Economic tools for water management

The Water Framework Directive (2000/60/EC) has been instrumental in ensuring that economic considerations are taken into account in water-related decision-making processes. Article 9 of the October 23, 2000 directive concerns the recovery of the costs of water services.

It specifies that "Member States shall take into account the principle of recovery of the costs of water services, including environmental and resource costs, having regard to the economic analysis" carried out in accordance with an agreed methodology (specified in the appendix to the directive and in guides to good practice published subsequent to the WFD).

The same article specifies that Member States should ensure, by 2010, that :

• "The water pricing policy encourages users to use resources efficiently and thus contributes to achieving the environmental objectives of the directive;

• "the various economic sectors, broken down into at least the industrial, household and agricultural sectors, make an appropriate contribution to recovering the costs of water services, on the basis of the economic analysis already mentioned".

It is also specified that Member States "may take into account the social, environmental and economic effects of recovery, as well as the geographical and climatic conditions of the region or regions concerned".

Member States were also required to "report, in the river basin management plan, on the measures planned (...) which will contribute to the achievement of the environmental objectives of this Directive, and on the contribution of the different types of water use to the recovery of the costs of water services".

This article covers

• the economic tools introduced by the WFD ;

• characterization of water uses ;

• cost recovery ;

• methods for assessing the value of an environmental good or service;

• short considerations on water price incentives.