This report provides an analysis and evaluation of the economic aspects of water management practices and water demand management in Europe, in particular focusing on eight Member States, namely Germany – DE, Denmark – DK, Spain – ES, France – FR, Italy – IT, Romania – RO, Sweden – SE and Cyprus – CY. The study mainly concentrates on the domestic sector, although some insights on the agricultural sector are also provided. It addresses and analyses the price or non-price approaches and their relative performance towards managing water demand/use more efficiently, including the barriers and enabling factors for implementing price and non-price approaches. In addition the report analyses whether the incentive structures for water demand management are in place to encourage more efficient water use/water conservation – i.e. how they are implemented, how cost recovery is taking place and where the revenue goes. Managing water demand via price approaches refers to incentivizing efficient water use through a wide range of instruments such as tariffs, charges or fees, taxes or subsidies. This study presents an overview of these instruments and then focuses mainly on water tariffs. The reason for this is that water tariffs were identified as the most used instrument and is recognised in this context as the one that addresses domestic water demand in the most direct way. The report contributes to an update of the knowledge base on price elasticity of water demand to gain insights on how price evolution influences water consumption and evaluates the effectiveness of pricing instruments in managing water demand against technological developments or other nonprice measures.
