Water Price Effects on Consumption and Territorial Imbalances in Spain in the Context of the Water Framework Directive

Abstract

This research examines the water tariff applied to Spanish households with the aim of determining the adequacy of the river-basin approach established by the water framework directive (WFD). The analysis pays particular attention to Spain’s interregional differences in water prices, as well as determining the most influential factors in household water consumption. The results achieved through minimum ordinary squares and 2-stage least squares show the great influence of relevant factors such as the composition of the household, as the most populated households are penalized by the structure of the rate. In addition, there is evidence of inefficiency of the approach derived from the existence of regional differences, since the prices are higher in those regions where resources are reduced, a fact related to the higher cost of service. Thus, taking into account the excessive attention to the cost of the service, the results obtained allow to propose a change in the rate with the aim of balancing prices between regions taking into account factors such as the structure of the household or income.