11. Economic Data

The canal project is expensive. The Israel study team estimated costs ranging from $1.5 to $5 billion, which included the cost of infrastructure, but not of conveyance from the desalination plant to the end users. The Harza study estimates that construction of the canal would take 10 years with an estimated cost of $5 billion. While the Harza report also did not include an extensive economic analysis of conveyence costs, Harza engineers compared the value of one cubic meter of water per second diverted, with the value of desalinating the same unit of water. They estimated that the cost of water diverted by a canal would range from $1.30 to $1.55 per metric cube. These calculations are similar to the cost of desalinated seawater from current desalination projects. Therefore, the canal would not necessarily be the most cost efficient solution. Harza concluded that further studies about the economic benefits of a Dead Sea canal project are necessary.
Despite the fact that the project would be costly and its economic benefits unclear, the canal could take advantage of sparsely populated lands for agricultural and industrial production, spark regional cooperation and help alleviate the region's water shortage. Additional economic returns might include: energy towers and solar energy ponds; expansion of fish culture in reservoirs and fish farms; expansion of water sports and the tourism industry; opportunities for investment in industries such as plastic manufacturing, aggregate processing; metal fabrication and repair workshops; and a possible communications network serving the canal project. All of these side benefits would create jobs. Desalinated water would also boost agriculture and help alleviate domestic consumption shortages.

Another economic issue is the cost of water. In January 1991, a Israeli Comptroller General report identified the low price of water as the cause of a decline in supply. Farmers "take what they can" rather than taking only that allotment necessary for efficient water use. The report urged increasing water prices -- a move that would encourage farmers to reduce consumption of irrigation water, adopt efficient water-use technologies and find new sources of water. High water subsidies, especially in agriculture, are the primary reason for low prices. Subsidized water causes waste in agricultural practices, little incentive for development of conservation techniques and too much water allocated to agriculture over industry or domestic use. Removing subsidies and allowing the price of water to reflect the total cost of resource development -- including pumping, treatment and transport -- would maximize efficient usage. It would allow water historically used for agricultural purposes, to be reallocated to higher-valued uses such as domestic and industrial needs. Israel has already cut back the amount of water available to farmers in Israel proper by 40 percent, and restricted Israeli farmers in the West Bank from engaging in extensive water-absorbing farming practices. If water was correctly priced, farmers would rely less on water-intensive crops and shift crops according to market demand. They could also sell water surplus as a source of income, which they could reinvest in new technology to improve overall efficiency.

The cost of freshwater produced by a Dead Sea hydro project would have to reflect investments in, and maintenance of the conveyance system and desalination plant. Although infrastructure is expensive, the price of desalinated water has decreased. In the early 1980s the unit cost was $1.2 per cubic meter. By 1994, the cost dropped to between $0.6 and $0.7. Price decreases are expected to continue as the desalination industry continues to grow.