Session 8

Iran: Cost Assessment of Environmental Degradation

Morteza Rahmatian (mrahmatian@fullerton.edu) World Bank Institute Ashgabad, November, 2005

Caspian EVE 2005/UNDP and WBI

GEF

Cost of Environmental Degradation

From materials prepared by

Maria Sarraf Marwan Owaygen

Islamic Republic of Iran

Present the Main Findings of the Report

1. Water 2. Land

3. Air
4. Coastal 5. Waste 6. Forest
Caspian EVE 2005/UNDP and WBI Morteza Rahmatian, Iran: Cost Assessment of Environmental Degradation

Whats the objective?

To assign a monetary value (using latest environmental economics methodologies and data available) to damages resulting from environmental degradation in Iran in 2002

Caspian EVE 2005/UNDP and WBI Morteza Rahmatian, Iran: Cost Assessment of Environmental Degradation

Whats the point?

1. It allows comparison between various environmental categories (air, water, land, forest, waste etc.)

2. 3.
4. 5.

It enables comparison with other economic indicators It enables comparison between the benefits and the costs of investing in natural resource management It raises awareness about environmental degradation beyond the environment audience It gives environment ministers a tool to discuss the importance of environmental protection using the same language as ministers of finance.

Caspian EVE 2005/UNDP and WBI Morteza Rahmatian, Iran: Cost Assessment of Environmental Degradation

Estimated Average Annual Damage Costs (% of GDP in 2002)

3 2.5 2 1.5 1 0.5 0
Water Land, Forest Air Waste Coastal

Water Impact on Health

Mortality: Based on Iranian health experts, diarrhea disease is responsible for about 12.5 % of children death. That means that about 8,600 children under 5 years old die every year. This is equivalent to 246,000 DALYs (1 death = 33 DALYs) Morbidity: DHS survey in Iran showed that diarrhea prevalence in children in the last 10 days is 22 %, using an average duration of diarrhea of 4 days, an avoidance ratio of 85%, a severity weight of 0.11, and an age weight of 0.31 the estimated no. of DALY lost for children is 15,000. Using a same methodology DALY lost due to diarrhea diseases population above 5 years is 67,000. Cost of illness: In addition to pain and suffering from illness (measured by DALY) one should also add the cost of treating diarrhea (medication, doctors visit) as well as the time spent by care givers to take care of sick children.

Estimated costs $2.5 billion or Rials 20,000 billion (2.2% GDP)

Water Underground Water Depletion

1. Decrease in Water Table: Groundwater exploitation constitutes 54% of total water withdrawal. Before 1960 groundwater extraction was estimated at 20 BCM per year. In 2002 this number reached 73.8 BCM. This increase in mainly due to the drastic rise in the number of wells. Current abstraction from aquifers exceeds the safe yield by 3.2 BCM. Overexploitation of groundwater results in decrease in the water table, and in extreme cases in the penetration of salty waters into aquifers and destruction of soil quality.
Main Basins Annual extraction (million m3) Safe Yield (million m3) Deficit (million m3) Average long term change in water table (m) -0.24 -0.26 -0.06 -0.47 -0.25 -0.79 -0.41

Mazandaran Persian gulf & sea of Oman Urumieh Lake Central Plateau Eastern Border Ghara-Ghoom Total / weighted average

7,380 26,630
2,630 33,320 1,310 2,600 73,860

7,210 26,310
2,620 30,910 1,240 2,340 70,620

-170 -320
-10 -2,410 -70 -260 -3,240

Water Underground Water Depletion

1. Decrease in Water Table: To assess damage costs, we looked at the additional pumping costs needed to extract water from a deeper water level. The main additional variable costs is fuel. The amount of diesel required to extract 1 m3 of water per meter depth is 0.004 liter. Given an average market price of diesel of 18 cents/liter. Total present value of damage costs is $200 million (0.17% GDP). 2. Well replacement costs: overexploitation of groundwater also results in the need to abandon wells and dig new ones. Total number of new wells 3,500 / yr (85% due to decline in water table). Cost of digging new well $43,000 and $53,000 Annual costs $332 million (0.3 % GDP) 3. Groundwater pollution: rapid survey undertaken during this study reveals that in 2002 out of 450 new wells (drinking water) every year about 60 were abandoned due to water pollution. Annual costs $3 million

Water Dam Sedimentation

Iran has 151 dams in operation with a capacity of 25 BCM. Water from storage and diversion dams irrigate 22 % of irrigated land Deforestation, overgrazing, etc. resulted in soil erosion estimated at 30 tons/ha/year and sediment loads 10 tons/ha/year. Loss in reservoir storage capacity: 236 MCM (1 % of dam storage capacity) Damage costs estimated in terms of potential loss in irrigated crops (approximated by potential loss in wheat (31% of irrigated land). Estimated the productivity of irrigated water in terms of wheat production: $0.1/m3. (opportunity cost of water) NPV $370 or Rials 3,000 billions (0.33% GDP)

LAND DEGRADATION

RANGELAND

WETLAND

FLOODS & SOIL EROSION

FOREST

IRRIGATED AGRICULTURAL LAND SALINTY

Caspian EVE 2005/UNDP and WBI Morteza Rahmatian, Iran: Cost Assessment of Environmental Degradation

LAND DEGRADATION: Rangeland

Irans rangelands total about 90 million hectares. The main source of degradation is overgrazing.

There are about 46 million animal units in excess on rangelands.

Table 1: Degradation of rangeland quality between 1975 and 2000
Quality of rangeland Area in 1975 Area in 2000 Total change in area Good/Fair 14 9.3 -4.7 Fair/Poor 60 37.3 -22.7 Poor/Very poor 16 43.4 27.4 Total area (in million ha) 90 90

Using a social discount rate of four percent and a 25-year time horizon, the net present value of the damage cost in 2002 amounts to US$ 172 million (Rials 1,400 billion).

LAND DEGRADATION: Wetland

Iran has 286 wetlands, twenty of which have been listed in the Ramsar Convention, covering 0.7 percent of the countrys territory. The most serious threats to wetlands have been their drainage and reclamation for agriculture and the diversion of water supplies for irrigation.

Many wetlands have been polluted with domestic sewage, herbicides, pesticides, fertilizers, industrial effluents and other waste products.

The report focuses on damages resulting from man-driven droughts. The value of damage is assessed by multiplying the total service value of a hectare of wetland by the total damaged area.

Table 2: Estimate of damage costs resulting from wetland degradation

Name of wetland

Type *

Area (ha)

% dried up

Area degraded (ha)

Degradation time span (years)

Annual degradation (ha)

Value of service (US$/ha /y)

Total loss (US$ millions per year)

Ramsar sites:
Gavekhoni Lake Lake Orumiyeh Neyriz Lakes and Kamjan Marshes Yadegarlu and Dorgeh Sangi Lakes (2) (2) (2) 43,000 483,000 108,000 80% 25% 25% 34,400 120,750 27,000 30 10 25 1,147 12,075 1,080 940 940 940 1.08 11.35 1.02

(2)

500

100%

500

10

50

940

0.05

Other internationally important wetlands:

Helleh Boralan Lavandavil Marsh Huralazim Jazmourian Total (1) (2) (2) (2) (2) 42,600 2,000 200 35,000 200,000 914,300 30% 10% 60% 20% 100% 12,780 200 120 7,000 200,000 402,750 20 10 20 23 25 639 20 6 304 8,000 1,620 940 940 940 940 1.04 0.02 0.01 0.29 7.52

23,321

22.4

LAND DEGRADATION: Wetland

Using a social discount rate of four percent and a 25-year time horizon, the net present value of the damage cost in 2002 equals US$ 350 million (Rials 2,800 billions).

Caspian EVE 2005/UNDP and WBI Morteza Rahmatian, Iran: Cost Assessment of Environmental Degradation

LAND DEGRADATION: Irrigated Agricultural Land Salinity

The irrigated agricultural land in Iran amounts to 7.4 million ha. Around 60% of this land suffer from different degrees of soil salinity.

Table 3: Soil salinity on irrigated lands

dS/m Area irrigated (million ha) 2.67 0.87 1.18 1.55 1.11 7.4 %

Salinity level
No salinity Slight salinity Moderate salinity Strong salinity Very strong salinity Total irrigated land 0-4 4-8 8-16 16-32 >32

36% 12% 16% 21% 15% 100%

LAND DEGRADATION: Irrigated Agricultural Land Salinity

Table 4: Irrigated cropping patterns, salinity tolerance and yield decline
Cropping pattern (share of irrigated land)
8% 11% 14% 2%

Irrigated crops
Pulses Fodder Fruits Citrus

Salinity threshold (dS/m)

1.5 2 2 2

Yield decline per 1dS/m

15% 7% 15% 15%

Vegetables
Maize Potatoes Rice Soybean Wheat Sugar beet Barley Cotton

5%
2% 2% 9% 1% 31% 3% 9% 3%

2
2 2 3 5 6 7 8 8

10%
12% 12% 12% 20% 5% 5% 5% 5%

LAND DEGRADATION: Irrigated Agricultural Land Salinity

Table 5: Estimated annual cost of soil salinity
Irrigated crops
Pulses Fodder Fruits Citrus Vegetables Maize Potatoes Rice Soybean Wheat Sugar beet Barley Cotton Total

Average yield losses (in million ton)

0 0 0 0 0 0 0 0.75 0.02 3.07 5.45 1.34 0.27

Price/ton (in US$)

Total loss (in million US$)

0 0 0 0 0 0 0

325 281 170 35 140 408

245 6 522 191 188 112

1,265

LAND DEGRADATION: Floods & Soil Erosion

The number of floods recorded in the 1980s and 1990s is more than five times the number recorded in the 1950s and 1960s. Forest clearing for agriculture, firewood and charcoal production reduced forest area from 19.5 million hectares to 12.4 million hectares over the last 57 years. The countrys most damaging floods occur in the Caspian region. Average annual losses:

- Human losses: US$ 23 million - Damage to infrastructure: US$ 164 million Total annual damage cost: US$ 187 million

One-fifth of the annual damage cost can be related to natural causes and four-fifths to man-made activities. This would amount to US$ 150 million (Rials 1,200 billion).

LAND DEGRADATION
Total annual damage cost: US$ 2.8 billion

Rangeland 6% Wetland 12%

Floods&Soil Erosion 5% Irrigated Land Salinity 45%

Forest 32%

Caspian EVE 2005/UNDP and WBI Morteza Rahmatian, Iran: Cost Assessment of Environmental Degradation

Air Urban air pollution (PM10 and lead)

PM10 Based on existing and estimated level of PM10 in 7 cities in Iran: Tehran, Mashad, Isfahan, Shiraz, Tabriz, Ahwaz, and Karaj and using international D-R coefficients to combine concentration levels and baseline data on mortality and morbidity:
13,200 premature deaths 12,500 new cases of chronic bronchitis 28,600 hospitalizations

Lead
Health Impacts IQ losses in children Mortality Morbidity

Total costs: US$ 1.5 billion or Rials 12,000 billions (1.32% of GDP)

560,300 emergency room visits 1.6 millions restricted activity. days 263 million respiratory symptoms

Air Urban air pollution (Epidemiology)

Greater Tehran Area Health end-points Premature mortality (PM 2.5) Chronic bronchitis (PM 10) Hospital admissions (PM 10) Emergency room visits (PM10) Restricted activity days (PM 10) Lower respiratory illness in children (PM10) Respiratory symptoms (PM 10) Cases 5,324 4,760 10,850 212,900 31,461,000 604,000 100,126,000 Ahwaz Health end-points Premature mortality (PM 2.5) Chronic bronchitis (PM 10) Hospital admissions (PM 10) Emergency room visits (PM10) Restricted activity days (PM 10) Lower respiratory illness in children (PM10) Respiratory symptoms (PM 10) Cases 342 350 790 15,500 2,285,000 44,000 7,272,000 Mashad Cases 1,095 900 2,050 40,200 5,940,000 114,000 18,903,000 Karaj Cases 516 460 1,050 20,600 3,048,000 58,000 9,702,000 Isfahan City Cases 1,140 1,090 2,490 48,900 7,220,000 139,000 22,979,000 Other cities Cases 3,801 4,150 9,470 185,800 27,458,000 527,000 87,387,000 Shiraz Cases 454 380 870 17,000 2,513,000 48,000 7,998,000 Iran Total Cases 13,200 12,520 28,560 560,300 82,789,000 1,589,000 263,480,000
2.1 per adult 0.06 per child 6.7 per adult 3% of CDR

Tabriz Cases 528 430 990 19,400 2,864,000 55,000 9,113,000

Air Indoor air pollution

International literature estimates odds-ratio which relate the likelihood of contracting a disease if biomass fuel is used for cooking 7.8% of Iranian households use biomass for cooking. Impacts on:
Acute respiratory infections
Children: 552 deaths / 3 million cases of illness Adult women: 726 deaths / 549 thousand cases of illness

Chronic obstructive respiratory disease

Adult women: 770 deaths / 2,200 cases of illness

Total costs: US$ 300 millions Rials 2,500 billions (or 0.28 % of GDP)

COASTAL ZONE: Loss in Fishery in the Caspian Sea

Sturgeon Fishery:
Most of the world's caviar comes from sturgeon of the Caspian Sea. It is believed that about 90 percent of all the world's sturgeons swim in the Caspian. The most pressing threat for sturgeon is widespread poaching throughout the Caspian to feed the international demand for caviar. Sturgeons are also under stress due to natural habitat degradation including: - Reduced access to spawning grounds caused by the construction of large dams.

- Destruction of natural spawning grounds due to quarry operations.

- Chemical and organic pollution.

COASTAL ZONE: Loss in Fishery in the Caspian Sea

Sturgeon Fishery:
Figure 1: Sturgeon Catch in Iran (1978-2002)
2500

Sturgeon catch (in ton)

2000 1500 1000 500 0 1975

1980

1985

1990 Year

1995

2000

2005

COASTAL ZONE: Loss in Fishery in the Caspian Sea

Sturgeon Fishery:
An average of 2,500 tons/year is used as the best estimate of potential annual sustainable catch of sturgeon. Under this consideration, the loss of sturgeon catch for year 2002 would be 1,857 tons. This is equivalent to a loss of 278 tons of caviar. At an average export price of $533/kg, this will result in a loss of around US$ 148 million (Rials 1,200 billions).

Numerous sturgeon hatcheries were created as mitigation for lost spawning habitat. 85 percent of Iranian sturgeon catches are related to fingerlings release. The production cost of each fingerling is US$ 0.50. With an average annual release of 22 million, this would result in a total cost of US$ 11 million.

COASTAL ZONE: Loss in Fishery in the Caspian Sea

Kilka Fishery:
The kilka fishery is threatened by the comb jelly, an invasive species introduced by the ballast water of ships traveling the Volga-Don canal.

The kilka fish catch decreased dramatically since 2000. The catch of 2002 presents 44 percent of the average annual catch between 1993 and1999. This results in a loss of US$ 6.8 million.

Total Loss in Sturgeon and Kilka Fisheries for the Year 2002: US$ 166 million (Rials 1,300 billions).

Waste
Municipal waste: collection is 90 to 100 % (cities with more than 500,000 people, 70% (cities with pop between 25,000 to 500,000) and 50 to 60 % in rural areas. WTP to improve waste collection and street cleaning varies $3.3 and $7.3/hshl/month. Apply WTP to 5% (large cities), 30% of hshl of medium cities and 45% of rural households Damage cost $235 million or 0.21% GDP Unsanitary Landfills: comparison between the gate fee of two landfills (same size): Current Kahrizak landfill serving Tehran without environmental consideration: gate fee $1/t (include waste reception, dumping, minimal soil cover, exclude land and profits). Proposed Houshang landfill designed with environmental considerations: gate fee $4.7/t (incl. bottom liner, leachate collection and treatment, gaz collection, replanted vegetation, site closure). The difference $3.7 is applied to municipal waste generated. Damage cost $90 million or 0.08 % GDP

Waste
Loss in Recreational Value Northern Provinces: 5 million tourists visit Northern provinces. 2 million tons of solid waste has been dumped in river banks considerably reducing aesthetic attractiveness of some areas. Based on study in Australia, a decline in environmental condition from Unspoiled to Somewhere Spoiled could reduce tourists expenditure by 30 %. Conservatively used 10 to 20 % reduction in tourists expenditures. Average expenditure $35/day and average time spent is 3 days. Potential decline in tourists revenue $75 million or 0.07% GDP
No estimate of damage costs related to Hospital or Industrial waste

Annual damage costs $400 million or Rials 3,200 billions (or 0.36% GDP)

Deforestation - WWF Ecological Regions in Gilan and Mazandaran Provinces

Cleared Areas (GEF & IFPRI)

Deforestation
Forest cover 12.4 million ha (7.4% country area). Estimated annual deforestation 125,000 ha/yr. Deforestation mainly due to conversion of land to agriculture and clear cutting for wood. Benefits loss due to deforestation: Direct Use Value: Timber. Timber only important in the Caspian Forest (45,000 ha deforested). MAI was 7m3/ha now 3m3/ha. Assume that half this figure is wood and the rest is firewood and an average stumpage price US$150/m3. Estimated annual loss of timber US$ 10 million (Rials 80 billions) Direct Use Value: Firewood. Firewood important in Caspian (45,000 ha), Zagros (54,000 ha) and Irano-Touranian (27,000 ha) regions. Considering MAI (ranging 0.4m3/ha to 1.5m3/ha) and the stumpage price in various forests ($ 4/ha, $7/ha and $30/ha). Estimated annual loss of firewood US$ 2.4 million (Rials 20 billion) Direct Use Value: Grazing and other NWFP. No reliable data was found on these values. We applied the results found in Turkey $20/ha/yr ($15 for grazing and $5 for other NWFP). Estimated annual loss US$ 2.5 million (Rials 20 billion)

Deforestation
Direct Use Value: Hunting. Value found in Turkey $1/ha was used in Iran (valuation is based on the hunting permit price and license fees). While hunting occurs only in designated areas, this estimate represents an average value calculated. Estimated annual loss $125,000 (Rial 1 bill) Direct Use Value: Recreational. Based on the number of visitors to Caspian area and the recreational benefits in forest parks ($6/person/yr), we estimated the potential loss in recreational value due to deforestation at $6.5/ha/yr. Estimated annual loss $812,000 (Rials 6 billions) Indirect Use Value: Loss of plant nutrient. FAO reports that 46% of total soil erosion is due to deforestation (but this result of past deforestation). Conservatively assume that annual deforestation contributes to 1.8% of annual soil erosion (or 18 million t). This result in a loss in soil nutrient 73,000 tons. Valuation is based on replacement cost method ie using as proxy the cost of fertilizers necessary to substitute the loss of nutrients ($0.1/kg). Estimated annual costs of substituting nutrient $7.3 million (Rials 58 billions)

Deforestation
Indirect Use Value: Protection of Water Reserves & Water Purification Study in Iran estimates the benefits of forests in protecting underground water reserves about $17/ha Caspian Forest, $8/ha Zagros forest, $37/ha Irano-Touranian forests. Estimated annual loss of water protection $2 million (Rials 16 billions) Indirect Use Value: Carbon Sequestration. Net emissions of CO2 from forestry sector is 31.5 million tCO2 Average price adopted by Carbon Market $13 - $18 tC. Estimated annual damage costs: $132 million (Rials 1,000 billions) Option, Bequest and Existence Values. Option value of pharmaceutical products: no estimate found in Iran. Only estimate in the Mediterranean is Turkey $6.3/ha. Applying this estimate to Iran loss of $ 800,000. Biodiversity conservation: study in Iran assessed the annual benefits of biodiversity conservation to $16/ha in Caspian forests, $8/ha in Zagros and $16/ha in IranoTouranian forests. An annual loss of $1.6 million
NPV $900 million or Rials 7,000 billion (0.8% GDP)

Total Damage Costs

Category Water Land and Forest Air Waste Coastal Zone Sub-total Rials (billions) 25,500 22,600 14,500 3,200 1,300 67,100 US$ / yr (million) 3,220 2,840 1,810 410 170 8,430 % GDP 2.82 2.5 1.6 0.36 0.15 7.43

Global Environment TOTAL

12,300 79,400

1,540 10,000

1.36 8.8

Thank You