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In the agriculture sector, the price of irrigation water has
been generally low in many countries and its use
consequently high. Irrigation accounts for 75% to
90% of total water use in developing countries
and for over one third of water use in many OECD
countries. Irrigation subsidies are again often justified
on social grounds, that is, the need to support low
income farmers. However, subsidies generally
benefit all farmers indiscriminately and tend to
exacerbate waste and to encourage cultivation
of water-intensive crops.
Area-based tariffs for irrigation water are far more common
than other payment schemes such as charges
based on the volume of water used. Schemes not
based on volume give less incentive to conserve water,
and this will be exacerbated by subsidized tariffs. For
instance, a study of irrigation projects in Brazil revealed
that the single most important cause of water over-use
was the excessive length of irrigation time (OECD
2003a).
Box 6.11: Targeting water pricing against
social objectives
Maltese water pricing uses a ‘rising block’ system
where at lower levels of household water use, the
rate per m3 is significantly lower than for higher
use. In 2000 there were nearly 13,000 accounts
in the social assistance category. This group
represented around 4% of total water use in Malta
and around 6% of domestic use. The average
consumption charge for the social assistance
tranche was 0.56 €/m3 , while for the general
residential sector it was 0.79 €/m3 . Rates are
higher for higher levels of consumption, but no
tariff is charged for ‘lifeline’ consumption levels
below 5.5m3 /person per year. Rates also vary
by economic sectors with the highest charges
paid by those where affordability is higher i.e.
tourist and commercial sectors (1.98 €/m3 ) and
government (2.59 €/m3 ).
Source: GHK et al. 2006
REFORMING SUBSIDIES
Water scarcity, particularly in water-poor countries,
can be exacerbated by cultivation of waterintensive
crops (where climate conditions and
rainfall patterns should dictate otherwise) and
outright waste of water. In Europe as a whole,
agriculture accounts for about 24% of total water use,
but this reaches up to 80% in parts of Southern Europe
(EEA 2009) where, despite evidence of desertification,
crops like corn and strawberries are still grown. Water
scarcity is expected to further increase in these already
semi-arid or arid areas. The Mediterranean basin,
together with the western USA, southern Africa and
north-eastern Brazil, are particularly exposed to the
impacts of climate change, which is projected to further
decrease their water resources (IPCC 2007).
The negative impact of subsidised water prices on
water resources is increasingly recognised. Several
countries are already moving towards full cost recovery.
Mexico is often cited as an example of a country that,
after wide-scale reform of the agriculture sector, has
substantially reduced irrigation subsidy levels, with
many irrigation schemes now achieving financial
self-sufficiency (Kloezen 2002; Cornish et al. 2004). The
EU Water Framework Directive requires EU Member
States to take into account the principle of full cost
recovery in water pricing policies, in order to promote a
more efficient use of resources (see also Boxes 6.10
and 6.11 for country cases and Chapter 7).
TEEB FOR NATIONAL AND INTERNATIONAL POLICY MAKERS - CHAPTER 6: PAGE 22