Water Cost Recover Options

Mohamed Abdel Raouf, Program Manager in Environment Research at the Gulf Research Centre, UAE

Policy-makers in the Arab World have now shifted from entirely supply solutions to demand management, highlighting the importance of using a combination of measures to ensure adequate supplies of water for different sectors.

In most countries, effective national institution frameworks have been set up to meet the demand for water resources management. All the countries of the region have developed national water plans keeping within the broad lines of Agenda 21.

The first and foremost strategy for sustainable use of water resources is to protect and conserve the available resources. This calls for harvesting every drop of water through rainwater harvesting, protecting the natural and manmade storage reservoirs as well as groundwater aquifers. Besides developing new systems and technologies, protecting the traditional systems such as the Aflaj in some countries such as Oman is also imperative.

More importantly, reliance on desalinated water alone could be a risky policy considering the volatile nature of oil prices and revenues. The sustainable use of groundwater resources should be a consideration in the overall integrated water resource management policy of each country.

In the context of the agriculture sector, given the large amount of groundwater used for irrigation, the emphasis should be put on improving irrigation efficiency through: (i) expanding the use of modern irrigation systems and automated irrigation scheduling systems to increase water productivity; (ii) shifting from low value and high water consuming crops/ vegetables grown in open fields to high value vegetables grown in greenhouses; and (iii) reducing the area of high water consuming crops such as fodder

There are a number of Environmental Management policy Approaches to handle environmental issues such as water ones, these include:

• Command-And-Control Instruments (CAC):

Prescribed behavior based on legislative and mandatory regulations that “command” polluters to “control” specific activities. They are implemented through directives from regulatory authorities (i.e., government).

• Market-based Economic Instruments (MBI):

Instruments that generally operate through establishing prices for environmental services via a market.

• Persuasive Measure:

Is used alongside the other two approaches to offset environmental market failures by internalizing environmental awareness and responsibility into individual decision-making.

Policy mix:

Experience has showed that specific environmental problems such as water problems are usually addressed by employing a “policy mix” consisting of various command and control instruments (penalties and fines), economic instruments (incentives) and awareness and educational programs. This policy mix needs to address different water issues; besides a

1

more active role should be assigned for civil society organizations in water related decision-making and a greater role should be given to the private sector to invest in water projects.

In this context, the right cost recovery option plays a very important role in water conservation which varies from city to city and according to economic conditions.The following table summarizes the different cost recovery options adopted and its implications.

Cost Recovery Options

Details Implication-

Flat Rate Constant fee Water-wasteful behaviour

Uniform Rate Price per liter No special incentives

Decreasing Block Rates

Volumetric rate that decreases fro higher use-levels

Ease the incentive to save water at higher use-levels

Increasing Block Rates

Volumetric rate that increases for higher use-levels

Economize water use

Seasonal Rates Higher price in peak season

Regardful water use in peak times of water scarcity

It is worth mentioning here that, one of the recent initiatives are the new tariff system was introduced in March 2008 by Dubai Electricity and Water Authority (DEWA). The rising tariffs will make people more conscious of using water efficiently as it would encourage customers who fall into the higher categories of consumption to cut back on use. Under the Slab Tariff System, residents using up to 2,000 kilowatts of electricity and up to 6,000 gallons of water will pay a charge of 20 fils per kilowatt and 3 fils per gallon of water used. Those using over 6,001 kilowatts of electricity and more than 12,001 gallons of water will be charged an additional 33 fils and 4 fils per unit respectively.

2

One must admit that this is a step on the right direction to send signals to consumers about the true cost of water. However, the new tariff does not apply to UAE nationals. In fact, it would be better to offer them a monetary allowance and charge their wasteful water consumption instead according to the new DEWA tariff. From the environmental point of view, this is more environment-friendly.

This increasing block rates unlike other policy options tools such as flat rate or decreasing block rate, are one of the best cost recovery options as it sets volumetric rate that increases for higher use-levels and thus Economize water use.

It is worth mentioning here to refer to the issue of "water pricing" because, very recently, many voices are calling on adopting water pricing as the best solution, the author completely refuse this policy and believe it is a misleading solution and it is an imported idea from capitalism which tries to market everything in the world. In fact government of developing world need to guarantee what is called the basic line life which provides the basic needs for people. In many developing countries, people, do not have anything to pay. So, how come we ask them to pay for water? It might be accepted to have some sort of cost recovery in Arab countries as now water infrastructures, systems and monitoring. Beside, there is an urgent need to send some signals to customers about importance of conservation especially with high living standards and high consumption patterns in the Arab countries. However, this varies from country to country depending on various economic, political and social considerations. As well as at the same country from time to time and depending on the country’s situation ion the economic ladder.

The appropriate cost recovery in water sector promotes resource conservation by encouraging efficient use of water and facilitates cost recovery. Water tariffs must conform to a set of conditions, of which the most important is that they are affordable for all, especially the poor, that they are acceptable to the population and that they are administratively and institutionally feasible.

Finally, there is no one solution that fits all. Every country may need to tailor own management system to fit its specific needs. Policy measures vary from state to state and from local to national and regional levels of governance. Different actors naturally perceive different problems and priorities.

3