Economic instruments for water policyin the Mediterranean

Gaëlle Thivet, Plan Bleu

Hashemite Kingdom of Jordan – Ministry of Water and Irrigation

Agence Française de

Développement –

French Agency

for Development

Marseille Center

for Mediterranean IntegrationEnvironment and

Development of the

Mediterranean

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1. Plan Bleu and the Mediterranean

A Regional Activity Centre of the Mediterranean Action Plan

Created 30 years ago as a systemic and prospective analysis centre

Connected to the Med. Action Plan, UNEP Regional Seas Programme

� Producing information and knowledge

in order to alert decision makers and

stakeholders to the challenges both

environmental & sustainable

development-related in the

Mediterranean,

� Drawing up scenarios for the future to

assist in the decision making process.

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1. Plan Bleu and the Mediterranean

Increasing pressure on water resources and possible water savings

Exploitation index of renewable water resources, 2005

Water demands per using sectors at Med. ScaleTrend and alternative scenarios by 2025

Potential water savings in

2025: 85 km3/y

25% of total water demand

44

2. Panorama of instruments for water demand management in the Mediterranean

The case of the agriculture sector

Economics

Pricing, quotas,

Targeted subsidies and taxes,

Decoupling & cross-compliance,

Agro-environmental measures…

Technics

Improved irrigation systems,

Adequate cropping patterns,

Supplementary irrigation,

Irrigation planning tools…

Institutional framework

Coherent strategic framework

Training & awareness-raising

Awareness-raising campaigns

(farmers, public)

Farmers & technicians training…

Laws

Water rationing,

Compulsory water metering,

Withdrawals control…

Planning & participation

Management at catchment level,

Water users associations,

New information technologies…

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3. Panorama of economic instruments for water policy in the Mediterranean

The case of the agriculture sector

Types of instruments Examples of countries

Level of water-saving incentive

Pricing Almost all Med. countries

Priority = cost recovery, but water-saving incentive according to price structure and level

Quotas CY, FR, IS No incentive within the limit of the quota

Financial aids (subsidies, soft loans)

CY, ES, FR, IS, MA, SY, TN…

Incentive via aid for purchasing modern irrigation systems, planting drought-resistant crops…

Water abstraction charges

(pollution/resource)

EU countries, IS, MA, TN…

Low incentive in that taxation levels are low

Decoupling of CAP aids (2003 reform)

EU countries Decoupling aiming to do away with all irrigation incentives through the mechanisms of the CAP

Agro-environmental measures

EU countries Signals of water scarcity in specific regions, impacts unless AEMs are taken collectively (watershed level)

Environmental cross-compliance

EU countries Coherence between water and agricultural policies, obligation to count the abstracted volumes

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3. Panorama of economic instruments for water policy in the Mediterranean

In the domestic (incl. tourism) and industrial sectors

Similar economic instruments:

Water pricing (progressive tariffs for urban water and for water for tourism),

Targeted subsidies and tax benefits for water-saving equipments,

Charges for sanitation and water abstraction,

Fixing quotas,

Contracts between States & towns and between States &tour operators (cross-compliance),

Industrial depollution funds…

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3. Panorama of economic instruments for water policy in the Mediterranean

Focus on water pricing – The agriculture sector

Price structure Examples of countries

Level of water-saving incentive

None AL, EG, PT No encouragement

Flat rating (per ha) ES, FR, GR, IT, LB, SY

If combined with very low prices and subsidies for irrigated crops � expansion of irrigated acreage and increase in agricultural water demand

Modulated flat rating(depending on the crop

irrigated & irrigation technologies)

TR, IT Can be used to discourage the irrigation of highly water-greedy crops (maize and tomatoes in TR for example)

Two-part tariff TN (pilot irritaged areas), LB (new areas)

Fix rate (depending on irrigable area) encouraging the irr. of equipped landProportional rate (depending on V consumed) encouraging the rational use of water

Uniform volumetric pricing

CY, ES, FR, MA, TN

Encourages water saving depending on price level

Block volumetric pricing

(rarely applied to irr.)

IS Strong water saving incentive (depending on price escalation & price level) within the limit of the quota imposed

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3. Panorama of economic instruments for water policy in the Mediterranean

Example: Irrigation water pricing in Tunisia

0

20

40

60

80

100

120

140

160

1990

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

Tarif : millimes/m3

� Reform of the irrigation water pricing system (1990-2000) based on cost price transparency, flexibility (depending on regions, uses of the irrigated areas), national objectives (food security),

� Measures: increase in water tariffs (9%/year) + metering systems + introduction of binomial pricing structures in the extensive irrigation areas (North),

� Results: recovery rate 57 ���� 90% (OM), significant impact on consumption in certain areas (ex. Jebel Ammar: water tariff*4, volume -2/3)

99

3. Panorama of economic instruments for water policy in the Mediterranean

Example: Domestic and industrial water pricing in Morocco

Volumetric and increasing-block tariffs (4 blocks since 2000) with metering systems,

1980-2000: tariffs *4 to 7 depending on the blocks ����incentive to water savings,

Increase in industrial tariffs to encourage recycling and the introduction of less consuming technologies (1990) (before: preferential tariff),

New pricing structure adopted in 2006: ���� limit of the 1st

block, ���� annual tax (*2), introduction of water abstraction charges for water basin agencies, hotels considered as industrial users (uniform volumetric pricing),

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3. Panorama of economic instruments for water policy in the Mediterranean

Example: Drinking water pricing in Tunisia

0 100 200 300 400 500 600 700 800 900

[ 151 et + ]

[ 71 - 150 ]

[ 41 - 70 ]

[ 21 - 40 ]

[ 0 - 20 ]

TARIFFS FOR DRINKING WATER(2005)

(Millimes/m3, hors TVA = 18%)

Water points

140 millimes ( each m3 )

Tourist sector

840 millimes ( each m3 )

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4. Combining economic instruments with other instruments

Concrete successfull experiences

National water-saving strategy for irrigation:

Creation of user associationsPricing for progressive cost recoveryTarget financial instruments

(farming equipment)Support to farmer revenues

Infrastructures savings through WDM in Morocco (Rabat-Casablanca)

Improved water management:Reduction of leaksProgressive pricingSystematic meteringPublic awareness campaign

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5. Conclusion

Increasing resort to economic instruments in the Med countries, but not yet to a large extent (cf. agriculture)

Could prove more effective in improving WDM, but do not provide any single, ready-made solution to the widely varying situations in the countries/regions

Primary requisite = defining a clear objective and a coherent framework + combining them with other instruments

In particular: tariff instrument cannot alone suffice to encourage users to economise water (low price sensitivity…) ���� resort to incentive measures, authoritarian measures for controlling demand…

Good knowledge of the situation (supply/demand balance) monitoring and evaluation system

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THANKS FOR YOUR ATTENTION

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