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Economic Instruments for Water Management


Economic Instruments for Water Management

Experiences from Europe and Implications for Latin America and the Caribbean

This publication provides practical examples of experience with economic instruments in water management mainly in European and other OECD countries. It assists in identifying appropriate instruments for the Latin American and Caribbean context and demonstrates the constraints and impediments to their introduction.

The publication consists of studies initiated by the Inter-American Development Bank to support discussions among participants in the "Regional Policy Dialogue" of Latin American countries. The main part of the publication has been contributed by Ecologic Institute.

Here you can find further background information on the entire project.

The publication [pdf, 1.22 MB, English] is available for download.

A paper copy can be obtained from:

Secretariat of the Regional Policy Dialogue
Mail Stop W-0610
Inter-American Development Bank
1300 New York Avenue, N.W.
Washington, D.C. 20577
E-mail: dialogo@iadb.org
Tel:  +1-202-623-2271
Fax: +1-202-312-4034


Kraemer, R. Andreas; Zulma Guzmán Castro; Ronaldo Seroa da Motta and Clifford Russell 2003: Economic Instruments for Water Management: Experiences from Europe and Implications for Latin America and the Caribbean. Berlin: Ecologic.

Zulma Guzmán Castro
Ronaldo Seroa da Motta
Clifford Russell
Published In
Regional Policy Dialogue Study Series
83 pp.
Project ID
Table of Contents

1. Economic Instruments for Water Management: Extra-Regional Experiences and their Applicability in Latin America and the Caribbean

    1.1 Functions of Economic Instruments
    1.1.1 Incentive Function
    1.1.2 Fiscal and Financial Function
    1.1.3 Soft Functions

    1.2 A Taxonomy of Economic Instruments
    1.2.1 Water Abstraction Taxes
    1.2.2 Water Prices
    1.2.3 Sewerage and Effluent Charges
    1.2.4 Water Pollution Charge
    1.2.5 Subsidies
    1.2.6 Tradable Permits
    1.2.7 Liability for Damage to Waters
    1.2.8 Classification

    1.3 Global Experiences with Economic Instruments
    1.3.1 Water Abstraction Taxes
    1.3.2 Water Prices
    1.3.3 Prices and Charges in (Public) Sewage Collection and Treatment
    1.3.4 Comparison of Water Bills
    1.3.5 Prices and Charges in Industrial Effluent Disposal
    1.3.6 Subsidies in the Water Sector
    1.3.7 Tradable Permits in Water Resource Protection and Management
    1.3.8 Liability and Risk Allocation
    1.3.9 Financial Arrangements in Water User Associations
    1.3.10 Concluding Remarks on Economic Instruments in Water Management in the EU

    1.4 The European Water Framework Directive
    1.4.1 The WATECO Guidance Document
    1.4.2 The Economic Instruments in the WFD and their Rationale

    1.5 Relevance for Latin American and Caribbean Countries
    1.5.1 Challenges to the Implementation of Economic Instruments
    1.5.2 Existing Experience with Economic Instruments in the Region
    1.5.3 Relevant Factors for Successful Implementation of Economic Instruments
    1.5.4 Discussions on the Relevance of EU Experience for Latin American and Caribbean Countries
    1.5.5 Options for Inter-Regional Co-operation

    1.6 Conclusions and Recommendations
    1.6.1 Global Experience
    1.6.2 Regional Experience
    1.6.3 Lessons Learned

    1.7 Bibliography

2 Case Study: The Colombian Water Tax

    2.1 Normative, Institutional and Theoretical Factors
    2.1.1 Institutional and legal Framework for Economic Instruments in Columbia
    2.1.2 Background for Current Environmental Issues
    2.1.3 Design of the Environmental Tax: Legal Aspects
    2.1.4 Operational Aspects of the Environmental Tax

    2.2 Implementation of the Instruments
    2.2.1 Problems and Overall Issues
    2.2.2 Positive Aspects and Successful Cases

    2.3 Conclusions

    2.4 Bibliography

3 Synthesis of Regional Experiences: From Theoretical to Practical Issues

    3.1 Country Cases
    3.1.1 France
    3.1.2 Mexico
    3.1.3 Brazil

    3.2 Conclusions
    3.2.1 Policy Phase
    3.2.2 Design Phase
    3.2.3 Implementation Phase

    3.3 Recommendations

    3.4 Bibliography

4 Discussion Note on Economic Instruments for Water Management in Latin America and the Caribbean

Water, economic instruments, IDB, Inter-American Development Bank, capacity building, technical co-operation, financial co-operation, development, Regional Policy Dialogue, European experience, Latin America, Europe