The polluter pays principle: The need for an institutional perspective on cost recovery in the water sector.

According to Article 9 of the Directive, the costs of water services, including environmental and resource costs, will have to be recovered taking account of the polluter pays principle. Environmental damages, and thus also the monetary value that is attributed to them, depend on both temporal and spatial factors. Quantitative and qualitative aspects affect the category of financial costs. The distinction between financial, environmental and resource costs is an artificially constructed one, depending on the stringency of environmental standards reflecting local preferences and ideology and the degree of compliance, reflecting the overall policy setting, institutional efficiency and broader patterns of governance. The introduction of cost recovery for environmental and resource costs adds yet another requirement to pricing systems for water supply and sanitation services and requires a reconsideration of the definition of public service obligations. This article illustrates that the implementation of cost recovery in the water sector is guided by formal rules that are not necessarily rooted in environmental policy