Title: Water policies and pricing in the Mediterranean The Context of the MEDROPLAN Project
1Water policies and pricing in the
Mediterranean(The Context of the MEDROPLAN
Project)
- Ana Iglesias,
- Consuelo Varela and Alberto Garrido
- Univ. Politécnica de Madrid, Spain
- Aquastress Workshop - Cyprus, 6 July 2005
2Contents
- Context MEDROPLAN project
- Overview water policies and pricing
- Learning from case studies
3European Commission - EuropeAid Co-operation
OfficeEuro-Mediterranean Regional Programme For
Local Water ManagementMediterranean Drought
Preparedness and Mitigation Planning
(MEDROPLAN)CoordinationMediterranean Agronomic
Institute of Zaragoza and Universidad Politécnica
de Madrid, SpainPartnersUniversity of Cyprus,
Cyprus National Technical University of Athens,
Greece University of Catania, ItalyInstitut
Agronomique et Vétérinaire Hasan II,
MoroccoConfederación Hidrográfica del Tajo,
SpainCanal de Isabel II, SpainFundación
Ecología y Desarrollo, SpainDirection Générale
des Barrages et des Grands Travaux Hydrauliques,
Ministère de l'Agriculture, Tunisia
MEDROPLAN Mediterranean Drought
Preparedness and Mitigation Planning
4Developing the Guidelines
1. Set up a Multidisciplinary Team
(Stakeholders Scientists)
5. Public review and Revision (Guidelines) 6.
Public dissemination
2. Evaluate the legal, social, and political
process (Case studies)
4. Select and identify priority activities,
based on the agreed Criteria (Draft Guidelines)
3. Identify potential vulnerabilities (Case
studies)
5Example Tagus Basin, Spain
Groundwater use aprox. 10
6Decision making in the Tagus Basin Authority
7Contents
- Context MEDROPLAN project
- Overview water policies and pricing
- Learning from the Case Studies
8Water policy and pricing
Policy
- Water has multidimensional properties Sustains
life (SD, human rights, human security
environment) it is used for food and energy
production, for disposing wastes for
transporting goods - No single policy can address all these issues
Cost of water
9Water policy and pricing
- Pricing facilitates cost recovery and encourages
careful use - Water pricing may be an effective management
instrument - Pricing alone is not enough
- Need to establish improved services, effective
charging systems and mechanisms to protect the
poor
10Definitions
- Water charges Water fees Water tariffs
generic denomination for any kind of payment
related to water - Cost of water. Elements that account for the cost
of supplying water (Operation and maintenance and
other costs) - Water pricing. Definition of the monetary value
assigned to the m3 of water - Water charging. Includes policies, practical
actions and mechanisms required to set a price
for water, decide the basis on which a charge
will be levied, levy (tax) the charge and collect
the revenue
11The cost of water
Environmental externalities
Full Cost
Economic externalities
Full Economic Cost
Opportunity cost
Capital cost
Full Supply Cost
O M Cost
12Definitions
- Service fee Operation and maintenance (cost of
the services of providing irrigation water
related to the direct cost of operating and
maintaining the system) - Tariff Services provided, amortization of
irrigation infrastructure, other payments - Capital cost fee The reimbursement of the
investments incurred to develop the water source
and related distribution system
13Implementation process of water tariffs
Source Varela 2004
14Historical development
- Dublin International Conference on Water and the
Environment, 1992 - Managing water as an economic good is an
important way of achieving efficient and
equitable use, and of encouraging conservation
and protection of water resources - Since 1992. Water charging has been on the agenda
of the World Bank, etc - but
15Historical development
- It is vital to recognize first the basic right of
all human beings to have access to clean water
and sanitation at an affordable price - UN Conference on Environment and Development, Rio
de Janeiro, 1992 - Includes the social emphasis water is an
economic and social good
16Historical development 1992-present
- Discussions in several major irrigated countries
(India, Pakistan, Egypt, Thailand, Vietnam, China
and Indonesia) on the introduction of full cost
irrigation charging. Little effective
implementation - Exception? the EU Water Framework Directive
(WFD) aims at partial cost recovery of water in
all member states by 2010
17EU WFD (2000)
- Article 1 (water is an economic and social good)
- Article 9, by 2010
- Water pricing policies provide adequate
incentives for users to use water resources
efficiently, and thereby contribute to the
environmental objectives of this Directive
(quality polluter space principle, the
contaminant pays) - Desegregation if users (industry, households and
agriculture, and more) to the recovery of the
costs of water services, based on economic
analysis (not everybody the same)
18Economic and social good
- Economic good Efficiency (size)
- Water use efficiency. How much is produced per
unit of water consumed or provided - Economic and social good Efficiency and equity
(size and distribution) - Allocation of scarce resources with criteria
beyond the highest value of use. In this case may
not be necessary to involve financial transactions
19Water use efficiency
20Types of water tariffs
- Different ways to price water depending on
technical (meters) and institutional
(organization) elements - Area Pricing (more than 60) (study of 12 Mha)
- Volumetric pricing (aprox. 25 )
- Tiered pricing (Block-rate)
- Two-part tariff (Fixed volumetric) (less than
15 ) - Output pricing (rare)
- Input pricing (rare)
- The efficiency of the different pricing methods
is relative and depends on several technical and
institutional factors
21Spain Average water tariffs (/ha)
Source Varela 2003, Sumpsi et al 1998
22Spain Water tariffs in irrigation districts
Source Sumpsi et. al, 1998
23Mediterranean Water charges (US /m3)
Source Dinar (1997), ESCWA(2000), Ahmed (2001),
Varela(2002)
24Contents
- Context MEDROPLAN project
- Overview water policies and pricing
- Learning from the Case Studies
25The economic instruments in MEDROPLAN
- Objectives
- Reduce risk of water shortages
- Ensure efficient and equitable allocation of
scarce water - Types of instruments (Case Studies)
- Issues
- Public goods
- Collective goods
- Willingness to pay
- Lessons learned for the Guidelines (work in
progress)
26Types of economic instruments
27Types of economic instruments
Greece, Italy, Spain Tunisia (via incentives)
All teams
Or water transfers exchanging mechanisms Italy,
Greece Tunisia, Morocco, Spain
All teams
28Public goods
- OECD (2003), among others, consider water
services reliability as a public good - By definition, public goods must be provided by
the Government - Examples of public goods Street lights, Police
service, Primary education, Coastal Lighthouses - Examples of public services hospitals, school,
transportation
29Collective goods
- When a single individual makes an effort to
reduce consumption - It may be not noticeable among the many users,
and - Many may benefit without doing anything
30Willingness to pay
- In times of shortages, willingness-to-pay for
water is always greater than the marginal water
tariff (the most expensive block) - Thus, unless consumers react reducing their
consumption voluntarily, there is no other option
but mandatory measures - Water service interruption
- Police control over users
31Very different ..
- The Canary Islands
- Tourism sector
- Water property since 1480
- Water Markets (different in Tenerife and Gran
Canaria) - Water Markets lead to overexploitation. In Gran
Canaria about 50 of the groundwater extracted is
non renewable
Source NASA/GSFC, SeaWiFS
32Lessons learned
- Most water policies include some aspects of water
pricing - Emphasis on operation and maintenance charges
- Differential strategies across sectors
(agriculture and urban) - Focus on increasing water use efficiency
(decreasing water misuse)
33Lessons learned
- Ensuring moderate water consumption and the fact
that water is a public good act in opposing ways - Consumers awareness must be induced by means of
campaigns
34Lessons learned
- Water tariffs are only useful for medium or
long-term responses - Water exchanging mechanisms must include
efficient risk-sharing agreements, based on - Option-like contracts, and/or
- Contingent planning
- Reallocation measures
35Key interactions
- Development
- Human rights
- Conflicts
- Health
- The environment
- The future
36FUTURE
Increase risk of drought Increase demand
37Population and lifestyle scenarios
38Madrid water balance Future scenarios
39Technology
40Policy decisions affect the future
- Management strategies are part of a political
process, and reflect different views about the
future of resources and development - Cultural impediments to change traditional water
management add complexity to the design of
adequate policies
41The Millennium Development Goals
The Millennium Development Goals are a set of
quantified objectives with concrete target times
that arise form the Millennium Declaration, and
adopted by all members of the United Nations
(September 2000)
Target 2 Halve by 2015 the proportion of people
who suffer from hunger
Target 9 Integrate the principles of sustainable
development into country policies and programmes
and reverse the loss of environmental
resources Target 10 Halve by 2015 the
proportion of people without sustainable access
to safe drinking water
42Greece Case Study
- Actions proposed and rejected
- Water transportation with tankers
- Trihonis lake addition to the system
- New infrastructure
- Actions taken
- Water supply cut off according to a schedule
- Pricing policy (high penalties for high
consumptions) - Public information (media campaigns, advertising)
- Irrigation water reduction from Yliki reservoir
over 50
43Willingness to pay
44Tunisia National Strategy on Water Management
Current and projected water demand ()
1996 2030 Drinking 11.5
17.7 Irrigation 83.7 73.5 Tourism 0.7
1.5 Industrial 4.1 7.3
The development or irrigators communities
(farmers groups that mange the water
collectively) is essential for reaching the goals
- Resources management
- Mobilization, storage (over 1000 hill reservoirs
in 10 years), and transfer of the resources - Use of the non-conventional resources saline and
waste water for irrigation (95,400 and 7,600 ha) - Desalinization
- Demand management
- Water saving in irrigation (up to 60 Gov.
subsidies), industry, etc