Although there are many uncertainties around quantitative assessments of climate change impact and water resource management, what is certain is that the climate is changing and this will have an effect on water resources.
This case study considers the economic consequences of water resource scarcity, particularly as it relates to the poor and small municipalities. The author is concerned that, in the case of water, economic principles where price adjustments to an increasingly scarce resource will balance demand, do not apply.
Currently, most countries adopt free or subsidised water for the poor which is accommodated through a cross subsidy within the municipal tariff structure. However, the likely rate of increase in tariff due to water scarcity resulting from (projected) reduced rainfall will be too much of a burden for the small number of high-end users in small municipalities. Coupled with inflationary increases, the majority middle- and low-end users are also unlikely to be able to meet the dramatic increases. The methodology outlined in this paper will assist municipal planners to evaluate these financial impacts due to climate change and develop appropriate strategies to ensure the sustainability and affordability of long term water supplies. In addition, policy intervention at a national level may be needed in order to sustain small communities’ ability to provide affordable water to their poorer members.
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