INTERCONNEXIONS BETWEEN INTERCONNEXIONS BETWEEN ECONOMICS AND WFDECONOMICS AND WFD

What room and what role for economics?

INTERCONNEXIONS BETWEEN ECONOMICS AND WFD

Where are economics in WFD process?

What input is expected from the use of economics?

What are the implications in terms of decision-making?

2/18

INTERCONNEXIONS BETWEEN ECONOMICS AND WFD

What input is expected from the use of economics?

What are the implications in terms of decision-making?

Where are economics in WFD process?

3/19

WFD BEARS THE STAMP OF ECONOMICS

debates on the economic impact of previous directives

discussions on cost recovery & tarification

From the origins...

stress on the economic dimension in the preamble

major role for economics in the design of water policies to reach WFD's key goal

prior economic justification of derogations

… to the adoption...

… and to the implementation

intensive use of economics to define measures

tarification as an incentive for an efficient use of water resources

economic and fiscal measures may contribute to the achievement of the goalWhere are

eco?

4/19

ECONOMICS IN WFD PROCESS

12/2003

Art.3

Transposition

12/2015

Art.4

Good status

Art.4

Designation of HMWB

DeadlineGoal

Art.4

Derogations

3/2005

Art.15Reporting

12/2004

Art.6

Register of protected

areasArt.5

Characterisation of the district

Identification of potential gaps

Economic analysis

Description of the district

Baseline scenario

Recovery of costs

Art.15Reporting

3/2010

Art.9

Water pricing policy

Adequate contribution to

recovery of costs

12/2010

12/2012

Art.8

Combined

approach

Art.15Interim

report

12/2012

12/2006

Art.8Monitoring programm

e

Art.14

RBMP working progr.

12/2006

3/2007

Art.15Reporting

Art.14 RBMP

interim

review

12/2007

12/2009

Art.11Programme

of measures

Art.13

RBMP

12/2009Art.1

4RBMPdraft

copies

3/2008

New measures according to

results of monitoring

12/2006

EE

E

E

E

E

E

EDeliverables

Main tasks

"Sub-tasks"

Actions /Measures

EEconomic input

Where are eco?

5/19

THOUGH IMPORTANT,ECONOMICS ARE ONLY ONE INPUT

… in the implementation

Basic measures

- implementation of directives

- controls- licences...

Supplementary measures

- legislation- fiscal instruments- negotiated agreements- codes of good practice- education...

… in the decision-making process

WFD

forward-look'g

monito

ring

participation

hydrology

Where are eco?

6/19

INTERCONNEXIONS BETWEEN ECONOMICS AND WFD

Where are economics in WFD process?

What are the implications in terms of decision-making?

What input is expected from the use of economics?

7/19

What to do?Economic analysis of water uses and services

What economic input? calculations of recovery of costs of water services

taking into account long-term forecasts of supply and demand

estimates of volume, prices and costs associated with water services

estimates of relevant investments judgements on most cost-effective combination of measures

based on estimates of potential cost of such measures

When? December 2004 Update December 2013 and every 6 years

CHARACTERISATIONOF THE DISTRICT

Art. 5 Annex II; III

E

Economic input

8/19

All WFD process is based on the initial characterisation:potential to reach the goal, trends, judgements on cost-effectiveness of measures, etc.

pay special attention to the quality of works, data, etc. take into account the requirements for later stagesBalance adequately two constraints:• information shall be sufficiently detailed to allow

proper implementation of WFD• costs associated with collection of the relevant

data should not be excessive

CHARACTERISATIONOF THE DISTRICT

Art. 5 Annex II; III

Economic input

9/19

What to do?Register all areas designated as requiring special protection under specific Community legislation

bathing waters (Dir. 76/160/EEC - 8/12/1975) nutrient-sensitive areas: sensitive zones (Dir. 991/271/EEC -

21/05/1991); vulnerable zones (Dir. 1991/676/EEC -12/12/1991) Natura 2000 (Dir. 92/43/EEC - 22/07/1992)…

What economic input?Include the areas designated for the protection of economically significant aquatic species

When? December 2004 Kept under review and up to date

REGISTER OF PROTECTED AREAS

E

Art. 6Annex IV

Economic input

10/19

What to do?Identify water bodies unlikely to reach the goal by 2015 and check whether 3 conditions are simultaneously filled:

physical alterations by human activity make it impossible to achieve the good ecological status

and changes needed to achieve the goal would have significant adverse effects on existing uses / the wider environment

and other environmental options to serve the same objectives are technically unfeasible and/or disproportionately costlyWhat economic input?

Disproportion of costs of the required measures is the ultimate factor to designate a water body as HMWB

When? No precise agenda Between 2004 (characterisation) and 2006 (RBMP working

programme)

DESIGNATION OF HMWB Art. 4; 4.3 Annex II; V

E

Economic input

11/19

What to do?Seek specific solutions for water bodies unlikely to reach the goal by 2015Assess whether the cost of the required measures are disproportionate and/or the measures are technically not feasible

where phased achievement of the measures allows to reach the goal under acceptable conditions (no more disproportionate costs nor technical unfeasibility): seek time derogation until 2021 or 2027

where phased achievement doesn't suffice: seek derogation on the objective and achieve less stringent objective

DEROGATIONS Art. 4.4; 4.5 Annex II

When? No precise agenda Between 2004 (characterisation) and 2006 (RBMP working

programme)

What economic input?Disproportion of costs of the required measures is the ultimate and key factor to designate a water body as HMWB

E

Economic input

12/19

DISPROPORTIONATE COSTS

Disproportion of costs is a key indicator for the designation of HMWB the justification of derogations on deadline or on

goal

Ultimately, disproportionality

is a local judgement informed

by economic information

Disproportionality is considered on a case-by-case basis: it changes from place to place and (often) from time to time

Disproportionality is determined with regards:

to the ability to pay of parties involved to the benefits expected, including

environmental ones

Art. 4.3; 4.4; 4.5 - Annexes II; V

Economic input

13/19

What to do?Construct a programme of measures allowing to reach the goal combining basic measures and supplementary measures

What economic input? define economic measures

basic ones : incentive water pricing policies; adequate contribution of the 3 main sectors to the recovery of the costs of water services

supplementary ones: economic and fiscal instruments (fines, abstraction/discharge taxes…)

help constructing the programme of measures select the most cost-effective measures allowing to reach

the goal make the most cost-effective combination of individual

measuresWhen?

December 2009 Update December 2015 and every 6 years

PROGRAMME OF MEASURES Art. 11 Annexes VI; III

E

Economic input

14/19

What economic input? Economic measures on their own Have regards to users' affordability and to the elasticity of the

demandWhen? December 2010

INCENTIVE PRICING POLICIES

AND RECOVERY OF COSTS

Art. 5; 9 Annex III

E

What to do? Use such economic instruments as contributions to the

environmental objectives of WFD by: ensuring that water pricing policies provide adequate

incentive for efficient use of water ensuring an adequate contribution of the different uses to

the recovery of costs Implement those measures having regards to:

social, environmental, economic effects local conditions

Economic input

15/19

INTERCONNEXIONS BETWEEN ECONOMICS AND WFD

Where are economics in WFD process?

What input is expected from the use of economics?

What are the implications in terms of decision-making?

16/19

NOVELTY IN TERMS OF METHODS

An open process involvement of professionals, experts and stakeholders all aspects of water management at hydrological

scales unusual issues to be debated: disproportion of costs,

recovery of costs, cost-effectiveness and cost-benefit ratios...

Clear justification of important decisions HMWB, derogations... based on "objective" arguments: efficiency, benefits,

ability to pay of citizens...

A structured process global process: long-term and cyclic approach connections with other European policies: CAP,

regional, etc. stringent step by step methodology

Implications

17/19

NOVELTY IN TERMS OF INSTRUMENTS

Economic tools cost-benefit and cost-efficiency analyses understanding of specificities and of outputs

Unusual use of prices pricing policies as a tool aiming at a specific

goal assessment of environmental costs: damages,

resource cost...

Construction and use of baseline scenario horizontal approach: impacts of other policies

on water water policy as a driver for evolutions: choices

regarding water with impacts on other policies

Implications

18/19

ECONOMIC ANALYSIS IS NOT AN ISOLATED EXERCICE

Integrated into technical issues: water utilities, quality of water, etc..

Integrated into interdisciplinary

exercise:IRBM

Decision-making oriented:

concrete, operational, "ready-to-apply"

Included into public participation process:

clear, understandable...

Opened to external

skills

"Integration", the motto for

economics under WFD

Opened to non experts

Implications

19/19

GO FURTHER

WFD and economics room functions

Economic input in selected cases HMWB recovery of costs of water services

WHAT ROOM FOR ECONOMICS IN WFD?

The general approach

"Water is not a commercial product like any other but, rather, a heritage which must be protected, defended and treated as such" (Preamble 1)

The text

art.4 - designation of HMWB / derogations

art.5 - characterisation of the district art.6 - register of protected areas art.9 - recovery of costs art.11 - programme of measures art.13 - management plan art.16 - priority substances art.23 - penalties

The annexes Annex III: economic analysis Annex VI: basic/supplementary

measures

ECONOMIC ANALYSIS: EXPLICIT AND IMPLICIT FUNCTIONS

The implicit function other references to

economic issues that will require economic analysis

various stages : designation of HMWB, choice of measures, justification of derogations…

The explicit function economic components

specifically outlined: art.5 and Annex III

main focus on recovery of costs and pricing

WATECO Guidance document is thus essential

FLOW CHART OF THE HMWB DESIGNATION PROCEDURE

Heavily Modified Water Body

Are alternatives significantly better environmental options?

Can we identify technically feasible alternatives?

Are costs of alternatives disproportionate?

Step 2Comparison with alternatives no

Natural water body

no

no

yes

yes

yes

no

Do the measures required for achieving good status have significant impact on the specific use(s) / the wider

environment?

Step 1Significantadverse effect

yes

Natural water body

ACTORS INVOLVEDTASKS OF HMWBDESIGNATION PROCEDURE WP ECO DM SH

COMMENTS

Step 1 Do measures requiredfor achieving GES havesignificant impact?

X X

“Significance” assessed both fromenvironmental and from economicpoint of views

Step 2 Are there technicallyfeasible alternatives? X

Done by several types of experts fromthe water sector: hydrologists,biologists, civil engineers, etc.

Are alternativessignificantly betterenvironmental options?

X X X X

Environmental dimension assessedfrom a global point of view“Significance” determined on an openbasis with all actors

Are costs ofalternativesdisproportionate?

X X X X

Assessment of costs by economists“Disproportion” determined on anopen basis with all actors

Actors involvedWP: water professionalsECO: economistsDM: decision makersSH: stakeholders

WHO DOES WHAT IN THE HMWB DESIGNATION PROCEDURE?

RECOVERY OF COSTS

The scope of implementation

What costs?

What uses of water?

What level?

Two levels By water service By sector: domestic,

industrial, agriculture

Covers all costs Financial costs Environmental costs Resource costs

Applies to "water services"

Definition: art. 2#38 Detailed comments:

WATECO Guidance document

Art. 9 Annex III

WATER SERVICESart.2 #38; art.9

All services which provide, for households, public institutions or any economic activity:

a) abstraction, impoundment, storage, treatment and distribution of surface water or groundwater

b) wastewater collection and treatment facilities which subsequently discharge into surface water

Examples drinking water supply, wastewater

treatment hydropower production individual or collective irrigation etc...

WATER USESart.2 #39; art.5

Water services together with any other activity identified under Article 5 and Annex II having a significant impact on the status of water.

No impacton water status

is not water use is an activity

Significant impact on the ecology of a riverand on the water status

is a water use

ExampleSeveral activities may be considered as water uses depending on their scale