EU flags water tariff loophole for Malta’s businesses

The European Commission has flagged a gap in Malta’s water tariff system, noting that the highest volumetric tariff does not apply to non-residential users and warning that this weakens the incentive for commercial consumers to reduce their water use.

In its latest country-specific assessment of Malta’s third River Basin Management Plan, published on 2 October, the Commission says Malta’s drinking water tariffs include progressively higher rates as consumption increases, but that the highest volume bracket is exempt for non-residential users.

“Specifically, the available information indicates that water tariffs include a volumetric component that increases across consecutive volume brackets,” the Commission says. “However, the highest volume bracket is exempt for non-residential water users, which renders the overall incentive performance incomplete.”

The Commission says this means Malta’s pricing system does not provide sufficient incentives for all users to conserve water.
The finding forms part of a broader criticism of Malta’s approach to recovering the costs of water services and applying the polluter-pays principle.

Financial cost recovery for public drinking water supply is reported at 88%, but the Commission says no breakdown is provided by user sector or service component. The River Basin Management Plan also provides no information on cost recovery for wastewater treatment services.

The Commission also notes that “no environmental charges are in place”, including charges for water abstraction reflecting resource costs or water pollution charges.

It says the lack of information on environmental and resource costs has hindered the effective application of the polluter-pays principle.

There are also no volumetric pricing schemes for agricultural groundwater self-abstraction, according to the assessment. The Commission urges Malta to fully apply Water Framework Directive Article 9 cost-recovery rules. Specifically, Malta must ensure transparent water pricing that incentivises conservation, justify less-than-full cost recovery, break down recovery by user sector, estimate environmental costs, enforce the polluter-pays principle, and strengthen volume controls on groundwater abstraction

The Commission’s concerns come as Malta’s groundwater resources show signs of serious deterioration.

Four of Malta’s 15 groundwater bodies are now classified as being in poor quantitative status, compared with two in the previous assessment. The proportion classified as having good quantitative status has fallen from 86.7% to 73.3%.

More strikingly, 95.9% of the groundwater area covered by Malta’s quantitative monitoring is classified as being in poor quantitative status.
The Commission says this “indicates a systemic problem of overabstraction.”

The figure applies to seven groundwater bodies covering 85.5% of Malta’s total groundwater area. The remaining eight groundwater bodies are not subject to quantitative monitoring.

The chemical condition of the groundwater is also poor. All 15 groundwater bodies fail to achieve good chemical status in the latest assessment, with nitrates affecting 80% of groundwater bodies, chloride 73.3% and sodium 53.3%.

Malta is described as one of the EU’s most water-stressed countries. Its seasonal Water Exploitation Index reached 66.7% in the third quarter of 2023, the second-highest level in the EU after Cyprus.

The country has increasingly relied on desalination to meet demand. Desalinated seawater currently supplies 35% of total water demand, while treated wastewater accounts for only 2%.

The Commission says measures to increase water supply appear to rank higher than measures aimed at reducing demand, noting that this runs counter to the “water-efficiency-first principle”.

The issue of charging for groundwater extraction is not new. In 2023, the Maltese government proposed introducing licences and tariffs for groundwater extraction, with farmers receiving a free quota before charges would apply to additional extraction.

The new Commission assessment does not explicitly require Malta to adopt that particular system. However, it calls for the full application of the Water Framework Directive’s cost-recovery requirements and for pricing policies that provide adequate incentives for water conservation across different user sectors.

The Commission’s assessment therefore identifies two separate weaknesses in Malta’s pricing system: large commercial consumers are exempt from the highest drinking-water tariff bracket, while groundwater extraction for agriculture remains unpriced.

The findings come as Malta prepares its fourth River Basin Management Plan, with the Energy and Water Agency and Environment and Resources Authority having launched a six-month consultation on the significant water-management issues facing the country.

The full European Commission assessment, SWD(2026) 702, is available here.