Water Charges
Corinne Waelti, seecon international gmbh
Water Charges
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Water Charges
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Contents
1. Introduction to Economic Tools
2. What are Water Charges?
3. Implementing Water Charges
4. Conclusion
5. References
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1. Introduction to Economic Tools
The Economist’s View: Externalities
Source: SAVENIJE & VAN DER ZAAG (2002)
Externalities arise because a substantial part of the costs of economic
activities is not being paid by the actors responsible but by the general
public in form of environmental damage, security, or long-term
climatic risks.
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1. Introduction to Economic Tools
With Economic Tools…
...people change their behaviour because the want to achieve maximal
benefit at minimal cost. Economic Tools involve the use of prices and
other market-based instruments to provide monetary incentives to
change behaviour.
Tools:
• Water pricing (tariffs)
• Subsidies
• Charges (irrigation, wastewater)
• Tradable water rights
• Etc.
Source: http://www.wsp.org/userfiles/image/november2002.jpg [Accessed: 23.03.2010]
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2. What are Water Charges?
Definition and Impact of Charges
A charge can be defined as a ‘price’ paid on the use of the environment
in order to internalise negative externalities.
Behavioural change occurs, if it is less expensive than paying the
charge. Less consumption or pollution can be achieved by:
• Less production by firms
• More efficient production technologies (innovation)
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2. What are Water Charges?
Different Types of Water Charges
• Emission/effluent charges: fee on the discharged pollutant (based
on its quantity or quality)
• User charges: e.g. fees for the use of drinking water and
wastewater treatment facilities
• Product charges: levied on products that are harmful to surface or
ground water)
• Administrative charges: fees paid to authorities
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3. Implementing Water Charges
Requirements
Measuring the
emissions or
effluents
Setting an
appropriate
fee level
Collecting
the due
amounts
Allocating
the collected
amounts
With the collected charges, more revenue is available to the
government for reallocation.
Source: ANDERSON (2002)
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3. Implementing Water Charges
Hindering forces
• Weak institutional capacity
• Inadequate institutional co-ordination
• Economic instability
• Government or polluter resistance or inertia
Source: STAVINS & WHITEHEAD (1992)
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4. Conclusion
Advantages and Disadvantages
• Internalisation of negative
externalities
• Incentives for innovations in
order to reach more efficient
production technologies
Water Charges
• The implementation process is
hard to control
• There may be a lack of strong
enforcement bodies
• Resistance by polluters and/or
the government is possible
• High monitoring costs
• It is difficult to set an optimal
standard due to limited
information
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5. References
ANDERSON, R. (2002): Incentive-Based Policies for Environmental Management in Developing Countries. Issue Brief 02-07.
Washington D.C.: Resources for the Future (RFF). URL:
http://www.rff.org/Publications/Pages/PublicationDetails.aspx?PublicationID=9616 [Accessed: 14.06.2012].
KRAEMER, R., KAMPA, E., INTERWIES, E. (2004): The Role of Tradable Permits in Water Pollution Control. Brussels: Ecologic,
Institute for International and European Environmental Policy. URL: www.ecologic.de/download/projekte/1850-1899/187203/1872-03_tradable_permits.PDF [Accessed: 08.08.2012].
SAVENIJE, J., ZAAG, P. van der (2002): Water as an Economic Good and Demand Management. Paradigms with Pitfalls.
International Water Resources Association. In: Water International 27, 98-104. URL:
www.colorado.edu/geography/class_homepages/geog_4501_s12/readings/watereconomicgood.pdf [Accessed: 08.08.2012].
STAVINS, R.; WHITEHEAD, B. (1992): Pollution Charges for Environmental Protection. A Policy Link Between Energy and
Environment. In: Annual Reviews Energy Environment 17, 187-210. URL:
http://www.annualreviews.org/doi/abs/10.1146/annurev.eg.17.110192.001155?journalCode=energy.2& [Accessed: 14.06.2012].
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