The challenge of irrigation water pricing in the Water Framework Directive

Abstract

The scarcity and degradation of water resources is an important environmental challenge in Europe, which is being addressed by the Water Framework Directive, the Urban Waste Water Directive, and the Nitrates Directive. Water pricing is an essential component of the Water Framework Directive, and the increase of water prices up to full recovery costs is a valuable measure in urban networks. However, water pricing may not be the best reallocation instrument for irrigated agriculture. In irrigated agriculture, water pricing is challenging because water for irrigation is usually a common pool resource. Water pricing could recover costs and indicate scarcity in the long run, but it doesn’t seem feasible in the short run for irrigation water reallocation. Other policy instruments such as water markets and institutional cooperation seem more operational for water reallocation. The Water Framework Directive includes the 'polluter pays principle' as the suitable rule for pollution abatement. But the principle cannot be applied to agricultural pollution since this pollution is non-point, and water pricing is not the right abatement instrument. Also, the flimsy outcomes from the Nitrates Directive since 1991 call for a revision of the pollution abatement measures. This paper reviews the water policy instruments that could be more suitable for achieving the objectives of the Water Framework Directive, and the paper highlights the need for combining instruments to deal with the public good, common pool resource, and private good characteristics of water.