Abstract
Arid developing countries face growing challenges from water scarcity, which are exacerbated by deficient piped water supply infrastructures. Increasing block tariffs (IBTs), charging higher rates with increasing water consumption, can potentially reconcile cost recovery to finance these infrastructures with an equitable and affordable sharing of the cost burden. A firm understanding of the impacts of varying prices and socio-economic conditions on residential water demand is necessary for designing IBTs that promote these objectives. Consistently estimating water demand under an IBT requires a discrete/continuous choice (DCC) model. Despite this, few econometric studies of arid developing countries have applied this state-of-the-art approach. This paper applies a DCC model to estimate residential water demand under IBTs in the severely water-stressed country of Jordan, using 15,811 country-wide household-level observations from five years up to 2013. We extend Hewitt and Hanemann’s original DCC formulation in order to accommodate IBTs featuring a linearly progressive tariff block. We then use the resulting demand function to assess Jordan’s 2013 IBTs and alternative IBT designs. Under the estimated price elasticities, very few IBT designs achieve a full recovery of the financial costs of water provision, but we still identify a potential to improve cost recovery and affordability.
Highlights
Mitigating water scarcity and implementing a human right to water is one of the key challenges of the 21st century as part of the United Nations Development Program’s (UNDP) SustainableDevelopment Goal (SDG) 6 (“access to water and sanitation for all”) and as it is already one of the global risks with the highest potential impacts [1,2,3]
In order to develop and maintain an improved water supply infrastructure in developing countries, it is important to adopt a water pricing policy that reconciles the objective of financial sustainability with the goals of affordability and an equitable sharing of the cost burden [7]. (Note that we use the term developing countries under the definition applied by the UNDP to define countries which should receive support in pursuing the SustainableDevelopment Goal (SDG) [8].) A common approach to pursuing an equitable and affordable financing of the water supply infrastructure in developing countries is the use of increasing block tariffs (IBTs) [9]
While especially tanker trucks serve an important role in balancing shortages in the piped water supply network [54], this high percentage of households mainly using piped water implies that the results found here likely capture residential piped water demand quite well and overall residential water demand
Summary
Mitigating water scarcity and implementing a human right to water is one of the key challenges of the 21st century as part of the United Nations Development Program’s (UNDP) SustainableDevelopment Goal (SDG) 6 (“access to water and sanitation for all”) and as it is already one of the global risks with the highest potential impacts [1,2,3]. A key approach to mitigating water scarcity risks in developing countries is to invest in improving the often deficient water supply infrastructure [5]. In order to develop and maintain an improved water supply infrastructure in developing countries, it is important to adopt a water pricing policy that reconciles the objective of financial sustainability with the goals of affordability and an equitable sharing of the cost burden [7]. (Note that we use the term developing countries under the definition applied by the UNDP to define countries which should receive support in pursuing the SDGs [8].) A common approach to pursuing an equitable and affordable financing of the water supply infrastructure in developing countries is the use of increasing block tariffs (IBTs) [9].
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