Water pricing is only a relevant issue if the provision of water results in expenses – that have to be carried by someone. This is of particular relevance in countries where water cannot at all be considered an ubiquity, that is: in arid countries.
Managerial and Innovative Capacities
In dry regions the extraction or production as well as the distribution of water has significant costs and requires distinct managerial and innovative approaches.[1] Israel for instance has implemented an increasing block tariff which differs from region to region while irrigation water is made available for a special price. The Israeli government has also started to implement water saving and effluent reclamation projects. The capacities of the sea water and brackish water desalination plants are in the process of being enhanced.
Government Provision
The situation is different in the Arab countries on the Persian Gulf whose economies have gone through substantial transformation processes over the last 30 years. Governments have been able to generate enormous income from oil revenues.[2] This allowed them to improve the infrastructure. Like all government services, water is practically provided for free. There are however hardly and substantial efforts to increase efficiency in any of the GCC countries. Water desalination plants present a great opportunity: Sea water is practically infinite. A functioning and reliable electricity net is necessary, and energy costs are very high. The technology of self-sufficient, e.g. wind-driven, desalination plants is by now technically mature and feasible from an economic point of view.[3]
Developing Countries
Halve, by 2015, the proportion of the population without sustainable access to safe drinking water and basic sanitation.
Millenium Development Goal 7, Target c[4]
Developing-Country Specific Water Issues
Among others, water issues in developing countries include the following:
- Poor water quality. The causes of water pollution are mostly anthropogenic: Human waste, fertilizers, industrial chemicals contaminate water bodies.[5] Many developing countries have not passed or do not enforce laws on the prevention of water pollution. Wastewater treatment plants are not yet common in developing countries.[6] Poor water quality has enormous consequences for the population’s health.
- Low coverage. Infrastructure coverage is particularly low in rural areas, but also urban coverage is “under pressure”.[7] Not all households have access to piped water or a well close by. In some cases water vendors provide this area with water, but it’s not uncommon that especially women have to walk long distances to get water.[8]
- Low reliability. Even if a household or a company is connected to the pipe system, unannounced water outages negatively impact on the water situation. Businesses may even be forced to lay down work as water is essential for their operations.[9]
- Low efficiency of water usage. Irrigation systems as well as pipes for industrial and domestic use of water are mostly not working properly.[10] Due to e.g. leakages, the efficiency of water use is relatively low.
- Dysfunctionality of sewage systems. Dysfunctional or non-existent sewage systems pose a serious threat to public hygiene and health.[11]
The cause of most water issues is the sheer scarcity of clean water. Nature-produced causes of water scarcity include permanent aridity and temporal droughts while desertification and water shortages are man-made.[12]
Possible Causes
A basic but central challenge lies in the already insufficient and still decreasing availability of resources, the supply, and the increasing water demand.
As mentioned above, low precipitation, limited availability of clean water resources or difficulties to extract the available clean water resources are static causes for water scarcity in arid countries (World Water Council, 2009). The comparably high population will lead to an increased water demand (Immerzeel et al., 2011). Many developing countries are also experiencing economic growth, and this also brings about a strong increase in income generated in water-intensive industries (Apparel, Automobile, High-technology/Electronics industries are industries e.g. are generally considered water-intensive industries[13])[14], e.g. car manufacturing. Both indicators imply that the water demand will rise even further. Industrial users and other water demanders such as farmers or domestic users start to compete for water.[15]
On the supply side, many developing countries already have problems in providing enough water as non-renewable water resources have been gradually depleted. Climate change is generally expected to further aggravate the already difficult situation. The IPCC[16] forecasts a decrease in precipitation, higher temperatures leading to an increased evaporation of surface and irrigation water and more frequent extreme events such as floods and droughts. If water were a “normal” commodity traded on a traditional market, market mechanisms would lead to a price increase.
According to the World Bank’s[17] definition a developing country is a country with a GDP per capita of less than $12,475. Therefore developing countries have a comparably low budget generated by e.g. tax income. Governments have to operate economically when it comes to the provision of public goods. They also have to ensure an institutional and commercial system capable of actually recovering costs.[18] With regard to the specific conditions in developing countries, their water systems must, on the other hand, provide services that are safe, desirable, and affordable to consumers.
In addition to the supply-demand challenge outlined above, budget restraints are opposed to the social obligation to provide clean and affordable water. Solving this second conflict of interest requires strong technical, institutional and managerial capacities within the administrative apparatuses. Many developing countries though still have room for improvement concerning their governance capabilities “as reflected by a higher level of perceived corruption”.[19] The institutions of developing countries are “almost by definition”[20] weak and vulnerable, their employees “poorly trained and motivated”. The poor quality of the water infrastructures in developing countries can be counted as a consequence of corruption issues. “Funds […] for public infrastructure projects end up in the pockets of corrupt individuals”.[21] The weak governance is not only expressed in the lack of legislature to regulate the extraction and distribution of water, but also in the enforcement of these laws.[22] There is however a flood on development cooperation projects on the improvement of the water situation.
Empirical studies in general give evidence for economic costs and corruption;[23] this capital outflow leads to the conclusion that substantial investment is needed:[24] In theory, all these problems could be solved by a higher water price. Due to the actual poverty of parts of developing countries’ population, a proportional price increase is not feasible though.
Pricing
Pricing a commodity like water in countries with a relatively poor population is an even more sensitive issue. It might be the case that due to their low income, people are not able to afford water.[25] Key to the improvement of the situation is a smart blend of the three T’s: Tariffs, taxes and transfers.[26] Typically developing countries tend to rely more on taxes and transfers as they intend to relieve the poorest.[27]
Tariffs generally give an incentive to be efficient with water. The amount of money to be paid for the total of the water withdrawal should be in correspondence to the household’s income, which is not always easy to identify.[28] The process of establishing the tariffs should be transparent, ideally under participation of civil society groups.[29] Disproportionately low tariffs are not sustainable as they render impossible cost recovery in the long term. Local conditions need to be taken account of, especially in the case of poor water consumers. Tariffs should be designed to make sure that vulnerable groups have sufficient access to clean water.[30]
The performance of public water utilities in developing countries is often not satisfying. In combination with the absence of a legal system in that sense this gives rise to the formation of informal water markets.[31] Informal markets may in fact be a viable solution to allocate water resources because they work fairly independently. They cease to be a feasible method when there are not enough sellers and groundwater is no longer sufficiently recharged. In these cases that come true in many developing countries, fairness considerations as well as the obligation to prevent civil unrest make a government intervention necessary.
To ensure the revenue stream to the utilities and consequently operations and maintenance, some countries use fixed charge components within their tariffs.[32] Poor consumers perceive this as a financial hurdle. Another figure that characterizes developing countries is a relatively high degree of inequality. In the framework of a water tariff this suggests cross-subsidizing solution, i.e. an increased block tariff: The first block of a few cubic meters (according to the average need and regional climatic conditions) that are necessary to cover basic needs like drinking, cooking and washing are sold for a relatively cheap price (or even for free[33] that does not equal the cost of provision. It is assumed that consumers withdrawing more than the first block are economically robust enough to pay a relatively high price.[34] This may refer to rich households as well as to businesses. Special water prices for business and industrial use (compared to domestic use) are also a critical indicator for a tariff.[35] An increased block tariff ultimately results in rich households, businesses and industrial consumers cross-subsidizing poor consumers (ibid.).
Tariff makers have to be aware of two vicious circles: A high tariff meant to cover expenses is applied but only paid by a few users. Revenue collection is not sufficient to come up for repairs. As a consequence, even less consumers are not willing to pay for the low-quality services. In another case the water tariff is low due to subsidies. There is empirical evidence suggesting that a low price leads to a lack of respect for the resources and the service which results in inefficient water use and accidental or deliberate damaging of the facilities.[36]
Achieving a sustainable water situation can be enhanced by an appropriate water tariff. This tariff however has to be enforced, too.[37] With respect to the limited managerial governance capacities mentioned above this enforcement, maybe in the form of collecting bills, poses a great challenge to water utilities.[38]
See also
Water Price
:File:Irmler, Li 2012 Water Pricing in Cape Verde.pdf
- ↑ UN (2008) Drought and Arid Land Water Management. Retrieved from http://www.un.org/esa/agenda21/natlinfo/countr/israel/drought.pdfon 01.02.2013.
- ↑ World Bank (2005). A Water Sector Assessment Report on the Countries of the Cooperation Council of the Arab States of the Gulf. Retrieved from http://siteresources.worldbank.org/INTMNAREGTOPWATRES/Overview/20577193/GCCWaterSectorReport--Englishversion.pdf on 29.01.2013.
- ↑ Ghermandi, A. and Messalem, R. (2009). Solar-driven desalination with reverse osmosis: the state of the art. Desalination Publications, no. 7, pp. 285-296.
- ↑ UN (2010): Factsheet on Goal 7: Ensure Environmental Sustainability. Retrieved from http://www.un.org/millenniumgoals/pdf/MDG_FS_7_EN.pdf on 28.01.2013.
- ↑ Pereira, L., Cordery, I. and Iacovides, I. (2002).Coping with water scarcity. UNESCO Interna-tional Hydrological Programme. Retrieved from http://dl.irpdf.com/ebooks/Part21/www.irpdf.com%287437%29.pdf on 28.01.2013.
- ↑ Pimentel, D. et al.(2004). Water Resources: Agriculturaland Environmental Issues. Bio Sci-ence,vol. 54, no. 10, pp. 909-918.
- ↑ Briceño-Garmendia, C., Estache, A. and Shafik, N. (2004). Infrastructure Services in Developing Countries: Access, Quality, Cost and Policy Reform. Washington: World Bank.
- ↑ Kjellen, M, and McGranahan, G. (2006). Informal Water Vendors and the Poor. Retrieved from http://sei-international.org/mediamanager/documents/Publications/Water-sanitation/informal_water_vendors.pdf on 31.01.2013.
- ↑ Immerzeel, W. et al. (2011): Middle-East and Northern Africa Water Outlook. Retrieved from http://www.medrc.org/download/twb/Final_Report_v6.pdf on 29.01.2013.
- ↑ Immerzeel, W. et al. (2011): Middle-East and Northern Africa Water Outlook. Retrieved from http://www.medrc.org/download/twb/Final_Report_v6.pdf on 29.01.2013.
- ↑ Pereira, L., Cordery, I. and Iacovides, I. (2002).Coping with water scarcity. UNESCO Interna-tional Hydrological Programme. Retrieved from http://dl.irpdf.com/ebooks/Part21/www.irpdf.com%287437%29.pdf on 28.01.2013.
- ↑ Pereira, L., Cordery, I. and Iacovides, I. (2002).Coping with water scarcity. UNESCO Interna-tional Hydrological Programme. Retrieved from http://dl.irpdf.com/ebooks/Part21/www.irpdf.com%287437%29.pdf on 28.01.2013.
- ↑ Harling, A. (2009). What industries/products are the most water-intensive within the United States? Humboldt State University and Office for Economic and Community Development: Arcata. Retrieved from http://www.hbmwd.com/site_documents/HSU%2010-28-09%20Research%20water%20intensive%20industries.pdf on 28.01.2013.
- ↑ Immerzeel, W. et al. (2011): Middle-East and Northern Africa Water Outlook. Retrieved from http://www.medrc.org/download/twb/Final_Report_v6.pdf on 29.01.2013.
- ↑ Keskin, P. (2008). Thirsty Factories, Hungry Families: Intersectoral Impacts of Industrial Water Demand. Department of Economics, Yale University. Retrieved from http://www.eea-esem.com/files/papers/EEA-ESEM/2009/3199/Pinar%20Keskin-JMP.pdf on 28.01.2013.
- ↑ Christensen, J. H. et al. (2007). Regional Climate Projections. In: Climate Change 2007:The Phys-ical Science Basis. Contribution of Working Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change [Solomon, S. et al.(eds.)]. Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA.
- ↑ World Bank (2013a): Data – How we classify countries. Retrieved from http://data.worldbank.org/about/country-classifications on 28.01.2013.
- ↑ Komives, K. and Stalker Prokopy, L. (2000). Cost Recovery in Partnership: Results, Attitudes, Lessons and Strategies. London: BPD Water and Sanitation Cluster.
- ↑ Prasad, E. S., Rogoff, K., Wei, S.-J., Kose, M.A. (2003). Effects of Financial Globalizationon De-veloping Countries:Some Empirical Evidence. Washington D.C.: IMF.
- ↑ http://www.gsdrc.org/docs/open/HD32.pdf
- ↑ Mauro, P. (2004). The Persistence of Corruption and Slow Economic Growth. IMF Staff Papers 51 (1). Washington. Retrieved from http://www1.worldbank.org/publicsector/anticorrupt/feb06course/mauro.pdf on 30.01.2013.
- ↑ Molle, F. (2001). Water Pricing in Thailand: Theory and Practice. Kasetsart University, DORAS Center, Research Report n°7. Retrieved from http://dlc.dlib.indiana.edu/dlc/bitstream/handle/10535/5572/pricing.pdf?sequence=1 on 28.01.2013.
- ↑ Mauro, P. (2004). The Persistence of Corruption and Slow Economic Growth. IMF Staff Papers 51 (1). Washington. Retrieved from http://www1.worldbank.org/publicsector/anticorrupt/feb06course/mauro.pdf on 30.01.2013.
- ↑ OECD (2009). Managing Water for All. An OECD Perspective on Pricing and Financing – Key Messages for Policy Makers. Retrieved from http://www.oecd.org/environment/resources/42350563.pdf on 28.01.2013
- ↑ Pereira, L., Cordery, I. and Iacovides, I. (2002).Coping with water scarcity. UNESCO Interna-tional Hydrological Programme. Retrieved from http://dl.irpdf.com/ebooks/Part21/www.irpdf.com%287437%29.pdf on 28.01.2013.
- ↑ Winpenny, J. (2003). Financing Water For All. Report of the World Panel on Financing Water Infrastructure. Retrieved from http://www.worldwatercouncil.org/fileadmin/wwc/Library/Publications_and_reports/CamdessusSummary.pdf on 28.01.2013
- ↑ OECD (2009). Managing Water for All. An OECD Perspective on Pricing and Financing – Key Messages for Policy Makers. Retrieved from http://www.oecd.org/environment/resources/42350563.pdf on 28.01.2013
- ↑ IBNET (2013). Water and Sanitation Utilities Context Information and Indicators. Retrieved from http://www.ib-net.org/en/texts.php?folder_id=100&L=1&S=2 on 29.01.2013
- ↑ World Bank (2005). A Water Sector Assessment Report on theCountries of the Cooperation Council ofthe Arab States of the Gulf. Retrieved from http://siteresources.worldbank.org/INTMNAREGTOPWATRES/Overview/20577193/GCCWaterSectorReport--Englishversion.pdf on 29.01.2013
- ↑ OECD (2009). Managing Water for All. An OECD Perspective on Pricing and Financing – Key Messages for Policy Makers. Retrieved from http://www.oecd.org/environment/resources/42350563.pdf on 28.01.2013.
- ↑ Easter, K. W., Rosegrant, M. W. and Dinar, A. (1999). Formal and Informal Markets for Water: Institutions, Performance, and Constraints The World Bank Research Observer, vol. 14, no. 1 (February 1999), pp. 99–116.
- ↑ IBNET (2013). Water and Sanitation Utilities Context Information and Indicators. Retrieved from http://www.ib-net.org/en/texts.php?folder_id=100&L=1&S=2 on 29.01.2013
- ↑ Republic of South Africa (2001). White Paper on Basic Household Sanitation. Retrieved from http://www.dwaf.gov.za/dir_ws/content/lids/sanitation.asp on 28.01.2013
- ↑ Komives, K. and Stalker Prokopy, L. (2000). Cost Recovery in Partnership: Results, Attitudes, Lessons and Strategies. London: BPD Water and Sanitation Cluster
- ↑ IBNET (2013). Water and Sanitation Utilities Context Information and Indicators. Retrieved from http://www.ib-net.org/en/texts.php?folder_id=100&L=1&S=2 on 29.01.2013
- ↑ Komives, K. and Stalker Prokopy, L. (2000). Cost Recovery in Partnership: Results, Attitudes, Lessons and Strategies. London: BPD Water and Sanitation Cluster
- ↑ IBNET (2013). Water and Sanitation Utilities Context Information and Indicators. Retrieved from http://www.ib-net.org/en/texts.php?folder_id=100&L=1&S=2 on 29.01.2013
- ↑ Komives, K. and Stalker Prokopy, L. (2000). Cost Recovery in Partnership: Results, Attitudes, Lessons and Strategies. London: BPD Water and Sanitation Cluster
