Report Making water infrastructure investment decisions in a changing climate A political economy study of river basin development in Kenya Naomi Oates and Martin Marani November 2017 Overseas Development Institute 203 Blackfriars Road London SE1 8NJ Tel: +44 (0) 20 7922 0300 Fax: +44 (0) 20 7922 0399 E-mail: [email protected] www.odi.org www.odi.org/facebook www.odi.org/twitter Readers are encouraged to reproduce material from ODI publications for their own outputs, as long as they are not being sold commercially. As copyright holder, ODI requests due acknowledgement and a copy of the publication. For online use, we ask readers to link to the original resource on the ODI website. The views presented in this paper are those of the author(s) and do not necessarily represent the views of ODI. © Overseas Development Institute 2017. This work is licensed under a Creative Commons Attribution-NonCommercial Licence (CC BY-NC 4.0). Cover photo: Kenyan Water Resource Management Authority (WRMA) official at work in the Tana River watershed. Photo: Georgina Smith/CIAT (CC BY-NC-SA 2.0 license) Acknowledgements We are extremely grateful for the kind assistance provided by Prof Eric Odada, Prof Daniel Olago and Ms. Christine Atieno Omuombo and the rest of the team at the African Collaborative Centre for Earth System Science (ACCESS), University of Nairobi, who made this research possible. We are equally grateful for the expertise and advice provided by Mr William Mayaka (Independent), Prof Shem Wandiga (Chairman of ACCESS and Director of the Institute for Climate Change and Adaptation (ICCA) at the University of Nairobi) and Prof George Krhoda (University of Nairobi) at various stages of the research process. Thanks are also due to James Dalton and Rebecca Welling at the International Union for the Conservation of Nature (IUCN) for their steer and support throughout the project. Peer review was provided by Prof Shem Wandiga (Chairman of ACCESS and Director of the Institute for Climate Change and Adaptation (ICCA) at the University of Nairobi), Prof George Krhoda and Ms. Christine Atieno Omuombo (University of Nairobi), Mr William Mayaka (Independent), Anil Markandya and Laetitia Pettinotti (BC3), Matthew McCartney (IWMI) and Peter Newborne (ODI). Beatrice Mosello (ODI) also provided inputs and comments to the methodology and early drafts of this report. Finally, we would like to thank all the people we interviewed during the project who gave their time so generously and engaged in an open and constructive manner throughout. All quotations from interviewees are anonymous. Any errors or omissions are our own. This work was undertaken as part of the Water Infrastructure Solutions from Ecosystem Services Underpinning Climate Resilient Policies and Programmes (WISE-UP to Climate) project. The project is generating knowledge on how to implement mixed portfolios of built water infrastructure (e.g., dams, levees, irrigation channels) and ‘natural infrastructure’ (e.g., wetlands, floodplains, forests) that contribute to poverty reduction; water, energy and food security; biodiversity conservation; and climate resilience at a landscape scale. ‘WISE-UP to Climate’ aims to demonstrate the application of optimal portfolios of built and natural infrastructure developed through dialogue with stakeholders and decision-makers at multiple levels (local to national) to identify and find consensus on trade-offs. The project also seeks to link ecosystem services to water infrastructural development in the Volta River Basin (Ghana, principally, and also Burkina Faso) as well as the Tana River Basin in Kenya. The project is a global partnership led by the International Union for Conservation of Nature (IUCN) and involves the Council for Scientific and Industrial Research - Water Research Institute (CSIR-WRI); African Collaborative Centre for Earth System Science (ACCESS), University of Nairobi; International Water Management Institute (IWMI); Overseas Development Institute (ODI); University of Manchester; and the Basque Centre for Climate Change (BC3). This project is part of the International Climate Initiative. Bundesministerium für Umwelt, Naturschutz, Bau und Reaktorsicherheit (BMUB) (Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety), Germany, support this initiative on the basis of a decision adopted by the German Bundestag. For further details about the project, visit: www.waterandnature.org or www.iucn.org/water_wiseup 3 Contents Acknowledgements 3 List of boxes, figures and tables 5 Abbreviations 7 Executive summary 8 1. Introduction 11 1.1. Investing in natural and built water infrastructure 11 1.2. Understanding the political economy of decision-making 11 1.3. Research approach and methods 12 2. The Kenyan context 15 2.1. National development challenges and ambitions 15 2.2. Tana River Basin 19 2.3. Case study 1: meeting Nairobi’s water needs through inter-basin transfers 22 2.4. Case study 2: the multipurpose High Grand Falls Dam 24 3. Research findings 27 3.1. The decision-making process for large water infrastructure projects in Kenya 27 3.2. Systemic constraints in coordinating water infrastructure investments in the Tana River Basin 28 3.3. Key actors, their priorities and influence on the water infrastructure decision-making process 33 3.4. Accounting for natural infrastructure in investment decisions 40 3.5. Accounting for climate change in investment decisions 44 4. Conclusions and recommendations 48 4.1. Key findings 48 4.2. Recommendations for policy-makers 50 4.3. Recommendations for development partners 51 References 53 Appendix 1: Stakeholders consulted 60 Appendix 2: Maps of planned infrastructure 62 4 List of boxes, figures and tables Boxes Box 1: Research questions 13 Box 2: Formal water sector institutions in Kenya 16 Box 3: Key institutions for climate change in Kenya 17 Box 4: Livelihoods in the Tana Basin 22 Box 5: A short history of High Grand Falls Dam 25 Box 6: Planning processes for water resource management and development in Tana Basin 29 Box 7: Whose data? 30 Box 8: National revenue allocations 31 Box 9: Land use planning in the Tana Delta 42 Figures Figure 1: The layered approach to political economy analysis in WISE-UP 12 Figure 2: Map showing the boundaries of the Tana River Basin, its counties and key natural features 21 Figure 3: Planning and implementing the Northern Water Collector Tunnel in a changing governance context 24 Figure 4: Planning the High Grand Falls Dam in a changing governance context 26 Figure 5: The influence and interest of different actors in making infrastructure investment and management decisions 41 Figure A1: Location of the Northern Water Collector Tunnel (Phases 1 and 2) and nearby forest area 62 Figure A2: Map showing the locations of existing and planned dams in the Tana Basin including High Grand Falls 63 5 Tables Table 1: Primary data collection in Kenya for the political economy analysis 14 Table 2: Water, sanitation and electricity coverage estimates for Kenya 15 Table 3: Institutional changes under the 2016 Water Act 17 Table 4: Kenya’s policy priorities and sector development targets 20 Table 5: Water resources and infrastructure in the Tana Basin 21 Table 6: Current and projected water demands for Tana Basin 22 Table 7: Existing and planned water supply projects for Nairobi 23 Table 8: Key climate adaptation initiatives in Kenya 46 6 Abbreviations AFD Agence Française de Dévelopment (French Development MENR Ministry of Environment and Natural Resources Agency) MEP Ministry of Energy and Petroleum APPP Africa Power and Politics Programme MIC Middle Income Country ASALs Arid and semi-arid lands MUWASCO Murang’a Water and Sanitation Company AWSB Athi Water Services Board MW Megawatt BWRCs Basin Water Resource Committees (previously CAACs) MWI Ministry of Water and Irrigation CAACs Catchment Area Advisory Committees (renamed Basin NCCAP National Climate Change Action Plan Water Resource Committees) NCCRS National Climate Change Response Strategy CIDP County Integrated Development Plan NCWSC Nairobi City Water and Sewerage Company CRA Commission on Revenue Allocation NEMA National Environment Management Authority DFID Department for International Development (UK) NGO Non-governmental organisation E(S)IA Environmental (and Social) Impact Assessment NIB National Irrigation Board ESMP Environmental and Social Management Plan NRM Natural Resources Management EMCA Environmental Management and Coordination Act NWCT Northern Water Collector Tunnel GDP Gross domestic product NWMP National Water Master Plan GoK Government of Kenya NWF Nairobi Water Fund ha Hectares ODI Overseas Development Institute HGF High Grand Falls (Dam) PEA Political Economy Analysis IFI International finance institution SEA Strategic Environmental Assessment IMF International Monetary Fund TARDA Tana and Athi Rivers Development Authority IRDP Integrated Regional Development Plan TRDA Tana River Development Authority (renamed TARDA) IUCN International Union for Conservation of Nature TEEB The Economics of Ecosystems and Biodiversity IWMI International Water Management Institute TRDC Tana River Development Company (no longer exists) (I)WRM (Integrated) Water Resources Management UNCRD United Nations Centre for Regional Development JICA Japanese International Cooperation Agency USD United States Dollar KenGen Kenya Electricity Generating Company WAB Water Appeals Board (renamed Water Tribunal) KES Kenyan Shilling WASH Water Supply and Sanitation and Hygiene KFS Kenya Forestry Service