THE ECONOMIC ANALYSIS IN THE WATER FRAMEWORK DIRECTIVE: THE SPANISH CASE IN THE EUROPEAN CONTEXT

This paper describes the current state of implementation of the economic analysis prescribed by the Water Framework Directive (WFD) in Spain. It also outlines what should be the policy and research priorities for economic analysis in the coming years. The economic characterization of water services, and the theoretical and practical debate about the cost recovery principle and the role of water pricing as an efficient instrument for water demand management constitute significant progress. However, challenges do remain regarding the calculations for cost recovery and water pricing, such as the inclusion of environmental and resource costs. Other elements of the economic analysis also require further improvement. Cost-effectiveness analysis needs to be more fully applied to the Programs of Measures, and cost-benefit analysis will have to play a key role in the assessment about derogations from the required environmental objectives for certain water bodies. Two further remaining challenges are the incorporation of uncertainty in for instance cost calculations and the modeling of future water supply and demand, and the estimation of the cost of adaptation to climate change