DEA application to evaluate the technical and ecological efficiency of water pricing policies

Abstract

With the enforcement of the Water Framework Directive 2000/60/EC (WFD), policy makers are required to pursue the improvement of the use efficiency of the water resources in the agricultural sector. For this purpose, we suggest a methodology to perform an ex-ante analysis of the efficiency of water pricing policies, based on a two stage DEA technique, by which it is possible to disaggregate the technical and the ecological efficiency of the policy. According to our results, we found that, coherently with the WFD principles, the direct pricing methods show the highest levels of efficiency. However, we have also found that some indirect pricing methods show relatively high levels of efficiency. Therefore, since the high cost for the management and implementation of water measurement devices required to apply the volumetric methods, indirect pricing methods might still be preferable.