An Exercise on the optimal use of groundwater resources

According to the EU water framework directive 2000/60, water tariffs should be based on the full cost recovery principle, including scarcity and external effects. To disregard these two aspects is not only conceptually misleading, as we try to show, but also leads to determine a wrong, distorted tariffs. Our tentative application to the italian case shows, for example, that water tariffs should be up to three times higher than the actual ones, revealing a significant distortion.