Water Tariffs

Abstract

Tariffication is a major challenge of water resource management, as it raises technical and economic questions simultaneously, that can become very complex, both in theory and in implementation. The chapter covers issues of water tariffication from a variety of perspectives, with a focus on simple, and less simple, economic principles. After an historical review of water pricing debates, the chapter discusses criteria for water tariffs, such as economic efficiency, financial viability, ecological sustainability, and social concerns. In addition to the comparison of stylized water tariffs, such as single- and two-part tariffs, the chapter also goes into more details on increasing block tariffs, and pricing in physically unconnected water markets. In addition to water pricing, the chapter also addresses rationing as an instrument of water management. The chapter includes exercises and suggestions for further reading.