Unclassified ENV/EPOC/EAP(2012)11 Organisation de Coopération et de Développement Économiques Organisation for Economic Co-operation and Development 20-Sep-2012 ___________________________________________________________________________________________ English - Or. English ENVIRONMENT DIRECTORATE ENVIRONMENT POLICY COMMITTEE Unclassified ENV/EPOC/EAP(2012)11 TASK FORCE FOR THE IMPLEMENTATION OF THE ENVIRONMENTAL ACTION PROGRAMME FOR CENTRAL AND EASTERN EUROPE, CAUCASUS AND CENTRAL ASIA ECONOMIC INSTRUMENTS FOR WATER MANAGEMENT IN THE DEBED RIVER BASIN Issues and Options Annual EAP Task Force meeting, 24-25 September 2012, Oslo, Norway Agenda item: 5 ACTION REQUIRED: For information Please contact Ms. Tatiana Efimova, Environmental Performance Information Division, Environment Directorateby e-mail [email protected] or phone +33 1 45 24 14 34 for any additional information. English - Or. English JT03326587 Complete document available on OLIS in its original format This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. ENV/EPOC/EAP(2012)11 2 ENV/EPOC/EAP(2012)11 TABLE OF CONTENTS INTRODUCTION .......................................................................................................................................... 5 CHAPTER 1 - HOW ARE ECONOMIC INSTRUMENTS CONSIDERED IN THE WFD? ...................... 6 CHAPTER 2 – THE METHODOLOGY APPLIED ...................................................................................... 8 CHAPTER 3 - BASIC INFORMATION ON WATER MANAGEMENT AND WATER SERVICES IN THE DEBED RIVER BASIN ...................................................................................................................... 12 1. Water services to households ................................................................................................................ 12 2. Water services to agriculture ................................................................................................................. 13 3. Other uses in the Debed river basin ....................................................................................................... 15 4. Water management costs in the Debed river basin ............................................................................... 16 CHAPTER 4 – CURRENT ECONOMIC INSTRUMENTS IN THE DEBED RIVER BASIN: AN OVERVIEW ................................................................................................................................................. 17 1. Water tariffs for households .................................................................................................................. 17 2. Water tariffs for irrigation ..................................................................................................................... 21 3. The water resource fees ......................................................................................................................... 23 CHAPTER 5 – WHAT IS THE PERFORMANCE OF EXISTING ECONOMIC INSTRUMENTS FOR WATER MANAGEMENT? PRELIMINARY ANSWERS TO SELECTED POLICY QUESTIONS ....... 27 CHAPTER 6 – WHICH POTENTIAL (NEW) ECONOMIC INSTRUMENTS FOR WATER MANAGEMENT IN THE DEBED RIVER BASIN? .................................................................................. 30 IN CONCLUSION........................................................................................................................................ 53 ANNEX – LIST OF EXPERTS AND STAKEHOLDERS CONTACTED/INTERVIEWED .................... 55 Tables Table 1. Data and information sources mobilized for the study ........................................................... 8 Table 2. Average water supply duration for LWSC and AWSC between 2007 and 2010 (in hours per day) .............................................................................................................................................. 13 Table 3. Supply of raw water in the Debed river basin: main characteristics ..................................... 15 Table 4. Water tariffs for LWSC and AWSC ..................................................................................... 17 Table 5. Drinking water supply, received payments and water losses for LWSC and AWSC (2005- 2010) .............................................................................................................................................. 18 Table 6. Trends in water tariffs for AWSC and LWSC from 2004 to 2010 ....................................... 18 Table 7. Potable water supply, discharge, and wastewater treatment retail tariffs in the main water supply companies in Armenia ................................................................................................................... 19 Table 8. Annual allocations (in thousand AMD) from the Government of Armenia to MWSC and AWSC .............................................................................................................................................. 21 Table 9. Annual revenues and payments received for the different irrigation water supply companies of Armenia .............................................................................................................................................. 22 Table 10. Water Abstraction Fees in AMD per m3 .............................................................................. 23 Table 11. Pollution Fees (in AMD per ton of Pollution) ...................................................................... 23 3 ENV/EPOC/EAP(2012)11 Table 12. Share of total abstraction and water resource fees paid according to sectors ....................... 25 Table 13. The (new and adapted) economic instruments for water management selected for ex-ante qualitative assessment as part of the OECD study .................................................................................... 30 Figures Figure 1. The different elements covered in the ex-ante assessment franework .................................. 10 Figure 2. The common assessment template ........................................................................................ 11 Figure 3. Breakdown of Water Resource Fees in Debed River Basin in 2010 .................................... 24 Figure 4. Share of different water uses in overall water resources fees paid in 2010 .......................... 25 4 ENV/EPOC/EAP(2012)11 INTRODUCTION1 As part of the EU Water Initiative National Policy Dialogue on IWRM in Armenia OECD is providing a support to the Government of Armenia to strengthen the economic and financial dimension of water resources management in the Debed river-basin. Within the support process, it is proposed to review if and how economic instruments are being used in the Debed river basin and in draft river basin management plan that has been developed for this basin within the EU Kura River Phase II project. The review of the draft Debed river basin management plan has stressed the limited attention given to economic instruments in that report. Thus, additional data and information was collected for presenting the current status in terms of the application of economic instruments for water management in the Debed river basin. Based on the analyses made, new instruments or adaptation of existing instruments were proposed and further assessed. The present report is the final report of this study. It is structured as follows: • Chapter 1 provides an overview on how economic instruments are considered in the WFD, stressing more recent developments that are taking place in Europe with regards to economic instruments for water management. This chapter is a background chapter that make explicit the requirements of the WFD in terms of water pricing ; • Chapter 2 presents the methodology and data sources that have been mobilized for the description and assessment current and new economic instruments for water management in the Debed river basin. It is important to stress that “new” economic instruments include adaptation in existing economic instruments (e.g. an adaptation in the structure and rate of the existing water abstraction tax) as well as new instruments that have are not applied so far in Armenia (e.g. payments for ecosystem services) ; • Chapter 3 presents some basic information on the management of water and water services in the Debed river basin that will help putting information on economic instruments in their water management context; • Chapter 4 presents the main characteristics of the economic instruments in the Debed river basin; • Chapter 5 provides preliminary answers to key policy questions linked to the application of economic instruments. These include: do water tariffs cover costs? Do economic instruments currently provide an incentive for more efficient water management? Is affordability of water services a key issue for inhabitants and economic sectors of the Debed river basin? • Chapter 6 presents new economic instruments that have been proposed along with the results of the qualitative assessment for each economic instrument, a common summary template being presented for individual instruments to facilitate their comparison and the identification of their potential strengths and weaknesses; • The report presents preliminary conclusions on further development of economic instruments for water management in Armenia, identifying possible issues that would require additional work for supporting