Economic aspects of the Water Framework Directive Julia Martin-Ortega & Klaus Glenk Water @ Leeds Meeting Reducing the costs of the WFD through PES Leeds, 9 th May 2012
Transcript
1. Economic aspects of the Water Framework Directive Julia
Martin-Ortega & Klaus GlenkWater @ Leeds MeetingReducing the
costs of the WFD through PESLeeds, 9th May 2012
2. Background The WFD prescribes the use of economic tools and
principles to attain its ecological goals This is one its most
relevant and innovative aspects and has generated a great deal of
research and implementation questions Economics are there to inform
policy decisions (not a substitute for political choices!)
3. Aims of this talk To provide the context for payment for
ecosystems services in the economic principles of the WFD through a
case study in Scotland To point out key remaining challenges To
introduce our current work on the peatland restoration project
4. Cost DisproportionalityThe WFD allows for derogation of good
ecological status (less stringent objectives) if the costs to
achieve it are disproportionateTwo aspects of it: economic
efficiency: the costs of achieving the targets outweigh the
benefits distributional effects: are costs and benefits equally
distributed? Who are the winners and losers?
5. Cost DisproportionalityThe WFD allows for derogation of good
ecological status (less stringent objectives) if the costs to
achieve it are disproportionately costlyTwo aspects of it: economic
efficiency: the costs of achieving the targets outweigh the
benefits distributional effects: are costs and benefits equally
distributed? Who are the winners and losers?
6. Economic efficiency Need to compare (CBA): The costs of the
measures to achieve good ecological status With the environmental
benefits: the welfare gain resulting from the improvement of water
quality from the current to the good ecological status (Brouwer et
al. 2010) In environmental economics: welfare improvements are
measured through individuals willingness to pay (WTP) WTP is an
indicator of welfare change associated with and environmental
change; not a way of putting a price on water Market benefits (eg.
reduced treatment costs) Substantial non-market benefits (eg.
recreation & scenic beauty, health & wellbeing,
regulatoring services, etc) Non-market benefits are measured via
public surveys asking for peoples WTP for water quality
improvements (stated preferences valuation)
7. Example: Phosphorous mitigation inScottish Lochs (Vinten et
al. 2012) Of the 209 loch water bodies : 66 below moderate status
54 downgraded because of total P concentrationCost-assessment of P
pollutionmitigation measures for managedgrassland, rough grazing,
arable land,sewage and septic tank sources Producing mitigation
costs per loch area to give a national scale marginal mitigation
cost curve
8. Example: Phosphorous mitigation in ScottishLochs (Vinten et
al. 2012) Marginal mitigation cost/benefits (/ha loch) 5000
marginal mitigation costs 4500 4000 3500 3000 2500 2000 1500 1000
500 0 0 0.2 0.4 0.6 0.8 1 Fraction of lochs restored to Good
Ecological Status or better
9. Example: Phosphorous mitigation in ScottishLochs (Vinten et
al. 2012; Glenk et al. 2011)For the estimation of benefits A survey
of 432 face-to-face interviews to a representative sample High - NO
of the Scottish population was carried Quality- PROBLEMS out Asking
for peoples WTP for an increase in the % of loch area with Medium -
FEW Quality - PROBLEMS improved water quality Obtaining marginal
benefits per loch area in GES at the national (RB) scale Low - MANY
Quality - PROBLEMS
10. Example: Phosphorous mitigation in ScottishLochs (Vinten et
al. 2012) Marginal mitigation cost/benefits (/ha loch) 5000
marginal mitigation costs 4500 4000 3500 3000 2500 2000 1500 1000
500 0 0 0.2 0.4 0.6 0.8 1 Fraction of lochs restored to Good
Ecological Status or better
11. Example: Phosphorous mitigation in ScottishLochs (Vinten et
al. 2012; Glenk et al. 2011) Marginal mitigation cost/benefits (/ha
loch) 5000 marginal mitigation costs 4500 marginal WTP 4000 3500
3000 2500 2000 1500 1000 Proportionate Disproportionate mitigation
mitigation 500 0 0 0.2 0.4 0.6 0.8 1 Fraction of lochs restored to
Good Ecological Status or better72% lochs mitigated proportionately
at cost of 5.7m/y. Additional 28% could be mitigate
disproportionately at 184.2m/y
12. Cost DisproportionalityThe WFD allows for derogation of
good ecological status (less stringent objectives) if the costs to
achieve it are disproportionately costlyTwo aspects of it: economic
efficiency: the costs of achieving the targets outweigh the
benefits distributional effects: are costs and benefits equally
distributed? Who are the winners and losers?
13. Distributional effects This RB (national) Scottish
framework helps prioritizing, but local specificities are lost We
know that benefits are not homogeneously distributed across the
space : Improvements in certain areas might be more valued by
general public Also because individual values are aggregated at a
certain spatial scale, welfare impacts are higher for water bodies
closer to larger population centres For example, results from the
RELU ChREAM Project suggest that the most efficient policy for the
UK would be to focus upon improving sufficient urban rivers rather
than all rivers in all areas (Bateman et al. 2011) Also, certain
groups/sectors might benefit more than others (eg. water companies,
anglers?)
14. Distributional effects The costs are likely to be borne by
specific sectors (eg. farmers) Water quality mitigation measures
related to farm land use might cause a redistribution of welfare
from the rural to the urban population This raises concerns about
the equity implications and the need for compensation
mechanismsPayment for ecosystem services: PES initiatives aim to
reach mutually beneficial agreements between providers and users of
ecosystem services in recognition of the value of the service
provided and the opportunity costs of provision Would it be
appropriate that beneficiaries of GES pay to those bearing the
costs of implementing WFD measures?
15. Remaining challenges Disproportionate costs decisions
(including compensation and PES) require a political judgement
(societal choice) But this needs to be informed by economic
analysis We need to understand more about: Who are the costs
bearers and beneficiaries and where are they located? What are
flows of benefits and costs (how are each of the groups/sectors
affected and how much)? What does this imply in terms of equity and
affordability in different sectors and the need for compensation?
What are the barriers/risks for introducing compensation mechanisms
and the most appropriate settings?
16. Remaining challenges An important number of on going
initiatives: EU Project REFRESH: Disproportionality and
distribution effects specific to the WFD at the sub-catchment level
Defra report (Sept 2011): Barriers and Opportunities to the Use of
Payments for Ecosystem Services in England (including a chapter on
freshwaters) Defra has commissioned a Best Practice Guide for
Payments for Ecosystem Services (PES) VNN Project for peatland
restoration
17. Remaining challenges An important number of ongoing
initiatives: EU Project REFRESH: Disproportionality and
distribution effects specific to the WFD Defra report (Sept 2011):
Barriers and Opportunities to the Use of Payments for Ecosystem
Services in England (including a chapter on freshwaters) Defra has
commissioned a Best Practice Guide for Payments for Ecosystem
Services (PES) VNN Project for peatland restoration
18. VNN Peatland Restoration Project Aim: To understand the
delivery of peatland ecosystem services and how financial
mechanisms can be used for the maintenance and improvement of those
services through peatland restoration We have water working group,
which integrates hydrological and economic knowledge to understand:
How peatland interventions can deliver water services (quality,
supply, flooding protection) How the valuation of WFD benefits can
help in estimating benefits associated with peatland restoration To
ultimately feed into the wider discussion on PES schemes for
peatland restoration