By James Winpenny
Water, already a scarce source, is handled as if it have been ample and loose. the duty of offering adequate water of the mandatory caliber to transforming into populations is straining gurus and governments to the restrict because the monetary and environmental expenditures of recent offer assets enhance and wasteful offer, supply and intake platforms persist. handling Water as an financial source argues that the basis of the situation is the failure of providers and shoppers to regard water as a scarce commodity with an monetary worth. James Winpenny evaluates guidelines for the enhanced administration of present call for, and attracts on case experiences from diversified international locations as he discusses how guidelines will be applied to regard water as an fiscal solid conferring significant fiscal, monetary and environmental advantages.
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Additional resources for Managing Water as an Economic Resource (Development Policy Studies)
Marginal cost pricing in conditions of increasing marginal cost (the most common situation) is best served by a progressive tariff structure, whereby higher units of consumption are charged at a higher rate. Many tariff structures do not, however, incorporate progressive pricing, and some display the opposite characteristic, especially for bulk users. For reasons of equity, public health and amenity, there is a strong case for providing a minimum amount of water at low unit prices. Higher consumption should attract progressively higher unit charges, to reflect the increasing costs of providing capacity to meet peak load demand, and more generally to encourage consumers to save water and avoid frivolous use.
This will raise its real value and create an incentive for existing consumers to relate their use of water more closely to its marginal value, and sell the rest. This section first considers pricing through water tariffs and pollution charges. It then discusses the various kinds of water markets, including auctions and water banks. CONSTRUCTING THE POLICY MIX 43 Water tariffs As noted in Chapter 1, economic principles require that users be charged for water at a rate equal to the marginal cost of supply; at this level the benefit from consuming the last unit of water equals the cost of providing it.
Regulation and supervision have to reconcile the need for public scrutiny and the application of sanctions for non-performance with the need to assure the operator of sufficient continuity and profits. This is a difficult balance to achieve. Few would dispute the responsibility of governments to set and enforce environmental standards. This is a precondition of internalising environmental costs, for instance in water prices or pollution charges and fines. Enforcement is obviously CONSTRUCTING THE POLICY MIX 35 important: several countries have model environmental standards on the statute books but show a poor record in enforcing them.