Water charges are a widely used economic instrument implied mainly by federal governments to better control water use and water pollution by imposing a price on the use of the environment. The goal of such measures is to internalise negative externalities related to water use. Charge systems are one of the most frequently used economic tools to reduce the negative effects of over-consumption of water as a resource. (Waelti 2012)
Beside charges for wastewater treatment as part of water tariffs and charges levied on the extraction of raw water from rivers, lakes and aquifers (abstraction charges) pollution charges are an important instrument to achieve environmental sustainability.
A water pollution charge takes the form of a direct payment based on the measurements or estimates of the quantity and quality of a pollutant discharged to a natural body of water (not a sewer). Pollution charges are an important step towards the realization of the polluter-pays principle even if their calculation is not based on estimates of damage costs. Designing optimal pollution taxes that minimize the total cost of pollution (damage costs plus control costs) is a difficult task, as it requires the existence of a reasonable database and information on pollution damages. The exact calculation of taxes requires information about the exact quantity and quality of the discharged wastewater. (Kraemer et al. 2003)