Political Drama Over Water Prices in Israel: An Update on the Drought Tax

Israel’s been dragging its feet over the proposed drought tax.

It’s been a pretty tumultuous month for water politics in Israel.  After more than five years of abnormally low rainfall, as well as decades of unsustainable water consumption (at least according to Prof. Hillel Shuval) Israel faces an increasingly dire water crisis.  Back in July, the Knesset (Parliament) enacted a tax on water, dubbed the “drought tax,” to help curb household water consumption.

Much of the Israeli public views the tax unfavorably, and over the past months protest has mounted. The Kadima party, headed by Member of Knesset (MK) Tzipi Livni, has been quite vocal about its opposition to the tax.  Livni believes the drought tax won’t solve the fundamental problem of water scarcity in Israel, “and the tax is unjust, because some people can afford to pay it and some can’t.  It imposes a burden on the citizen’s basic need to use water.  The public can’t live with it.”

Although the tax was approved by the Knesset Finance Committee and passed by the Knesset as part of the 2009-2010 budget, many MKs are unpleased.  Several even went so far as to call for a tax revolt against the drought tax.  Led by Ronit Tirosh (Kadima party), this group called on citizens to protest the tax, and even prepared a booklet advising the public on how not to pay the tax (i.e. canceling standing bank orders to local authorities so the tax won’t be collected automatically, or requesting water bills separated into different parts and then only paying the charges, not the tax).

In the middle of November, amidst this growing outcry, Prime Minister Benjamin Netanyhau ordered the drought tax to be frozen from January 1 until April 15, 2010.  This past week Knesset Finance Committee passed the freeze to the Knesset for a second and third reading (laws in Israel need three readings in the Knesset before they can be enacted).

Another piece of the complicated policy puzzle is that on the same day PM Netanyahu froze the drought tax, National Infrastructure Minister Uzi Landau announced that Israel’s Water Authority will increase water prices 25% across the board.  This price hike is part of a gradual process that will lead to a 40% increase in Israeli water prices by 2011.  Familar criticisms abound:  The National Insurance Institute stated that the new prices will place a great burden on middle class, working class, and poor families in Israel.

So this is where we are now.  Quick review:  drought tax frozen, at least temporarily, but water prices still set to jump in a bid to reduce water consumption in Israel.

And a little bit of commentary:  Where is the differentiation between different types of water use?  Agriculture, for instance, consumes 57% of Israel’s water resources, but contributes a meager 2.7% to Israel’s economy.  Many of the crops that are grown with this water are exported to other countries, meaning that Israel is actually exporting virtual water.

This pattern is extremely inefficient, both environmentally and economically speaking.  Even though agricultural water prices will increase, they are still heavily subsidized by the state.  Plus, the new water prices, in contrast to the drought tax, which had blocs for different levels of water usage, do not discern between luxury and necessary water consumption.

I’m all incentivizing conservation and demand management, economically and otherwise.  But these policy goals should be achieved in environmentally just manner that accurately reflect the reality of water consumption in Israel and do not dump a regressive tax on the state’s most disadvantaged citizens.

In any case, stay tuned because I’m sure there is much more water drama to come.

::  Ha’aretz, Ha’aretz, Ha’aretz, Arutz Sheva, YnetNews, YnetNews

Image Credit: Rudhach

More on Israel’s water issues:
The Agricultural Roots of Israel’s Water Crisis
A Green Prophet Finds Water Crisis in West Bank Too
Water Relationship Possibilities Between Israel and Gaza