Raouf - water cost recovery options


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Raouf - water cost recovery options

  1. 1. Water Cost Recover Options Mohamed Abdel Raouf, Program Manager in Environment Research at the Gulf Research Centre, UAEPolicy-makers in the Arab World have now shifted from entirely supply solutions to demandmanagement, highlighting the importance of using a combination of measures to ensureadequate supplies of water for different sectors.In most countries, effective national institution frameworks have been set up to meet thedemand for water resources management. All the countries of the region have developednational water plans keeping within the broad lines of Agenda 21.The first and foremost strategy for sustainable use of water resources is to protect andconserve the available resources. This calls for harvesting every drop of water throughrainwater harvesting, protecting the natural and manmade storage reservoirs as well asgroundwater aquifers. Besides developing new systems and technologies, protecting thetraditional 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 thevolatile nature of oil prices and revenues. The sustainable use of groundwater resourcesshould be a consideration in the overall integrated water resource management policy of eachcountry.In the context of the agriculture sector, given the large amount of groundwater used forirrigation, the emphasis should be put on improving irrigation efficiency through: (i)expanding the use of modern irrigation systems and automated irrigation scheduling systemsto 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 fodderThere are a number of Environmental Management policy Approaches to handleenvironmental 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 fromregulatory authorities (i.e., government).• Market-based Economic Instruments (MBI):Instruments that generally operate through establishing prices for environmental services viaa market.• Persuasive Measure:Is used alongside the other two approaches to offset environmental market failures byinternalizing environmental awareness and responsibility into individual decision-making.Policy mix:Experience has showed that specific environmental problems such as water problems areusually addressed by employing a “policy mix” consisting of various command and controlinstruments (penalties and fines), economic instruments (incentives) and awareness andeducational programs. This policy mix needs to address different water issues; besides a moreactive role should be assigned for civil society organizations in water related decision-makingand a greater role should be given to the private sector to invest in water projects. 1
  2. 2. In this context, the right cost recovery option plays a very important role in waterconservation which varies from city to city and according to economic conditions.The following table summarizes the different cost recovery options adopted and itsimplications.Cost Recovery Details Implication-OptionsFlat Rate Constant fee Water-wasteful behaviourUniform Rate Price per liter No special incentivesDecreasing Volumetric rate that Ease the incentive to save water atBlock Rates decreases fro higher use- higher use-levels levelsIncreasing Block Volumetric rate that Economize water useRates increases for higher use- levelsSeasonal Rates Higher price in peak Regardful water use in peak times season of water scarcityIt is worth mentioning here that, one of the recent initiatives are the new tariff system wasintroduced in March 2008 by Dubai Electricity and Water Authority (DEWA). The risingtariffs will make people more conscious of using water efficiently as it would encouragecustomers who fall into the higher categories of consumption to cut back on use. Under theSlab Tariff System, residents using up to 2,000 kilowatts of electricity and up to 6,000gallons 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 becharged an additional 33 fils and 4 fils per unit respectively. 2
  3. 3. One must admit that this is a step on the right direction to send signals to consumers aboutthe true cost of water. However, the new tariff does not apply to UAE nationals. In fact, itwould be better to offer them a monetary allowance and charge their wasteful waterconsumption instead according to the new DEWA tariff. From the environmental point ofview, this is more environment-friendly.This increasing block rates unlike other policy options tools such as flat rate or decreasingblock rate, are one of the best cost recovery options as it sets volumetric rate that increasesfor 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 completelyrefuse this policy and believe it is a misleading solution and it is an imported idea fromcapitalism which tries to market everything in the world. In fact government of developingworld need to guarantee what is called the basic line life which provides the basic needs forpeople. In many developing countries, people, do not have anything to pay. So, how come weask them to pay for water? It might be accepted to have some sort of cost recovery in Arabcountries as now water infrastructures, systems and monitoring. Beside, there is an urgentneed to send some signals to customers about importance of conservation especially withhigh living standards and high consumption patterns in the Arab countries. However, thisvaries from country to country depending on various economic, political and socialconsiderations. As well as at the same country from time to time and depending on thecountry’s situation ion the economic ladder.The appropriate cost recovery in water sector promotes resource conservation by encouragingefficient use of water and facilitates cost recovery. Water tariffs must conform to a set ofconditions, 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 andinstitutionally feasible.Finally, there is no one solution that fits all. Every country may need to tailor ownmanagement system to fit its specific needs. Policy measures vary from state to state andfrom local to national and regional levels of governance. Different actors naturally perceivedifferent problems and priorities. 3