Evolution of household water consumption in Chile

Water tariffs in Chile send the right signals to consumers. Average monthly household consumption has significantly fallen since 1998, from approximately 25 to 18.6 m3/household/month in 2013

Increasing Block Tariffs in the Water Sector: An Interpretation in Terms of Social Preferences

Meran, Georg and von Hirschhausen, Christian, Increasing Block Tariffs in the Water Sector: An Interpretation in Terms of Social Preferences (September 2014). DIW Berlin Discussion Paper No. 1434. Available at SSRN:http://ssrn.com/abstract=2553084 or http://dx.doi.org/10.2139/ssrn.2553084


Abstract

Many developing countries around the world apply progressive water tariffs, often structured in the form of discretely increasing block tariffs (IBTs). These tariffs have been criticized in the welfare economic literature due to their perceived inefficiency: many of the prices charged under IBTs do not correspond to marginal costs and thus violate the principle of allocative efficiency. In this paper we explore an alternative interpretation of the widespread use of IBTs, in terms of social preferences and fairness considerations. For this, we rely on an extension of the Fehr and Schmidt (1999) utility function, including inequality aversion, to which we add another parameter representing a preference for redistribution, which reflects a societal preference to correct for income difference perceived as unfair. In addition, the paper also includes household size in the analysis, finding that as poor households are on average larger (in per capita terms), a simple IBT tariff disregarding household size may not be "fair" at all. We conclude on a methodological note on the importance of addressing allocative and distributional issues simultaneously.

The Benefits Of Reusing Wastewater

Only 2.5 percent of the world's water is fresh water, and of that, only 1 percent is accessible as much is trapped in glaciers and snowfields. As a result, only a tiny fraction of the planet's water is available for everyday use. By one estimate, global fresh water demand will exceed supply by a staggering 40 percent in 2030 if current trends continue.

As corporate citizens, businesses must look at their impact on the environment and assess how their operations affect the communities they operate in and serve. By reducing their source water requirements, food and beverage companies of any size can do their part to reduce environmental impact, while reinforcing their corporate social responsibility. Many companies also realize substantial cost savings from water-related investments. 

Integrated Water Resources Management and its Contribution Towards Achieving the MDGs

The interface of water resources and development and the achievement of the MDGs is complex and includes many specific linkages.  Examples of the linkages between water and achieving the MDGs are emphasized in the previous section.  This wide array of important linkages that present many synergies, explains why pursuing each goal separately reduces the complex process of human and economic development to a series of conflicting, and unsustainable interventions.  In addition, the interface of water resources and the achievement of the MDGs occurs at several different institutional levels, explaining why water resource policies in many countries have evolved in a fragmented and piecemeal fashion.  Under this framework, policy objectives have been set without consideration of the implications for other water users and without consultation across sectoral and institutional boundaries.  This traditional approach to water management has, in general, proven to be an ineffective policy strategy due to the fact that these problems fall outside of the normal purview of the agencies tasked with addressing them and, thus, require cooperation from multiple sectors.  In order to optimize water resources for development and the MDGs, countries must overcome constraints through appropriate investments and management arrangements within broad planning and policy iniciatives.

Saleth and Dinar (1999, 2004) also emphasize that institutional changes are needed to improve water management since previous institutions were developed during a water surplus era.  Moreover, as Global Water Partnership (2000) points out, water management is usually left to top-down institutions, the legitimacy and effectiveness of which have increasingly been questioned. However, it is important to highlight that the effectiveness of these sectoral improvements will be affected by the country’s institutional and  macroeconomic environment since many of these reforms depend on economic, ecological, and political constraints (Saleth and Dinar, 2004) and reflect the fact that institutional reform is path dependent (North, 1990). 

An IWRM approach, defined as a process that “promotes the coordinated development and management of water, land, and related resources, in order to maximize the resultant economic and social welfare in an equitable manner without compromising the sustainability of vital ecosystems” (Global Water Partnership website), provides an opportunity to attack these problems more effectively, identifying root causes and solutions that lie outside of any one specific sectoral area and focusing on investment as well as management issues. IWRM is not a reform whose objective is just to achieve a more efficient management of water as a resource, it considers reforms whose objectives are to improve governance and financial systems at all levels, in order to meet each country’s development goals.

Thus, an IWRM approach considers the diverse linkages between water resources and the achievement of the MDGs, ensuring that investments across sectors work together, producing greater returns by exploiting the synergies between the linkages.  In addition, the involvement of multiple sectors highlights opportunities that are often hidden by sectoral thinking. For example, examining domestic water and sanitation needs along with food security issues generates opportunities to provide communities with water for domestic and food production purposes at a lower additional cost compared with traditional water planning approaches (Global Water Partnership, 2004a).  IWRM also helps reduce the negative consequences of undesired environmental impacts associated with water development and the costs associated to the environmental damage. For example, the annual cost of mitigating the effects of land and water degradation in Asia associated to water development strategies has been estimated at US$35 billion (Global Water Partnership, 2004a). Finally, since IWRM considers in an integrated manner social, economic and environmental goals, it promotes a more strategic and socially efficient water allocation than traditional approaches driven individual sectors interests.  The UN Task Force on water and sanitation, based on the advantages of IWRM, is convinced the MDGs as a whole will not be met unless an IWRM Plan, which considers deliberate planning and investment in sound water resources management and infrastructure, is implemented (Lenton, 2005).

1.  Saleth, R.M. and Dinar, A. 1999. Evaluating water institutions and water sector performance Tech. paper 447, World Bank, Washington D.C. Available at: http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/1999/09/21/000094946_99090305381648/Rendered/PDF/multi_page.pdf

2.    Saleth, R.M. and Dinar, A. 2004. The institutional economics of water: A cross country analysis of institutions and performance Edward Elgar, Mass. 398 pp.

3. Global Water Partnership. 2004a. Catalyzing Change: A Handbook for Developing Integrated Water Resources Management (IWRM) and Water Efficiency Strategies. Technical Advisory Committee, Global Water Partnership, Stockholm, Sweden. www.gwpforum.org

4.   Lenton, R. 2005. Water Resources Management and the Millenium Development Goals. Presentation at the Seminar Water and the Millenium Development Goals: It’s Contribution to Development. Organized by IDB. Okinawa, Japan, April 6, 2005.

Environmental Sustainability and #Water

Reduced water quantity and quality have serious negative impacts on ecosystems. The environment has a natural absorptive, self-cleansing capacity; however, if this is exceeded, biodiversity is lost, livelihoods are affected, natural food sources are damaged and high clean-up costs result. Unesco (2003) points out that increased environmental damage has led to a greater occurrence of natural disasters, such as floods where deforestation and soil erosion have prevented natural water attenuation. More specifically, between 1991 and 2000 over 665,000 people died in 2,557 natural disasters— 90% of which were water-related and 97% of the victims were from developing countries.  Based on this marked increase, Hideaki (2005) proposes that the target to halve human loss due to water disasters by 2015 be added to the MDGs.

Additionally, unsustainable agricultural activities such as the draining of wetlands for agriculture and land clearance, among others, lead to significant negative impacts on the future availability of water (Unesco, 2003). The reduction and degradation of natural water courses due to deforestation and over-extraction of water have put many wetlands and marine ecosystems at risk.  Therefore, ecosystem health, in turn, is critical to the quantity and quality of freshwater supply and, thus, sustainable water resources management requires ecosystem-based management.  IWRM Plans do not regard the ecosystem as a user of water in competition with other users, but as the base from which the resource is derived and upon which development is planned (Jewitt, 2001).

Furthermore, water quality is an aspect of freshwater availability that also has a major impact on environmental sustainability (see e.g. Lenton, Wright, and Lewis; 2005).  Water quality currently represents a significant problem in several countries created or aggravated by anthropogenic causes, such as pollution discharges into surface water bodies and leaching of contaminants into underground water sources.   Adequate treatment and disposal of waste contributes to reduce the pressure of freshwater resources. Therefore, improved water quality management is a key factor in maintaining ecosystems integrity.

#Water is required to achieve MDG 5. Improve Maternal Health

Access to adequate water in quantity and quality affects maternal health by reducing labor burdens and health problems resulting from water portage; improving nutrition which reduces the susceptibility to anemia and other conditions that affect maternal mortality; and malaria is particularly dangerous to pregnant women, and better water management reduces mosquito habitats.  Thus water available to women affect their health and maternal health problems impacts and prevent the proper care of children, undermining development efforts. Additionally, educated women with access to adequate resources are better able to care for themselves. Thus, meeting the MDGs for education and women’s empowerment by improving the management of water has a positive impact on maternal health

Most water related diseases effects impact negatively maternal health and, thus, must be considered as an integral part of the necessary strategies in order to achieve this goal

Increasing access to safe water and thereby reducing child mortality

While most countries are committed to increasing access to safe water and thereby reducing child mortality, there is little consensus on how to actually increase access to safe water and sanitation coverage and to improve water service.  Some developing countries have implemented a strategy based on the privatization of water provision companies.  Galiani, Gertler, and Schargrodsky (2005), using the variation in ownership of water provision across time and space generated by the privatization process in Argentina, found that child mortality fell 8 percent in the areas that privatized their water services; and that the effect was largest (26 percent) in the poorest areas.

Galiani, S.,  Gertler, P., and Schargrodsky, E. 2005. Water for Life: The Impact of the Privatization of Water Services on Child Mortality. Journal of Political Economy, 113 (1), 83-120