Economic Regulation, Water Pricing, and Environmental and Resource Costs: The Difficult Marriage Between Financial Sustainability, Investment Requirements and Economic Efficiency

Abstract

This chapter provides an overview of the financing patterns of the Italian water sector, which is segmented and characterised by a wide plurality of management systems and operators. In the last 25 years, Italy has introduced far-reaching reforms, which concerned in particular urban water supply and sanitation. The most important goal was to create the basis for an autonomous and self-sufficient water industry, driving the sector out of the public budget. Financial equilibrium of water undertakings and access to market-based finance have thence dominated over other possible aims of water pricing. Other sectors, and notably irrigation, continue to follow more traditional schemes. The chapter also discusses further reform opportunities with a view to turning water prices into economic incentives for a more sustainable use of water resources.