1. Jim Winpenny opened by stating that how well we manage water is a touchstone for our future success. He identified a number of tensions in water management: food security vs. water security in dry environments; the high energy cost of desalination; and the high water demand of biomass for energy security. But he said there are win-wins: such as the positive effects of water supply and sanitation on education and health.

2. Winpenny noted that water is the key indicator of the impact of climate change – “the canary in the cage”. On adaptation to climate change, he said that different adaptation measures will be financed in different ways, and many are not very costly:

• Policy, institutional and behaviour change have few direct financial costs (though they are difficult to achieve)

• Some costs are borne by water users

• Soft approaches (information networks, research, policy) are important and need finance, but costs are not very high

• Some hard infrastructure will be needed and will be expensive, e.g. multipurpose storage and changes to irrigation networks

1. Winpenny noted that since the World Commission on Dams report (2000) there is a much higher onus of proof on the proponents of dams. But he argued that there is a huge case for governments to support water storage (alongside better management) given the relationship between droughts, floods and GDP. Hydropower can be a cash cow but many schemes are public goods and will depend on financing by governments or international financial institutions (IFIs). He said that it is now accepted that old models of public-private partnerships in dam building were flawed as the private sector was asked to take on a disproportionate share of risk.
2. He also said that existing irrigated and rainfed farming will have to adapt: expansion of irrigation will not work an adaptation to climate change on a large scale (though it will be important in some places including Africa), and adaptation of existing infrastructure, better groundwater management, demand management, water reuse approaches and upgrading rainfed systems will be more important.
3. Winpenny presented estimates by the Stockholm Environmental Institute for the cost of water resource management needed to achieve the MDG hunger goal: USD 47bn for 2005-2015, and 67bn for 2015-2030. The majority is for irrigation development, with lesser sums for upgrading rainfed agriculture, research and extension. He noted that major irrigation development and rehabilitation will need to be financed by governments, ODA, IFIs, user charges and private sector participation, while minor works will tend to be financed by communities, NGOs, and micro-finance.
4. He suggested that the current financial crisis is increasing the role for IFI lending as commercial lending declines. The pendulum is swinging towards governments; it was never realistic to expect the private sector to meet the financing gap. He proposed that water infrastructure should be part of national stimulus packages as in the USA and China.
5. Finally, Winpenny proposed 4 main roles for ODA in supporting adaptation:

• Financing international and regional public goods (e.g. information and monitoring systems, and international/transboundary water institutions)

• Catalysing institutional, technological and financial innovation

• Going “back to agriculture” and supporting the major changes needed for climate adaptation

• Supporting (selectively) multipurpose storage schemes, particularly in Africa

1. Thomas Tanner spoke about the challenges in developing national adaptation frameworks, presenting his work in the water sector in China. He said awareness of climate change is increasing in China because of recent devastating floods and storms, and that institutional coordination is also increasing, driven by the UNFCCC process. China is seeking to learn lessons on adaptation.
2. Tanner explained that the project selected four water management projects (ranging from policy to infrastructure) and assessed the likely impact of climate change on the achievement of project objectives using a screening framework. Historic climate variability as well as climate change projections were used. Cost-benefit analysis and multi-criteria analyses were used to identify and select options to manage these impacts.
3. He highlighted some of the project’s main experiences:

• China has a well-developed system for monitoring and managing climate impacts

• Future uncertainties about rainfall are very high – sometimes models did not even agree on the direction of change

• Many of the projects were socially-driven and non-monetary aspects had to be included into cost-benefit analyses.

1. Finally he discussed the main lessons learned:

• Adaptation is time- and place-specific: so how can this approach be taken to scale?

• Remember “soft” approaches. Adaptation does not have to mean infrastructure.

• There is an existing adaptation deficit as water management in China is already not adapted to existing variability. This has to be tackled first. 

• “No change” may sometimes be the best option. Socio-economic change is sometimes a much more important driver than climate change.

• Adaptation is not one-off, but a continuous learning process. 

1. Nanki Kaur put the two presentations in the context of the ongoing UNFCCC negotiations. She said that the main questions being asked about adaptation at the UNFCCC are:

• How much money is needed for adaptation?

• Where should this money come from?

• How will the money be disbursed?

• How can countries access it?

1. Kaur then focused on the first two questions. She said that there are various estimates of the total cost of adaptation to climate change: $44bn according to the UN, and $9-11bn for the water sector. However these are very uncertain. Different estimation methods include costing the projects identified in the NAPAs (National Adaptation Programmes of Action) of least developed countries, or using a screening tool such as in Tanner’s presentation. 
2. She said the main question about the source of funding for adaptation was whether it should come from ODA or dedicated climate funds (such as those under the UNFCCC or new bilateral funds). She observed that there is not enough money in these funds to meet the costs of adaptation, and that most government’s funding pledges have not been met. This has led to various new proposals for additional financing, including suggestions of a 2% levy on the Clean Development Mechanism, or a 2% tax on developed country GDP (the latter suggested by China).
3. Kaur then emphasised that answering the question “what is adaptation?” will tell us more about how much money is needed and where it should come from. She said that in the water sector adaptation can be:

• Demand or supply-based

• Technology, policy or market-based.

• Finally she asked the audience to consider what type of adaptation each intervention would facilitate:

• Reduced vulnerability (secure the asset base)

• Increased adaptive capacity (enhance the asset base)

• Reduced hazards

• More robust policies

1. A floor discussion followed. Questions and comments included the following.

• Who will coordinate and deliver adaptation on the ground? Will they include civil society? Thomas Tanner responded that much of what we need to do for adaptation is essentially about development to reduce the vulnerability of the poorest. ODA is already experiences in doing this, and we should focus on these “no or low regrets” options and step up efforts  to mainstream adaptation into development, while providing additional financing for adaptation over the existing 0.7% aid commitment. Nanki Kaur said that adaptation is usually coordinated in-country by the Ministry of Environment,. However this is often a weak ministry and civil society and the media can be very important in making Ministries of Finance pay attention.
• Is there a role for micro-financing in adaptation? Jim Winpenny responded that micro-finance and local savings institutions have considerable potential. He gave the example of successful micro-finance schemes in Kenya under which a local bank lends for community water investments in conjunction with World Bank investment, with revenue from the schemes being used to pay back loans. However Thomas Tanner noted that micro-finance often fails to reach the poorest and most marginalised.
• It is easier and more efficient to improve the management and efficiency of existing systems than to build new ones, but this is often resisted. Should donors put more money into restoration and maintenance? Jim Winpenny agreed that this is a problem: new schemes are more attractive politically, and they divert budgets away from existing schemes. However dedicated donor funds for operation and maintenance could be seen as interfering in government budgets.
• Communities in many affected countries already have experience of adaptation because they live with high climate variability. How can we learn from this, and connect their voices with high level policy debates?
• Given the high uncertainties about climate change impacts, we should focus on building adaptive capacity and ensuring resources can be mobilised when needed, rather than on adaptation blueprints. Nanki Kaur responded that most of the interventions identified in NAPAs aim to reduce vulnerability of populations and do not respond to particular future scenarios, because of high uncertainties. Thomas Tanner agreed that framing adaptation as building capacity is the way to deal with future uncertainty. But he argued that the starting point should be meeting the current adaptation deficit.
• The most urgent task is to reduce demand for water; we consume about 60% of renewable supply and are likely to hit the limits of supply by about 2025. This means pricing and river basin governance. We should not focus on finding finance to enhance supply. Jim Winpenny replied that a lot of the costs quoted for adaptation are for adapting existing systems to make them more water-efficient, not for new supply. He agreed that water pricing is important but as water is not traded, pricing is political. Thomas Tanner said that governance is critical to making sure that water resources management responds to the needs of the poor.
• Our understanding of river basins is often poor and current water management is often not sustainable – how then can we talk about managing for future climate change?
• Are there concrete examples of changes in runoff due to climate change? Thomas Tanner replied that it is impossible to attribute individual events to climate change, but we are seeing clear rises in temperature (0.7 degrees in the last 50 years) and an increase in extreme events.
• Do the cost estimates for adaptation include catchment restoration and management measures such as reforestation? Jim Winpenny replied that these are very important measures which are likely to have been excluded from cost estimates so far.   
• How are adaptation priorities set in country, and how can ODA support local people’s own solutions with the shift towards budget-wide or sector-wide support?

1. The speakers then gave concluding remarks. Thomas Tanner emphasised that we do not need to wait for a deal at Copenhagen or decide what adaptation means before we act. Many places are ill-prepared to deal with the shocks they already face, and we know a lot about how to reduce this vulnerability. Jim Winpenny said that we should not “build a box called adaptation”. Adaptation is linked to dealing with poverty, energy security, macro-economic problems of flood and drought and many other issues. A lot of adaptation measures are “win-win” and are worth doing irrespective of the uncertainty about future climate.
2. Sanjay Wijesekera wrapped up and noted that there is an important question about the pros and cons of mainstreaming vs. use of stand-alone funds. He suggested that the latter could reverse a lot of what has been achieved so far in aid effectiveness.

Session 2 – Thirsty cities and dry fields: new stresses at the urban-rural interface

1. Henri Tardieu opened with a presentation on “Water and food for ending poverty and hunger”. His presentation asked 4 key questions, which will each be the focus of a session at WWF 5:

• How to achieve the required food production to meet growing demand?

• How can food market measures boost rural development and poverty reduction?

• Water for bioenergy or food?

• How can better water management reduce poverty and hunger?

1. Tardieu noted that food demand is increasing because of both demography and diversification of diets. He said that 40% of production is currently from irrigated land (which makes up 18% of total cultivated land), and showed the spectrum of agricultural water management ranging from purely rainfed to fully irrigated production. Intermediate approaches include water harvesting, supplemental irrigation and water conservation practices.
2. He emphasised that increased productivity requires better agricultural water management, and that increasing yields can increase water use efficiency, especially for the lowest yields (under 2 tons/hectare) where there is usually excessive evaporation.
3. Tardieu then said that agriculturalwater has not been a priority for donors in the last 20 years, and there are many badly managed irrigation schemes in least developed countries (LDCs). Falling commodity prices have also meant that farmers are becoming less willing to invest in agricultural development for themselves. However, higher food prices are an opportunity to generate investments in agriculture, particularly water management
4. He then discussed biofuels, giving some evidence that biofuel production was probably not responsible for recent rises in food prices.
5. Tardieu noted that irrigation water for ethanol production is expected to double in the next ten years, but will still be less than 2% of global agricultural water. However he acknowledged that in some places facing water scarcitybiofuels would compete with water for food production. Some biofuel crops such as maize are “reversible” (can be used for biofuel or food), though this requires control by the government.
6. In conclusion Tardieu made three points: 

• Increasing the productivity of agricultural water is crucial to double food production; targeting low yields will both reduce evaporation and contribute to poverty alleviation.

• Higher agricultural prices are an opportunity for new investments in agricultural water management. Biofuels should help to sustain prices if integrated in rural development.

• Empowering farmers in local markets will lead to better prices at the farm gate and better incomes for farmers, which in turn should make irrigation services more financially sustainable.

1. Jacob Burke then presented on “Water scarcity – agriculture the guilty party or residual user?”. He started with the example of the Chennai, a thirsty city (now looking to desalination) surrounded by dry fields. He noted that all styles of production from irrigation to conservation farming will probably be needed to feed 9bn people.
2. Burke identified and challenged some myths about agriculture:

• Irrigation potential is not just about the maximum land and water available. In areas where irrigation has high potential, land and water are often constrained.

• Conservation/upgraded rainfed agriculture may be able increase yields to match irrigated agriculture, but the production risk of dependence on rain will remain.

• Cash per drop does not equal crop per drop.

• Water is one of the cheaper agricultural inputs.

He then mentioned a major challenge to reducing water use in agriculture: there are calls for agriculture to increase water use efficiency (WUE), but when farmers increase WUE they typically use the water saved to expand their irrigated area.

1. Burke then suggested that rather than a guilty party taking water from other sectors, agriculture is a “residual user”, making use of whatever water is left by others.
2. He noted that while the 2008 spike in commodity prices seemed to give hope to developing countries, the greatest production increases were in Europe. This was an extreme event when physical and market factors coincided, not long-term enough to trigger a production response. In addition some production systems are at their limit and cannot respond by increasing production (e.g. the Indus and Murray-Darling basins).
3. Burke then discussed the question of agricultural intensification. He noted that cropping intensities are often low even in major irrigation schemes, often reflecting poor management and a failure to get the most out of the infrastructure. He also highlighted that investment in irrigation is often poorly matched with need, as it is often targeted towards international rather than national markets. He gave the example of Nigeria, where agricultural intensification is not occurring to meet the demands of growing northern cities. He noted that irrigation is typically atomistic (private groundwater irrigation by individuals) and questioned what role is left for major public irrigation schemes.
4. Discussing the urban-rural interface, he suggested that keeping rural spaces open for return, and understanding the incentives for leaving and returning to agriculture, may be as important as improving urban infrastructure. He argued that cities and the energy sector are not held hostage by agriculture’s demand for water – these sectors are usually prioritised by government, and agriculture mops up the water that is left. Efforts to allocate away from agriculture may be beneficial in some places, and harmful in others, and he said that questions still surround how to evaluate beneficial use and regulate for it.
5. Finally, Burke concluded that feeding 9bn will require innovation and flexibility.
6. Eva Ludi, as discussant, highlighted the issue of equity. She suggested that there is a tension between an equity vs. a productivity approach: should we allocate water to the enterprises which are most efficient (often large agri-business) or to those with the potential to enhance equity and pro-poor growth (e.g. African smallholders).
7. She discussed four dimensions of equity:

• Spatial equity: How should water be allocated upstream and downstream? How can the mismatch between population centres and irrigation centres be addressed? How should costs and benefits of water management be shared? Who should pay to tackle agricultural pollution and make water potable?

• Temporal equity: Should we use large quantities of water now to lift as many people as possible out of poverty (and make them more resilient to future climatic shocks), or preserve more of our water resources to be deployed in the future?

• Equity within the agriculture sector: How should water be allocated between food and fuel, and between staples and luxury foods (“our beef and beer”).

• Equity between sectors: How should allocation be balanced among different sectors? Who will speak for non-human uses such as wetlands and biodiversity?

Finally she posed the questions: How do we solve these debates, and who should make allocation decisions?

1. A floor discussion followed. Questions and comments included the following:

• When we talk about water “allocation”, we are assuming governments should control the resource. But they often have a bad track record in equity and prioritise urban areas. Why don’t we accept markets in water. Henri Tardieu accepted that government interests are not the same as the interests of farmers, giving the example of Morocco where the government spent 5% of GDP to reduce food prices for urban. Jacob Burke responded that water falls in the public domain and needs a public (and transparent) allocation and arbitration mechanism. He noted that this is about more than having good laws and tests of beneficial use, as commercial concessions are often able to override the law with their buying power. Roger Calow observed that bulk water allocations between sectors are the only way to achieve wholesale reallocation – markets and prices will not achieve this.
• The voices for biodiversity are very strong – agriculture has a comparatively weak voice. Is agriculture really coming back? Jacob Burke agreed that agriculture has to do more to engage with other sectors, and develop more transparent ways of valuing its production. Henri Tardieu shared some experiences from the preparation process for WWF 5: talking about “water for food” not “water for agriculture” is seen as much less political; a “large-scale irrigation scheme” does not mean large scale farmers are the beneficiaries; and the water community was not very interested in a talking about markets.
• What will be the role of small-scale irrigation in sub-Saharan Africa? Henri Tardieu responded that priority should be given to small-scale farmers for water. Irrigation can have a high impact on yields in Africa, but requires risk-taking investments. Roger Calow observed that most NAPAs are prioritising smallholders. Eva Ludi agreed that irrigation is coming in through the backdoor as it features very highly in NAPAs in Africa, in combination with water conservation and catchment management. This may mean more of a voice for the small-scale farmer.
• Agriculture is last in the queue and always gives way to urban demands – it should not be said that agriculture takes water from other sectors. Eva Ludi noted that in the African context it is impossible to separate domestic from productive water – it is simply about “water for livelihoods”. An Ethiopian household will often use some of its “domestic water” for agriculture products which can provide vital income.
• Small-scale farmers tend to have high WUE because they have to pay for each unit of water in labour (for transport) or cash. But profitability is a big issue for them and biofuels may boost their incomes and help to stabilise the small-farm enterprise. Marketing is often more of a constraint than production. Jacob Burke agreed that market linkages are a big problem for small farmers in much of sub-Saharan Africa. Packages that go beyond water are needed to deepen the rural economy. He raised the question of whether small farmers can become large-scale operators. He also noted that farmer cooperatives can boost incomes, and that farming can be very dynamic as farmers may leave the land for a time to earn income elsewhere and return to put this money back into farming. Finally he emphasised that while subsidies have a role, small-scale irrigation can be profitable.
• Allocation may suffer from conflicting responsibilities – for example dams may be in the hands of one ministry or level of government and irrigation under another. Jacob Burke replied that an effective institution to allocate and enforce allocations is essential, and that reconfiguring responsibilities to this point can be painful.
• How can we ensure that enough water is available at the right place, at the right time, at the right price? Henri Tardieu replied that technology and planning are important to make sure water is in the right place at the right time, e.g. through regulation of canals and rivers.
• What advice would you give to countries where the climate models agree that drought will increase?
• In a developing country based on agriculture, agriculture can use 80-90% of freshwater. Even a 10% WUE gain at farm level would then translate into a doubling of available freshwater for other sectors or to increase irrigated areas.
• What kind of capacity building and knowledge system creation will be needed to meet these challenges?

1. The panel then gave concluding remarks, including responding to some of the unanswered questions above. Henri Tardieu said that climate change is a big concern, and that the first step is to convince people to think beyond new dams and consider demand-side options. Finally he sounded a note of caution about relying on water markets – there are few examples and these have often failed under droughts.
2. Jacob Burke agreed that the high value of water as a public good meant that market mechanisms only have a marginal impact. An effective water market would need strong equity controls, markets in technologies such as pumps, and good information which would require very costly regulation. He concluded that users need to become a lot more flexible – climate is a resource not a constraint – and that institutions should support this flexibility while protecting basic needs and the natural resource. Eva Ludi emphasised that capacity building and knowledge management is one of the most critical, but most difficult, things we need to do. Capacity building is needed at three levels: for end-users on resource management; for agricultural extension agents to show them different management options; and for policymakers where many people lack information and negotiating power.