Abstract
This paper aims to provide an international review of water pricing policy with an emphasis on the alignment of costs with prices. The paper raises questions around the mechanics of promoting policy changes for more sustainable irrigation management as well as environmental protection in the future. The information and data used for this review were extracted from available published studies but use was also made of information from research institutions and development organizations, country reports, working papers, conference proceedings, and some unpublished documents. My initial hypothesis was that developed countries are more likely to approach full cost recovery policy for irrigation while in developing countries subsidies were considered more likely. The concept of full cost pricing has been employment in shaping policy in a number of countries, including Europe. Although environmental externalities from irrigation are seen as an important part of irrigation costs, in practice these are seldom included as a component in charges for irrigation. While most developed nations have been promoting full supply cost recovery, subsidies are still dominated in irrigation in both developing and developed countries. Full cost for irrigation water consists of three components: supply cost, economic and resource cost, and environmental cost. Capturing the costs of each component into pricing policy arguably leads to more sustainable development and environmental protection in the water sector. The political will to reach full cost recovery seems beyond most governments.
Similar content being viewed by others
References
Bartolini F, Bazzani GM, Gallerani V, Raggi M, Viaggi D (2007) The impact of water and agriculture policy scenarios on irrigated farming Systems in Italy: an analysis based on farm level multi-attribute linear programming models. Agric Syst 93:90–114. doi:10.1016/j.agsy.2006.04.006
Bartolini F, Gallerani V, Raggi M, Viaggi D (2010) Water management and irrigated agriculture in Italy: Multicriteria analysis of alternative policy scenarios. Water Policy 12:135–147
Bell AR, Shah MAA, Ward PS (2014) Reimagining Cost Recovery in Pakistan's Irrigation System through Willingness-to-pay Estimates for Irrigation Water from a Discrete Choice Experiment, Water Resour Res 50:6679–6695 doi:10.1002/2014wr015704
Berbel J, Jómez-Limón JA (2000) The impact of water-pricing policy in Spain: an analysis of three areas. Agric Water Manag 43:219–238
Berbel J, Calatrava J, Garrido A (2007) Water pricing and irrigation: a review of the European experience. In: Molle F, Berkoff J (eds) Irrigation water pricing: the gap between theory and practice. CABI, Oxford, pp. 295–327
Bithas K (2011) Sustainability and externalities: is the internalization of externalities a sufficient condition for sustainability? Ecol Econ 70:1703–1706. doi:10.1016/j.ecolecon.2011.05.014
Bithas K, Kollimenakis A, Maroulis G, Stylianidou Z (2014) The water framework directive in Greece. Estimating the environmental and resource cost in the water districts of western and Central Macedonia: methods, results and proposals for water pricing. Procedia Econ Finance 8:73–82. doi:10.1016/S2212-5671(14)00065-3
Brelle F, Dressayre E (2014) Financing irrigation. Irrig Drain 63:199–211. doi:10.1002/ird.1836
Brezonik PL, Stefan HG, Dadaser-Celik F (2008) Agricultural and environmental changes after irrigation management transfer in the Develi Basin, Turkey. Irrig Drain Syst 22:47–66
Brugge R, Rotmans J (2007) Towards Transition Management of European Water Resources. Water Resources Management 21:249–267. doi:10.1007/s11269-006-9052-0
Cabezas F (2012) The European water framework directive: a framework? Int J Water Resour Dev 28:19–26
Cakmak EH (2010) Agricultural water pricing: Turkey. OECD Publishing, Paris
Calatrava J, García-Valiñas M, Garrido A, González-Gómez F (2015) Water pricing in Spain: following the footsteps of somber climate change projections. In: Dinar A, Pochat V, Albiac-Murillo J (eds) Water pricing experiences and innovations. Springer, Dordrecht, pp. 313–340
Daniel K, Kilkenny M (2009) Agricultural subsidies and rural development. Agric Econ 60:504–529. doi:10.1111/j.1477-9552.2009.00214.x
Dinar A, Mody J (2004) Irrigation water management policies: allocation and pricing principles and implementation experience. Nat Res Forum 28:112–122. doi:10.1111/j.1477-8947.2004.00078.x
Dinar A, Subramanian A (1997) Water Pricing Experiences: An International Perspective. Technical Paper No. 386. The World Bank. 164 Pages
Dinar A, Pochat V, Albiac-Murillo J (2015) Introduction. In: Dinar A, Pochat V, Albiac-Murillo J (eds) Water pricing experiences and innovations. Springer, Dordrecht, pp. 1–12
Donoso G (2015) Water pricing in chile: decentralization and market reforms. In: Dinar A, Pochat V, Albiac-Murillo J (eds) Water pricing experiences and innovations. Springer, Dordrecht, pp. 83–96
Doukkali MR (2005) Water institutional reforms in Morocco. Water Policy 7:71–88
Dwyer T (2006) Urban water policy: in need of economics. Agenda 13:3–16
Easter KW, Liu Y (2005) Cost Recovery and Water Pricing for Irrigation and Drainage Projects. The World Bank
EEA (2013) Assessment of Cost Recovery through Water Pricing. Technical Report No 16/2013. European Environment Agency. 123 Pages
Fan SG, Gulati A, Thorat S (2008) Investment, subsidies, and pro-poor growth in rural India. Agric Econ 39:163–170. doi:10.1111/j.1574-0862.2008.00328.x
FAO (2012) Coping with Water Scarcity: An Action Framework for Agriculture and Food Security. FAO Water Report 38. Food and Agriculture Organisation of the United Nations. 61 Pages
FAO (2015) Towards a Water and Food Secure Future: Critical Perspectives for Policy-makers. White Paper. Food and Agriculture Organisation of the United Nations. 61 Pages
Farooqui AZ, Zubair A, Tariq AA, Hassan S (2012) Pricing Irrigation Water in Pakistan: Issues and Prospects. DPRC Senior Project Research Series. 41 Pages
Faysse N, Errahj M, Kuper M, Mahdi M (2010) Learning to voice? The evolving roles of family farmers in the coordination of large-scale irrigation schemes in Morocco. Water Alternatives 3:48–67
François M, Hoanh CT (2011) Implementing Integrated River basin Management in the Red River Basin, Vietnam: a solution looking for a problem? Water Policy 13:518–534
Fuentes A (2011) Policies towards a Sustainable Use of Water in Spain. OECD Economics Department Working Papers No. 840, Organisation for Economic Co-operation and Development. 30 Pages
Garrido A, Calatrava J (2010) Agricultural water pricing: EU and Mexico. OECD Publishing, Paris
Garrido A, Iglesias A (2011) Lessons for Spain: a critical assessment of the role of science and society. In: Garrido A, Ingram H (eds) Water for Food in a Changing World. Routledge, London
Garrido A, Donoso G, Melo O, Solanes M (2014) Economic instruments for allocating water and financing services. In: Willaarts BA, Garrido A, Llamas MR (eds) Water for food and Wellbeing in Latin America and the Caribbean. social and environmental implications for a globalized economy. Routledge, New York, pp. 343–364
Gilboa Y, Gal G, Markel D, Rimmer A, Evans BM, Friedler E (2015) Effect of Land-use Change Scenarios on Nutrients and TSS Loads. Environ Processes 2:593–607
Gohar AA, Ward FA (2011) Gains from improved irrigation water use efficiency in Egypt. Int J Water Resour Dev 27:737–758
Gómez-Limón JA, Riesgo L (2004a) Irrigation water pricing: differential impacts on irrigated farms. Agric Econ 31:47–66
Gómez-Limón JA, Riesgo L (2004b) Water pricing: analysis of differential impacts on heterogeneous farmers. Water Resour Res 40:W07S05
Guerrero-Garcia-Rojas H, Gómez-Sántiz F, Rodríguez-Velázquez JR (2015) Water Pricing in Mexico: Pricing Structures and Implications. In: Dinar A, Pochat V, Albiac-Murillo J (eds) Water pricing experiences and innovations. Springer, Dordrecht, pp. 231–247
Guse B, Pfannerstill M, Fohrer N (2015) Dynamic Modelling of Land Use Change Impacts on Nitrate Loads in Rivers. Environ Processes 2:575–592
Hansjürgens B (2016) Theory, the market and the state: agricultural reforms in post Socialist Uzbekistan between economic incentives and institutional obstacles. In: Hüttl RF, Bens O, Bismuth C, Hoechstetter S (eds) Society - water - technology: A critical appraisal of major water engineering projects. water resources development and management. Springer International Publishing, New York, pp. 169–186. doi:10.1007/978-3-319-18971-0_12
Howarth W (2009) Cost Recovery for Water Services and the Polluter Pays Principle. In: ERA Forum, Springer, vol 4. pp 565–587. doi:10.1007/s12027-009-0134-3
Huang Q, Rozelle S, Howitt R, Wang J, Huang J (2010) Irrigation water demand and implications for water pricing policy in rural China. Environ Dev Econ 15:293–319
Hussain I (2007) Poverty-reducing impacts of irrigation: evidence and lessons. Irrig Drain 56:147–164. doi:10.1002/ird.298
Jenkins B (2015) New Zealand water pricing. In: Dinar A, Pochat V, Albiac-Murillo J (eds) Water pricing experiences and innovations. Springer, Dordrecht, pp. 263–288
Johansson RC, Tsur Y, Roe TL, Doukkali R, Dinar A (2002) Pricing irrigation water: a review of theory and practice. Water Policy 4:173–199. doi:10.1016/s1366-7017(02)00026-0
Luzi S (2010) Driving forces and patterns of water policy making in Egypt. Water Policy 12:92–113
Malik RP, Prathapar S, Marwah M (2014) Revitalizing Canal Irrigation: Towards Improving Cost Recovery. International Water Management Institute. Working Paper 160. 42 Pages
Manos B, Bournaris T, Kamruzzaman M, Begum M, Anjuman A, Papathanasiou J (2006) Regional impact of irrigation water pricing in Greece under alternative scenarios of European policy: a Multicriteria analysis. Reg Stud 40:1055–1068
Massarutto A (2015) Water pricing in Italy: beyond full-cost recovery. In: Dinar A, Pochat V, Albiac-Murillo J (eds) Water pricing experiences and innovations. Springer, Dordrecht, pp. 201–230
Mishra A, Ghosh S, Nanda P, Kumar A (2011) Assessing the impact of rehabilitation and irrigation management transfer in minor irrigation projects in Orissa, India: a case study. Irrig Drain 60:42–56
Molle F (2007) Thailand’s ‘free water’: rationale for a water charge and policy shifts. In: Molle F, Berkoff J (eds) Irrigation water pricing: the gap between theory and practice. CABI, Oxford, pp. 126–142
Molle F (2009) Water scarcity, prices and quotas: a review of evidence on irrigation volumetric pricing. Irrig Drain Syst 23:43–58
Molle F, Berkoff J (2007) Water pricing in irrigation: mapping the debate in the light of experience. In: Molle F, Berkoff J (eds) Irrigation Water Pricing: The Gap between Theory and Practice. CABI, Oxford, pp. 21–93
Molle F, Venot J-P, Hassan Y (2008) Irrigation in the Jordan Valley: are water pricing policies overly optimistic? Agric Water Manag 95:427–438. doi:10.1016/j.agwat.2007.11.005
Montginoul M, Loubier S, Barraqué B, Agenais A-L (2015) Water pricing in france: toward more incentives to conserve water. In: Dinar A, Pochat V, Albiac-Murillo J (eds) Water pricing experiences and innovations. Springer, Dordrecht, pp. 139–160
National Irrigators’ Council (2010) Submission to the ‘guide to the proposed murray-darling basin plan’. NIC, Canberra
Nickum JE, Ogura C (2010) Agricultural water pricing: Japan and Korea. OECD Publishing, Paris
Oakland WH (1987) Theory of public goods. In: Auerbach AJ, Feldstein M (eds) Handbook of public economics, vol II. Elsevier, North-Holland
OECD (2003) Environmentally Harmful Subsidies: Policy Issues and Challenges. Proceedings of the Workshop on Environmentally Harmful Subsidies in November 2002. Organisation for Economic Co-operation and Development. 217 Pages
OECD (2005) Environmentally harmful subsidies: challenges for reform. OECD Publishing, Paris
OECD (2008) Water Resources in Agriculture: Outlook and Policy Issues. OECD. http://www.oecd.org/dataoecd/15/16/48498988.pdf. Accessed 20 May 2015
OECD (2009) Managing water for all: an OECD perspective on pricing and Financing. OECD Publishing, Paris
OECD (2012) Water quality and agriculture: meeting the policy challenge. OECD Publishing, Paris
Palerm-Viqueira J (2010) A comparative history, from the 16th to 20th centuries, of irrigation water Management in Spain, Mexico, Chile, Mendoza (Argentina) and Peru. Water Policy 12:779–797
Parker S, Speed R (2010) Agricultural water pricing: australia. OECD Publishing, Paris
Pawsey N, Crase L (2012) The mystique of urban water pricing and accounting: the case of water tariffs in Victoria, Australia. Econ Pap 32:328–339
Raju K, Gulati A (2008) Pricing, Subsidies and Institutional Reforms in Indian Irrigation: Some Emerging Trends. In: Ballabh V (ed) Governance of Water: Institutional Alternatives and Political Economy. Sage, New Delhi, pp. 79–99
Reddy VR (2009) Water Pricing as a Demand Management Option: Potentials, Problems and Prospects. In: Saleth M (ed) Strategic Analyses of the National River Linking Project of India. International Water Management Institute, Colombo, pp. 25–46
Renzetti S, Dupont DP (2015) Water pricing in Canada: recent developments. In: Dinar A, Pochat V, Albiac-Murillo J (eds) Water pricing experiences and innovations. Springer, Dordrecht, pp. 63–81
Ribaudo MO (2009) Non-point pollution regulation approaches in the US. In: Albiac J, Dinar A (eds) The management of water quality and irrigation technologies. Earthscan, London
Rogers P, Bhatia R, Huber A (1998) Water as a Social and Economic Good: How to Put the Principle into Practice. Global Water Partnership. TAC Background Paper No. 2. 35 Pages
Rogers P, Rd S, Bhatia R (2002) Water is an economic good: how to use prices to promote equity. Efficiency, and Sustainability, Water Policy 4:1–17
Saleth RM, Amarasinghe UA (2010) Promoting irrigation demand Management in India: options, linkages and strategy. Water Policy 12:832–850
Saleth RM, Dinar A (2004) The institutional economics of water: a cross-country analysis of institutions and performance. Edward Elgar, Cheltenham
Scheierling SM, Young RA, Cardon GE (2006) Public subsidies for water-conserving irrigation investments: hydrologic, agronomic, and economic assessment. Water Resour Res 42:1–11. doi:10.1029/2004wr003809
Schmid E, Sinabell F, Hofreither MF (2007) Phasing out of environmentally harmful subsidies: consequences of the 2003 CAP reform. Ecol Econ 60:596–604. doi:10.1016/j.ecolecon.2005.12.017
Schreiner B (2015) Water pricing: the case of South Africa. In: Dinar A, Pochat V, Albiac-Murillo J (eds) Water pricing experiences and innovations. Springer, Dordrecht, pp. 289–311
Shobayashi M, Kinoshita Y, Takeda M (2010) Issues and options relating to sustainable Management of Irrigation Water in Japan: a conceptual discussion. Int J Water Resour Dev 26:351–364
Speelman S, Buysse J, Farolfi S, Frija A, D'Haese M, D'Haese L (2009) Estimating the impacts of water pricing on smallholder irrigators in north West Province, South Africa. Agric Water Manag 96:1560–1566
Tardieu H (2005) Irrigation and drainage services: some principles and issues towards sustainability an ICID position paper. Irrig Drain 54:251–262. doi:10.1002/ird.172
Thiam DR, Muchapondwa E, Kirsten J, Bourblanc M (2015) Implications of water policy reforms for agricultural productivity in South Africa: scenario analysis based on the Olifants River basin. Water Resour Econ 9:60–79. doi:10.1016/j.wre.2014.11.001
Tiwari D, Dinar A (2002) Role and Use of Economic Incentives in Irrigated Agriculture. Working Paper. The World Bank, Washington, D.C. 69 Pages
Toan TD, O’Keefe S, Crase L (2015) Farmer heterogeneity and water pricing reform: a case study from Vietnam. Int J Water Resour Dev:1–17. doi:10.1080/07900627.2015.1085368
Tsur Y (2005) Economic aspects of irrigation water pricing. Can Water Resour J 30:31–46. doi:10.4296/cwrj300131
Tsur Y, Dinar A (1995) Efficiency and Equity Considerations in Pricing and Allocating Irrigation Water. Policy Research Working Paper 1460. The World Bank. 40 Pages
Tsur Y, Dinar A (1997) The relative efficiency and implementation costs of alternative methods for pricing irrigation water. World Bank Econ Rev 11:243–262
Tsur Y, Dinar A, Doukkali RM, Roe T (2004) Irrigation water pricing: policy implications based on international comparison. Environ Dev Econ 9:735–755
United Nations (2003) Water for people, water for life. UNESCO Publishing, Paris
van den Bergh JCJM (2010) Externality or sustainability economics? Ecol Econ 69:2047–2052. doi:10.1016/j.ecolecon.2010.02.009
Varela-Ortega C (2007) Policy-driven determinants of irrigation development and environmental sustainability: a case study in Spain. In: Molle F, Berkoff J (eds) Irrigation Water Pricing: The Gap between Theory and Practice. CABI, Oxford, pp. 328–346
Varis O, Abu-Zeid K (2009) Socio-economic and environmental aspects of water management in the twenty-first century: trends, challenges and prospects for the MENA region. Int J Water Resour Dev 25:507–522. doi:10.1080/07900620902972679
Venot JP, Molle F, Hassan J (2007) Wells and canals in Jordan: can pricing policies regulate irrigation water use? In: Molle F, Berkoff J (eds) Irrigation water pricing: the gap between theory and practice. CABI, Oxford, p. 1
Ward FA (2010) Financing irrigation water management and infrastructure: a review. Int J Water Resour Dev 26:321–349. doi:10.1080/07900627.2010.489308
Ward FA, Pulido-Velazquez M (2009) Incentive pricing and cost recovery at the basin scale. Environ Manag 90:293–313. doi:10.1016/j.jenvman.2007.09.009
Webber M, Barnett J, Finlayson B, Wang M (2008) Pricing China's irrigation water. Glob Environ Chang 18:617–625. doi:10.1016/j.gloenvcha.2008.07.014
Wichelns D (2010) Agricultural water pricing: United States. OECD Publishing, Paris
Wilder M, Lankao RP (2006) Paradoxes of decentralization: water reform and social implications in Mexico. World Dev 34:1977–1995. doi:10.1016/j.worlddev.2005.11.026
Acknowledgments
The author would like to thank Professor Lin Crase (University of South Australia, Australia) and Dr. Suzanne O’Keefe (La Trobe University, Australia) for their comments and revisons on earlier versions of this paper.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Toan, T.D. Water Pricing Policy and Subsidies to Irrigation: a Review. Environ. Process. 3, 1081–1098 (2016). https://doi.org/10.1007/s40710-016-0187-6
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s40710-016-0187-6