To elicit willingness to pay for a continuous water service in urban Mexico, and find out whether Mexican consumers would cover the costs of such a service.
A contingent valuation based on surveys was conducted on 75 individuals, users of the water utility in Pachuca, a medium-sized city in Mexico.
Results and Policy Implications
Results confirmed that users are prepared to pay the costs of operation and maintenance of a continuous water supply, particularly considering that such a system would not mean a much higher operating cost (but would capex investments). Such a conclusion supports the policy of charging fees that cover the costs of operation and avoid the use of subsidies in a country in which most of the population pays subsidized water tariffs.
Mexico has, on average, enough natural occurring water to cover the demand of its population (123 million as of 2017), nonetheless, due to irregular distribution both geographical and seasonally, water availability throughout the country is very limited.
Despite official institutions state access to “improved” drinking water has reached 95% of the population in Mexico, and piped water access up to 91%, they do not tell the entire story; most of the population in Mexico, despite having piped access to water, do not receive a good quality service, both in water quality and quantity.
Most cities suffer of deficient water services, particularly when it comes to continuity of service; as of 2010, only 73% of the population received the service on a daily basis (but not necessarily 24 hours a day), 15% received the service every second day, and 12% of the population had water delivered to their households only twice a week or even less frequently. Intermittent water provision has been proved to cause physical damage to the water distribution network, causing leakages and reducing the lifetime of the infrastructure, in Mexico, this leads to a loss of up to 40% of the water produced. Moreover, it is also well known that the damage inflicted to the water mains by providing water intermittently causes recontamination of water; the abrupt decrease in pressure in the pipes during intermittent operation leads to the intrusion of pollutants surrounding the pipes. Most utilities use the lack of hydric and economic resources to justify this situation, but some studies have showed that offering a better service does not necessarily require more water, and that users are willing to pay enough to cover the costs, if they receive an improved service.
Previous studies have shown that when a better level of water service is offered, people are willing to pay for the operation costs, and when amortized by the water authority, even the capital costs can be covered by the users. Additionally, these studies show that when switching to continuous supply, users have used less water, and they are more willing to pay the bills on time, thus shattering the myths claiming that a continuous water supply requires more money and water to operate.
Is the population of urban Mexico willing to pay enough to cover the costs of providing an improved, continuous water service?
Does their current level of service, household income or other factors influence their response?
Brazilian water management model is decentralized with full participation of many actors (Law 9433/1997). The main management tool is a charging system for water use. The first experience in charging for water use took place in the State of São Paulo: The Paraíba do Sul River Basin (2003) and the Piracicaba, Capivari and Jundiaí River Basins (RB-PCJ) in 2006. In addition to these, there are four basins with charging for water use: Sorocaba and Mid-Tiete, Region of littoral, Low Tiete and Upper Tiete.
Sao Paulo state has a critical availability of water resources. The metropolitan region of Sao Paulo has more than 20 million inhabitants. This population is distributed in a 8051 km² area, about 0.1% of the national territory. However, this population is concentrated in an area of 2209 km². This means that 10% of the Brazilian people are concentrated in a smaller area to 0.1% of the territory.
This paper aims to discuss the relation between the charging for water use and water security in river basins, and analyze how the funds have been used. Therefore, the study area was São Paulo state in Brazil.
The methodology is divided into two parts. First, a literature review on the issue of water security will be held, seeking to outline the impacts on water availability in the state. Second, a qualitative and quantitative analysis of water management indicators will be developed, based on the São Paulo State Water Resources Public Policy. There are 45 indicators, divided into three groups: socio-economic and cultural scenario (group 1), the general situation of water resources in São Paulo (group 2), and implementation of the Basin Plan (group 3). These include variables such as the rational use of water resources; investments programs aimed at protecting the quality and quantity of water resources; conservation and protection of water resources include the recovery of water resources, payment for environmental services and restoration of riparian forests.
Results and discussion
Our initial results show that in the first years of charging in the Piracicaba, Capivari and Jundiaí basins, the sanitation sector accounted for the largest portion of the payment (84%), industry, 13%, and agriculture, 3%. There were 165 works and projects executed in the RB-PCJ, of which 68% was allocated to basic infrastructure; 28% combat losses; 4% for environmental education, prevention and protection against extreme events, etc.
The results show that the vulnerability of water resources in São Paulo state was related to the degradation of areas occupied by native forest. Apart from that, coexisting problems of susceptibility to flooding, groundwater drawdown risk, improper disposal of solid waste, demand for higher water availability or near the critical level, among others, also contributed the vulnerability of the resources.
The funds from the charge for water use need to be seen as a possibility to minimize the impacts of extreme events, shortages or excess water, from climate change. Measure the effectiveness of the charging through these indicators can help to focus investments and public policies in river basins.
The literature on water demand estimations shows that the functional form for the water demand equation can affect the price elasticity estimates. This paper evaluates the impact of different functional forms in the estimation of price and income elasticities within the discrete-continuous choice (DCC) models commonly used for increasing block price (IBP) schemes. This issue, functional forms in the DCC model of demand, has not been analyzed before in the water demand literature.
The estimation of the residential water demand is of course a recurring subject in the literature. From Headley (1963) and Howe and Linaweaver (1967) to date, there has been an increasing number of studies aimed at determining water demand, analyzing the factors influencing consumption or analyzing the impact of economic variables on the water demand. These efforts had led to extensive literature reviews (Arbués, García-Valiñas, and Martinez-Espiñeira (2003) and Ferrara (2008)), and to the development of meta-analyses intended to summarized the methodological characteristics of the studies and their implications (M. Espey, Espey, and Shaw (1997), and subsequently, Dalhuisen et al. (2003)).
Despite the fact that Arbués, García-Valiñas, and Martinez-Espiñeira (2003) show that the literature presents differences regarding the functional form used for the water demand equation, to the best of our knowledge, this literature has not analyzed this fact in the DCC model. Furthermore, In the continues demand models some functional forms prevailed, but a full discussion of the reasons to choose one functional form over the others is scarce in the literature. Some studies attempt to mitigate the uncertainty about functional forms by using more several specification and comparing their implications in terms of prediction and elasticities.
In fact, Dalhuisen et al. (2003) show that the functional form can affect the price elasticity results of the water demand. Therefore, water demand studies should consider the possible variability in their results when using a specific functional form. Whereas using more than one function to estimate the water demand does not solve the problem, it does allow expanding the number of possible results and obtaining the prediction and consumption elasticities for each one of the proposed functions.
The challenge when estimating water demand under increasing block pricing schemes is both the construction of the likelihood function and the estimation of the highly complicated elasticities. First, if consumers face an increasing block price system, there can be simultaneity in the choice of price and consumption. Hewitt and Hanemann (1995) and Olmstead, Hanemann, and Stavins (2007) solve this issue by using the DCC to estimate the water demand, assuming a logarithmic demand equation and since them the literature on DCC has continuo using that functional form.
Our paper fills this gap in literature. We estimate water residential demand under the DDC model using four functional forms (linear, logarithmic, semi logarithmic and Stone Gary) and analyze the differences between the expected consumption and price elasticity of the demand. Our results show the existence of significant differences between the expected water consumption and price elasticity when using different functional forms.
The implementation of water tariffs faces different challenges that are frecquently adressed from economic and regulation lenses. However, an important feature to assess a tariff suitability is the compliance with its meanings, implications and benefits. Therefore, understanding the adaptations of tariffs on a community - level organization is an underpinning query in the improvement of collecting and allocating benefits. Following this assertion, this presentation discusses the sociocultural implications of a tariff creation process in an interethnic community in the Peruvian Amazon. Using ethnographic data from a six - month fieldwork, the presentation organizes evidence tracking four decades of community history in order to identify how it frames new water governance procedures promoted by the State and the international cooperation. Working on the institutional bricolage concept, the argument sets that water tariffs are subject to malleable adaptations vis a vis transformations with community organizations. This process, however, holds limitations that depend on the community's envision of water value and social norms of coexistence.
This results have informed the current creation process of the Alto Mayo River Council, the first experience to incorporate the IWM focus to river basin organizations in the Amazon. Thus, it has highlighted the challenges of disassociating specific regulations, norms and procedures from the development framework that make sense of them, and the perils when they collide with different cultural frameworks without an intercultural understanding. This has led to include the awajun and wampi indigenous groups as part of the Council and to discuss better information and dialogue processes for further interventions. Thanks to these efforts, the autor was awarded with the Water Culture National Prize, third place, granted by the Peruvian National Water Authority.