Subsidies for water charges and water permits considering economic criteria and internalization of water pollution costs
Abstract
In Brazil, Law No. 9433/97 directs the regulation of multiple water uses, with management instruments as its main tools. However, the effectiveness of management relies on the performance of these instruments, for which more concrete objectives are still needed, particularly regarding water charges. This study contributes to this gap by proposing criteria and guidelines that support the formulation of charging models integrated with classification goals and permit criteria, based on the economic value of water, different uses, and scarcity variations across the basin. A hydroeconomic model was developed to assess permit distribution and its economic and water quality effects. The model represents externalities from water allocation, identifies areas with scarcity, potential for new permits, and the need for quality improvements. This combination allowed spatial differentiation of water's economic values in the basin, guiding a charging model capable of achieving specific objectives of pollution cost internalization and value differentiation based on scarcity differences in the basin. The model was applied in the Rio dos Sinos watershed, in the state of Rio Grande do Sul.
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