A proposal for the analysis of price escalation within water tariffs: The impact of the Water Framework Directive in Spain

Abstract

During the last few decades, numerous international organizations have emphasized the role of pricing policy as a tool to achieve objectives of efficiency, environmental sustainability, and cost-recovery in the management of water resources. Incorporating a certain level of price escalation within water tariffs by adopting increasing block rates is commonly advocated as a key element for controlling water demand and fulfilling these objectives. However, despite its widespread use, there exists no established procedure to measure the levels of price escalation embodied in water tariffs. We propose a measure of price escalation within water tariffs at the level of the water supply management unit (the municipality, in our study). In order to illustrate the usefulness of our measure, we analyse the evolution of price escalation in residential water tariffs between 2000 and 2014 in a sample of 952 Spanish municipalities and examine the factors influencing this evolution.