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Water Charge Instruments for Environmental Management in Latin America: from Theoretical to Practical Issues ●

France Country Case


The Old Paradigm • No integrated water management approach – Separate treatment of users categories – Separate approach to quantity and quality aspects in water regulation

• Environmental policy based on command-andcontrol mechanisms – Not adapted to the context of growing conflicts related to water availability and water quality

The 1964 Water Act • Principles: – Decentralization – Integrated approach to water-related problems – Planning – Participatory decision-making process

The New Approach to Water Management Policy • Institutional Arrangements – River basin as basic management unit – River Basin Committees (RBCs) – Water Agencies (WAs)

River Basin Committees and Water Agencies • RBCs – Consultative bodies – “Water Parliaments” composed by – Water users – Governmental representatives – Stakeholders

• WAs – Executive branches – Financing of private and municipal investment projects intended to reducing pollution and increasing water availability

Water Charges • Objectives – Financing investments defined in the working program established by WA and approvd by RBCs – Induce water use efficiency

• Who pays ? – Farmers (minor, just some animal breeding activities) – Households – Industrialists

• Two components – Water withdrawal – Effluent emission

Water charge design process W a te r A g e n c y E la b o ra te s th e fiv e -y e a r w o rk in g p la n D e fin e s th e v a lu e s fo r w ith d ra w a l a n d e fflu e n t e m is s io n c h a rg e s R iv e r B a s in C o m m itte e A p p ro v e th e w o rk in g p la n a n d th e w a te r c h a rg e s W a te r A g e n c y C o lle c ts th e w a te r c h a rg e s R e v e n u e ra is e d is u s e d to fin a n c e w a te r s a v in g a n d p o llu tio n c o n tro l in v e s tm e n ts

Institutional and legal barriers • Institutional barriers – RBC composition – Insufficient knowledge available to WAs with respect to water environment, external costs and consumer behavior

• Legal barriers – Dubious juridical nature of water charge

Implementation Path • First period: 1967 – 1992 – Low water charge levels, to ease acceptability • Second period: mid-nineties – Higher water charge levels, to correct for discrepancies between environmental objectives and actual achievements of WA policy – Enforcement of the “polluter pays” principle • Third period: late nineties to the present – Account for socio-economic consequences of household price increases – Incorporation of a larger part of the agriculture sector in the water charge system

Environmental Outcomes • Significative reduction in industrial and domestic pollution levels • Failure to control for agriculture emissions and to modify use patterns, since a majority of farmers are not incorporated in the water charge system

Institutional and legal factors • Agricultural water pollution charges – Difficulties in the implementation, since subsidies granted by WA could come into conflict with European agricultural subsidy policies.

• Separation between WA and environmental agencies – Lack of information sharing between WA (responsible for water charges) and environmental agencies (in charge of regulation enforcement)

Public Debate & Political Acceptability • Weight of water charges are gaining in importance, and so are complaints by residential water users – Residential users are the main contributors to the WA budget, while being at the same time the less favored stakeholders in the system

Subsidies and charges 1992-1996 (in million French Francs) Ratio of subsidies and charges


Total Charges

Total Subsidies and Loans
















Subsidies and loans allocation (in million French Francs)

Project type

VI Working Plan (1992-1996)

% of total loans and subsidies

VII Working Plan (1997-2001)

% of total loans and subsidies

Pollution control





Resource availability





Subsidies and Loans Allocation • Problematic issues – Small agents are not targeted by WA, who prefers to direct subsidies toward large users or polluters –

Absence of project managers prevents WA’s intervention, making difficult the implementation of non-source pollution control measures

Major Drawbacks • Farmers – Virtually exempted from the water charge system (except for some animal breeding activities) – Not charged for nitrogen and pesticide pollution

• Residential users – Water charges do not give an accurate price signal – Effluent emissions charge is not based on real consumption but on expected total water consumption – Cost-recovery and political constraints – Cost recovery ceilings limit price incentives – Residential users are more reluctant to new water charge increases • Industrial users – Lack of transparency and equity in the effluent emission charge system

Recommendations • Role of WA – Co-owned company or a public organism committed to environmental objectives ?

• Design of the charge – Clear guidelines for the computation of the effluent emission charge – Need of a continuous evaluation process to analyze the effects of the charge system on uses and on the environment

• User information – Need for more transparency and information to promote efficient water use. Especially for residential users, since they do not gain directly from rebates, exemptions and subsidies – Strengthening of residential users’ participation on RBCs

• Creation of a national water committee – Goals – Coordinate efforts among regulatory instances (WA, regional directions for industry and environment) – Definition of environmental objectives at the national level, especially to implement European directives – Centralize data collection, process and analysis

• Towards a sustainable implementation path – Two-stage implementation path – First stage: Simplified water charges, to allow users to become familiar with the charge system • only a subset of major pollutants being considered for taxation • just most important users being charged – Second stage: widening of the charge system • Set of pollutants is widening up to cover other important substances, including non-point source pollution • Unit charges are gradually increased depending on final environmental objectives

water charge instruments for environmental management in latin america: from theoretical to pract...