Pricing Water

Abstract

In Spain, as in many other countries, water is a scarce resource whose allocation is not always efficient. The State is vested with powers to price its uses, which it does mostly inadequately. Agriculture uses account for two thirds of the consumption of this valuable good; whereas, households and industry only consume 18 and 13 % respectively. This paper proposes the introduction of a market of rights over water controlled by a public body, since transaction costs are so high that the result achieved by the free negotiation of the parties would not be efficient.

Keywords: Water Bank, Tariffs, Hydrologic Planning, Water Law