoring costs due to self-monitoring
by dischargers
Current legal enforcement costs
R41m
C
Possible reduction of legal costs
Auditing, disbursement of funds
Setting charges
80 reduction in monitoring of significant
impactors
Billing, collection
B
Customer relations, appeals
Monitoring (increased during phasing-in period)
Information management
R12m
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CONTENTS
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CONTENTS OF PRESENTATION
34
Implementation schedule
68
IMPLEMENTATION SCHEDULE
Phase 2
Final strategy
(2003)
(Dec 2002)
Piloting important catchments
(2004)
General implementation Catchment management
(2005)
Disburse Revenue
Extend scope to diffuse sources
(2006)
(2010)
35
Issues to be discussed
69
ISSUES TO BE DISCUSSED

• Waste load vs volume abstracted
• Tier 1 based on load or only volume
• Charges to vary according to river class
• Downstream compensation
• Cross-subsidisation between sectors

36
MORE INFO
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MORE INFO CONTACTS
Robyn Arnold writeconnect_at_intekom.co.za