WATER RATES AND THE RESPONSIBILITIES OF DIRECT, INDIRECT AND END-USERS IN SPAIN

Irrigation is the main user of water in Spain, and the price paid for this resource has long been lower than its cost. The recent EU Water Framework Directive requires that all costs be recovered, but application has had perverse effects. In some cases, farms have become economically unviable, while in others, cultivation has intensified and water consumption has increased. This paper applies a slightly modified version of the computable general equilibrium model developed by the International Food Policy Research Institute (Lofgren et al., 2002), to a SAM (Social Accounting Matrix) of the province of Huesca in north-eastern Spain. The model disaggregates the agricultural sectors into irrigated and unirrigated farming, taking into account the improvements in irrigation efficiency. Within this framework, we analyse different payment scenarios affecting direct users, exporters and end-users in order to examine user responsibilities, the impact of international markets and macroeconomic effects on agriculture and industry in Spain.