Lecture 3 - Water Markets and Water Pricing
Lecturers:
Dr. Peter Robinson, Environmental Economist
Research Associate, Environmental Economics
Institute for Environmental Studies (IVM),
Faculty of Science, Vrije Universiteit Amsterdam
peter.robinson@vu.nl
Max Tesselaar, msc, Environmental Economist
Research Associate, Environmental Economics
Institute for Environmental Studies (IVM),
Faculty of Science, Vrije Universiteit Amsterdam
max.tesselaar@vu.nl
The lecture by Peter Robinson will look at the problem of freshwater scarcity and increasing global demand for water which implies a crucial role for public water management policy, including water pricing schemes and water markets. We will look at how water pricing has the potential to: increase water use efficiency (by raising the efficient allocation of existing water supply); increase financial sustainability through cost recovery; reduce water demand; and ensure that water is affordable for all users, e.g. through block pricing. It will also be discussed how there are different water pricing strategies for different water uses, such as the tariff structures for households vs. irrigation. Moreover, we will see how pricing can be combined with other measures, such as demand shifting policies related to efficient technologies and education, as well as nudges.
It will be shown how water markets and the trade in water rights allows for water to be redistributed from low to higher value uses (or uses with the greatest marginal benefits). The conditions that determine the adequate functioning of water markets will be elaborated upon, such as rights to water needing to be well-defined, easily tradeable at a very low transaction cost, well monitored, as well as there being a large number of potential buyers and sellers. Some examples in practice will also be described, e.g. the Californian and Australian water markets.
Afterwards, a theoretical economic analysis led by Max Tesselaar related to these topics will be practiced.
Recorded lectures:
Water Management 1: Water Pricing
Water Management 1: Water Market
Practical :
Practical 2 Market Failures & Water Pricing.docx
Practical 2 Market Failures & Water Pricing (Answers).docx