Assessing water pricing policies to enhance water efficiency in agriculture

Abstract

The improvement of water use efficiency is one of the priorities of the Water Framework Directive 2000/60/EC. In order to pursue this objective, the European Union suggests member countries adopt a direct pricing method, in which each user is charged proportionally to water consumption. However, since the implementation cost and the operational costs of the volumetric pricing method are usually higher than those related to other methods the present paper is aimed at verifying whether the volumetric pricing is capable of achieving a higher efficiency. Two aspects of the efficiency are considered and evaluated with a two-step Data Envelopment Analysis (DEA): the technical efficiency, depending on the profitability of the crops, and the ecological efficiency, affected by environmental externalities of the irrigation practice. The results prove that the gain of efficiency due to direct pricing method is rather limited, compared to other methods.