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Water policies and pricing in the Mediterranean The Context of the MEDROPLAN Project

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Iglesias, Garrido & Varela - Workshop on Water Stress, Cyprus, 6 July 2005. 1 ... des Barrages et des Grands Travaux Hydrauliques, Minist re de l'Agriculture, Tunisia ... – PowerPoint PPT presentation

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Title: Water policies and pricing in the Mediterranean The Context of the MEDROPLAN Project


1
Water 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

2
Contents
  • Context MEDROPLAN project
  • Overview water policies and pricing
  • Learning from case studies

3
European 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
4
Developing 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)
5
Example Tagus Basin, Spain
Groundwater use aprox. 10
6
Decision making in the Tagus Basin Authority
7
Contents
  • Context MEDROPLAN project
  • Overview water policies and pricing
  • Learning from the Case Studies

8
Water 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
9
Water 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

10
Definitions
  • 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

11
The cost of water
Environmental externalities
Full Cost
Economic externalities
Full Economic Cost
Opportunity cost
Capital cost
Full Supply Cost
O M Cost
12
Definitions
  • 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

13
Implementation process of water tariffs
Source Varela 2004
14
Historical 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

15
Historical 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

16
Historical 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

17
EU 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)

18
Economic 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

19
Water use efficiency
20
Types 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

21
Spain Average water tariffs (/ha)
Source Varela 2003, Sumpsi et al 1998
22
Spain Water tariffs in irrigation districts
Source Sumpsi et. al, 1998
23
Mediterranean Water charges (US /m3)
Source Dinar (1997), ESCWA(2000), Ahmed (2001),
Varela(2002)
24
Contents
  • Context MEDROPLAN project
  • Overview water policies and pricing
  • Learning from the Case Studies

25
The 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)

26
Types of economic instruments
27
Types of economic instruments
Greece, Italy, Spain Tunisia (via incentives)
All teams
Or water transfers exchanging mechanisms Italy,
Greece Tunisia, Morocco, Spain
All teams
28
Public 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

29
Collective 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

30
Willingness 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

31
Very 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
32
Lessons 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)

33
Lessons 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

34
Lessons 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

35
Key interactions
  • Development
  • Human rights
  • Conflicts
  • Health
  • The environment
  • The future

36
FUTURE
Increase risk of drought Increase demand
37
Population and lifestyle scenarios
38
Madrid water balance Future scenarios
39
Technology
40
Policy 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

41
The 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
42
Greece 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

43
Willingness to pay
44
Tunisia 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
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