A Portuguese hydrodinosaur: the hidden costs of the Alqueva dam

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Water transfers in some countries of the European Union (EU) are still driven by the supply-side or “needs” model. The Alqueva dam can be compared to the Rhone to Barcelona aqueduct projects as an example of supply driven transfers.
Many similar factors are behind the Alqueva dam and the Rhone to Barcelona
aqueduct projects, two large European water infrastructures. Overestimation of water demands, irrigation development and lack of water pricing, extra benefits not paying extra costs, high support provided by the EU, lack of project alternatives, disrespect for the subsidiarity principle applied to water, and a strong domestic political support (although not necessarily for the best reasons), are key factors behind both projects.Any water transfer from France to Spain should be welcomed by Portugal, as it may substitute to shared water resources between Portugal and Spain. Customary international water law helps little on this matter. Between both countries it seems to exist a deep agreement to build as many hydraulic projects as possible, with the help of European funds. Portugal has signed the 1998 Albufeira Convention with Spain to
guarantee stream flows to the Alqueva dam in the Guadiana River in the south. When completed, the Alqueva dam will be Europe’s largest dam. The estimated cost is 2,091 billion euros. The EU pays more than half of the cost. Irrigation is an important component of the project and a major cause of its bad economic and ecological performances. Yet, farmers are of course not going to pay the full-cost of the water. Therefore, the possibility to downscale irrigation, in order to minimize the economic losses and the ecological impacts of the project must be discussed.
Josep Vergés, an independent Catalan economist, has proposed that the amount of water devoted to farmers be renegotiated with their representatives in the area: what he calls the Alqueva Irrigation Agreement (AIA) would lead to downscale irrigation, despite the dam is already installed. The AIA project has considered several options.The most easily acceptable option, where farmers would pay full operation costs, but where investments would be “sunk” (called sunk costs option) would allow a 60% savings on water consumed by farmers; then a water level at 139 m could be maintained in the dam instead of 152 m, with a reduction of half of the drowned area; and about 222 million euros of investment would be saved in irrigation infrastructure. This paper argues that the AIA sunk costs option is even more attractive when three hidden costs to Portugal of the Alqueva dam project are considered: first, in the Albufeira Convention Portugal accepts a reduction of the northern rivers’ stream flow
incoming from Spain to guarantee instead stream flows to the Alqueva dam in the south, which works against the subsidiarity principle applied to water; second, the predicted expenditure allocation in the Portuguese River Basin Plans and National Water Plan, is driven by supply development in the south; and third, the Portuguese government’s position towards the Commission proposals for the midterm review of the CAP, is in part determined by the will of some farmers in the southern Alentejo region to capture more of the current CAP first pillars’ payments using the cheap water of the Alqueva. The AIA sunk costs option would allow the Portuguese government to largely reduce these three costs of the Alqueva dam project.
Original languageEnglish
Publication statusPublished - 2003


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