175
culatory capital costs (for using internal fi nancial resources for investment
purposes).
3. The “economic perspective” of water pricing includes not only private costs, as
is the case in the refi nancing and company perspective, but also so-called social
costs, which refers to additionally including environmental and resource costs.
The latter refers to societally assessed external effects where the calculation of
these social costs is a major (albeit largely unresolved) challenge.
12.2.2 Who Should Bear the Full Costs of Water Services?
Even if the task of defi ning the (full) costs has been tackled successfully, the second
question is how (according to which rules) costs should be distributed among water
users. In order to steer human behaviour, the costs of water have to be transmitted
directly to the water users following their use of the resource. The reason is that, in
the economic model, it should be the water user who decides upon strategies and
means to change his or her behaviour. Two arguments can be put forward for this,
based on fairness and allocation, respectively:
1. The water user is the person who benefi ts directly from using water resources.
Accordingly, following the polluter pays principle, this person should be the
addressee of pricing in order to bear the costs of resource use. It is generally
considered fair that the user of a resource should pay for that use.
2. Water users are normally those who know best how to change their water-related
behaviour, because they have the most comprehensive knowledge of ways to
avoid water use (Hansjürgens 2001 ): They can avoid water use by reducing consumption, they can use water more effectively, or they can reduce pollutants so
that water quality is safeguarded. Thus, the polluter pays principle is not only a
principle of fairness but also a principle of allocative effi ciency.
Having explained the two basic steps of defi ning water prices – defi ning the full
costs of water and distributing these costs among water users in a way that confronts
users with the true costs of the water resources they use – we now turn to the design
issues of water pricing. Our aim in highlighting these issues is to make two points
clear: (1) Water pricing is an “art” that involves resolving some very diffi cult methodological and design-specifi c “technical” problems. (2) Water pricing is a political
challenge that involves mitigating the infl uence of those who lose power in the
process of setting price incentives.
• Who pays the water price?
The water price should be paid by the entity (individual, private household, company, farmer, etc.) that uses the water resources. But who is the user of the
resources? Answering this question is more diffi cult than it seems at fi rst sight. Is
it the water company that draws water from groundwater tables? Or is it the
12 Theory, the Market and the State: Agricultural Reforms in Uzbekistan…
culatory capital costs (for using internal fi nancial resources for investment
purposes).
3. The “economic perspective” of water pricing includes not only private costs, as
is the case in the refi nancing and company perspective, but also so-called social
costs, which refers to additionally including environmental and resource costs.
The latter refers to societally assessed external effects where the calculation of
these social costs is a major (albeit largely unresolved) challenge.
12.2.2 Who Should Bear the Full Costs of Water Services?
Even if the task of defi ning the (full) costs has been tackled successfully, the second
question is how (according to which rules) costs should be distributed among water
users. In order to steer human behaviour, the costs of water have to be transmitted
directly to the water users following their use of the resource. The reason is that, in
the economic model, it should be the water user who decides upon strategies and
means to change his or her behaviour. Two arguments can be put forward for this,
based on fairness and allocation, respectively:
1. The water user is the person who benefi ts directly from using water resources.
Accordingly, following the polluter pays principle, this person should be the
addressee of pricing in order to bear the costs of resource use. It is generally
considered fair that the user of a resource should pay for that use.
2. Water users are normally those who know best how to change their water-related
behaviour, because they have the most comprehensive knowledge of ways to
avoid water use (Hansjürgens 2001 ): They can avoid water use by reducing consumption, they can use water more effectively, or they can reduce pollutants so
that water quality is safeguarded. Thus, the polluter pays principle is not only a
principle of fairness but also a principle of allocative effi ciency.
Having explained the two basic steps of defi ning water prices – defi ning the full
costs of water and distributing these costs among water users in a way that confronts
users with the true costs of the water resources they use – we now turn to the design
issues of water pricing. Our aim in highlighting these issues is to make two points
clear: (1) Water pricing is an “art” that involves resolving some very diffi cult methodological and design-specifi c “technical” problems. (2) Water pricing is a political
challenge that involves mitigating the infl uence of those who lose power in the
process of setting price incentives.
• Who pays the water price?
The water price should be paid by the entity (individual, private household, company, farmer, etc.) that uses the water resources. But who is the user of the
resources? Answering this question is more diffi cult than it seems at fi rst sight. Is
it the water company that draws water from groundwater tables? Or is it the
12 Theory, the Market and the State: Agricultural Reforms in Uzbekistan…