Cost recovery in the water supply and sanitation sector: A case of competing policy objectives?

According to Article 9 of the European Water Framework Directive, water-pricing policies have to provide adequate incentives for users to use water resources efficiently by 2010. In this paper, we investigate some of the conflicts that may arise when introducing the polluter pays principle for the recovery of costs of water supply and sanitation services. We argue that conceptually, there are no a priori reasons to question the co-existence of the polluter pays principle with other principles of environmental policy, although the latter do influence its practical implementation. There also seem to be no major formal conflicts with the rules that govern services of economic interest. This, however, does not mean that it is easy to implement the polluter pays principle in the water sector. Rather, it is a consequence of the fact that the Water Framework Directive does not reflect a strong commitment to a very stringent implementation of the principle that the polluter should pay. This does not imply that the ideas that lie behind the polluter pays principle should therefore be abandoned, but the neoclassical motive of cost-efficiency might not be the main argument to recommend its use in the context of water supply and sanitation services.