Flat-fee
water charges are still common in parts of Europe. Such schemes, where
users pay a fee regardless of the volume used, do not encourage
efficient behaviour, either in households or agriculture, according to a
new report from the European Environment Agency (EEA).
The EEA
study, 'Assessment of cost recovery through water pricing', considers
water pricing in several EU countries: Croatia, England and Wales,
France, Germany, the Netherlands, Scotland, Serbia, Slovenia and Spain.
Water
is under stress in many parts of Europe. Even in regions which usually
experience a high level of rainfall, abstracting and cleaning water can
have a high economic and environmental cost. This means that Europe
needs to redouble efforts in using water more efficiently to avoid
undermining its economy. Inefficient water use impacts hard on the
resources needed by ecosystems and people. In response to these
problems, the report states that water should be priced at a level which
both encourages efficient use and properly reflects its cost. This
should include all costs of purifying and transporting the water. In
addition, environmental and resource costs of water use, such as
pollution and the depletion of resources, should also be internalised
into water prices, the report says. Such charges should factor in lost
'ecosystem services' which also require water, for example wetlands
carry out valuable services such as water purification and flood
prevention.
The EU Water Framework Directive called for Member States
to create incentives for efficient water use by 2010. However, it is
unclear whether this has in fact resulted in any change in national
policies.
Key findings:
Households use around a third
less water when they are charged for the actual amount they use.
However, flat-rate charging structures are still common in many
countries, even though such tariffs are more expensive for most water
users and do not incentivise efficient water use.
Some water
uses, such as drinking water, are not significantly influenced by
changes in price. However, studies show that other uses are much more
responsive, including water for gardening or swimming pools.
The
report lists some examples of water use responding to pricing. Urban
water prices in Denmark increased by 54% between 1993 and 2004 along
with infrastructure investments. Over a decade water use per person per
day fell by almost 20% to 125 liters, one of the lowest levels of any
OECD country. Water prices in the Czech Republic increased in real terms
since 1990, resulting in a 40% decrease in domestic water use.
In
most countries, farmers are also allowed to use unlimited water for a
flat charge. Charging for the volume of water used reduces the amount of
water used by agriculture by 10-20 %, according to some studies.
Switching to volumetric charging is most successful when combined with
more modern irrigation technology and work to fix leaks, the report
says.
In most countries, household water tariffs are designed to
recover the financial costs. In contrast, agricultural water use is
often heavily subsidised, so the price covers as little as 20 % of costs
in some cases. In Spain, where some regions are severely
water-stressed, agricultural water prices recover less than half of the
cost. This may encourage inefficient water use, the report says.
When
the price of using water does not recover the full cost, some of the
cost may be inadvertently passed on to others. For example, if industry
pollutes water and fails to pay for it to be cleaned, these costs are
imposed on society.
Low-income households must also have access
to affordable water services, but keeping prices artificially low for
all users is not the best method, the report says, as it may lead to a
vicious cycle of underfunded service providers with poor infrastructure.
The
public seems to support being charged according to the volume of water
they use – 84 % of EU citizens agree with this principle to some extent,
according to a 2012 Eurobarometer survey.
Assessment of cost recovery through pricing of water – EEA
European Environment Agency – 27-09-2013