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Keywords:

  • Water pricing;
  • Resource rent taxation;
  • Stabilisation value;
  • Portfolio model

In the future, the marginal cost curve for urban water will be an increasing function. This fact favours a single volumetric water price to meet both equity and revenue adequacy criteria, and in some cities an explicit resource rent tax should be imposed. Although desalination and recycled water are likely to be more expensive than rain-fed water, their comparative stability and security of supply gives them a stabilisation value, and in a portfolio model framework there is a good case for their inclusion as a component of the urban water supply.