This chapter describes the main options for designing water and sanitation (W&S) tariffs, including the basic ideas of dynamic marginal cost pricing in the W&S sector. The chapter discusses the different objectives of water tariff design and the reasons why water pricing is controversial. Cost estimates of providing W&S network services are presented in order to illustrate the challenges associated with the objective of cost recovery. Alternative W&S development paths are explored for moving from low levels of W&S service (or no service at all) to modern piped services, as well as the costs associated with various incremental changes. The chapter shows how a two part tariff can be used to achieve both economic efficiency and cost recovery objectives. It also discusses how subsidies can be best used in the W&S sector to reach poor households.

 

 

 

 

D. Whittington^a

 

 

 

 

^a University of North Carolina at Chapel Hill, Chapel Hill, NC, USA

 

 

 

 

Available online 6 January 2011. www.sciencedirect.com/science