10. Water Pricing in Israel: Various Waters, Various Neighbors

Israel manages its water scarcity by a relatively unique combination of quantitative and pricing tools. As a semiarid climate country, efficient water pricing might prove to have much more potential welfare implications. The chapter contains a summary of the theoretical background of the different water pricing policies and reforms that have been recently implemented. The summary will then be accompanied by an effort to explain the rationale of the reforms. The chapter covers water pricing schemes in the various sectors and links them into one consistent policy vision. Currently, water pricing in Israel is more closely connected to the true scarcity value of this natural resource. Yet the goals and targets faced by water planners in Israel do not allow water prices to be the only allocation mechanism, and as such, a mixture of quantities and prices will be explored. The challenges faced now by the water regulators are new and contain pricing of different water sources (treated wastewater, desalinated water, etc.) for a variety of uses, including those that are characterized as nonmarket in nature (e.g., in-stream value) and those that should be based on basin cooperation among different countries (e.g., the Palestinian Authority, Jordan, and, potentially, Syria and Lebanon in the future).