Water Losses and Environmental Efficiency in Urban Water Supply Systems: A Comparative Assessment for Spain and Portugal

Water losses are a critical environmental and operational challenge, especially in regions exposed to increasing water stress. This study assesses the environmental productivity of municipal water supply services in Spain and Portugal during the period 2014–2022, explicitly treating losses as an undesirable output. Using the Metafrontier Malmquist–Luenberger index, dynamic changes in productivity are analyzed and broken down into changes in efficiency, best practice gap, and technological change, allowing for a consistent comparison between countries and management models. The results show that environmental productivity remained broadly stable in both countries, although with significant differences in its evolution over time. Public management in Portugal presented a more dynamic profile, with more periods of productivity improvement, while Spain showed a more moderate but technologically constant trajectory, albeit with declines in recent years. In the private sector, Portugal obtained the most favorable results, with more continuous technological progress and a greater contribution to the expansion of the efficient frontier. Spain also made progress, albeit in a more irregular manner. These findings underscore the importance of incorporating unwanted outputs into the performance evaluation of water services and highlight how institutional and organizational frameworks condition operators' ability to reduce losses. The study provides useful evidence to guide policies aimed at improving environmental efficiency and strengthening resilience to increasing water scarcity in southern Europe.