Cross-Subsidies between Water Users in Spain: the Guadalquivir River Basin Case

The European Commission highlighted that in Spain: “there is a lack of adequate incentives for efficient use of the resource and the adequate contribution to the recovery from different users is not guaranteed” and recommended to “present transparently subsidies and cross-subsidies”. This paper develops a robust hydro-economic methodological approach that provides transparency in the water cost contribution calculations and helps to assess the economic efficiency of the water resources allocation strategy for a particular water system. The Upper Genil River (a sub-basin of the Guadalquivir River Basin in southern Spain) presents an interesting context of study given its intricate multi-source supply system to meet multi-sectorial water demands, along with conflicts (especially during critical drought events) over historical water rights and the priority of water use. The simulation results demonstrated that, despite the additional average annual cost paid by the household water user for having the theoretical priority of water use (€ 6863 per cubic hectometre of water consumed) compared to the agricultural water user, in practice, that extra cost does not translate into a significant increase in the guarantee of water supply. In fact, the priority of water use would only be patent in very extreme drought events (200-year return period) and when all alternative water supply sources are exhausted. Therefore, competent authorities should ensure that a greater emphasis is placed on transparent water cost recovery assessments to achieve sound water pricing policies and efficient water allocation strategies, which can help to successfully address the major challenge of water scarcity.