The project “Innovation Demonstration for a Competitive and Innovative European Water Reuse Sector” (DEMOWARE) has received funding from the European Union’s 7th Framework Programme for research, technological development and demonstration, theme ENV.2013.WATER INNO&DEMO-1 (Water innova-tion demonstration projects) under grant agreement no 619040
DeliverableD4.3
Cost‐benefitanalysisapproach
suitedforwaterreuseschemes
i
Deliverable Title D4.3 CBA approach suited for water reuse schemes
The original title was "Report on choice‐ experiment study of CBA and
adaptation of the watereuse toolkit on water reclamation systems".
The report at hand specifies the tool for the cost‐benefit analysis of wa‐
ter reuse schemes. Results of its application are presented in D4.4.
Related Work Package: WP4: Business models and pricing strategies
Deliverable lead: ACTEON
Author(s): Ivan Zayas, Gloria De Paoli, Florimond Brun, Verena Mattheiß
Contact for queries g.depaoli@acteon‐environment.eu
Dissemination level: Public
Due submission date: 30/04/2016
Actual submission: 10/07/2016
Grant Agreement Number: 619040
Instrument: FP7‐ENV‐2013‐WATER‐INNO‐DEMO
Start date of the project: 01.01.2014
Duration of the project: 36 months
Website: www.demoware.eu
Abstract
VersioningandContributionHistory
Version Date Modified by Modification reason
1.0 20/04/2016
2.0 01/06/2016 Ivan Zayas, Gloria De Paoli Internal comments were addressed
3.0 05/07/2016 Gloria De Paoli Reviewer’s comments were addressed (comments by Jos Frijns)
final 06/07/2016 Rita Hochstrat Final edits
ii
Tableofcontents
Versioning and Contribution History ................................................................................................................. i
List of figures ................................................................................................................................................... iii
List of tables ..................................................................................................................................................... iv
Executive Summary .......................................................................................................................................... 5
1 Introduction .............................................................................................................................................. 9
1.1 Cost‐benefit analysis in the DEMOWARE project: overview of the task ......................................... 9
1.2 Structure and contents of this report ............................................................................................ 10
2 Applying CBA to water reuse projects: literature review ...................................................................... 11
2.1 Cost‐benefit analysis: some general concepts ............................................................................... 11
2.2 CBA for water reuse: review of international experience.............................................................. 12
2.3 Specificities and challenges of applying CBA to water reuse projects ........................................... 15
2.4 Existing CBA Tool: the Water Reuse Foundation Toolkit ............................................................... 17
3 Building the backbone of the DEMOWARE CBA Tool ............................................................................ 18
3.1 Water reuse cost‐benefits framework: setting a generic water reuse system to frame the analysis ............................................................................................................................................ 20
3.1.1 Setting boundaries of the system and describing flows and stakeholders .............................. 20
3.1.2 Payment flows ........................................................................................................................... 21
3.1.3 Supplier Cost mapping and water treatment ........................................................................... 22
3.2 Water reuse CBA framework .......................................................................................................... 24
3.2.1 Qualitative description of the actual system and the different options of the project ........... 25
3.2.2 Financial analysis ....................................................................................................................... 29
3.2.3 Economic analysis: from financial values to economic values ................................................. 31
4 Using the DEMOWARE CBA Tool to perform cost‐benefit analysis of a water reuse project: the user interface ......................................................................................................................................... 35
4.1 The DEMOWARE CBA Tool: how does it work in practice? ........................................................... 35
4.2 The user interface: how does it look like? ...................................................................................... 36
4.2.1 Project identification, context information and definition of scenarios .................................. 36
4.2.2 Financial analysis ....................................................................................................................... 38
4.2.3 Economic analysis ...................................................................................................................... 41
4.2.4 Sensitivity analysis ..................................................................................................................... 43
4.3 Improvements and novelties provided by the DEMOWARE CBA Tool .......................................... 43
4.4 Limitations of the DEMOWARE CBA Tool ....................................................................................... 44
5 Valuing the environmental benefits of water reuse systems ................................................................ 46
5.1 Stated preference valuation surveys .............................................................................................. 46
5.1.1 Contingent Valuation ................................................................................................................. 47
5.1.2 Choice Experiment .................................................................................................................... 51
5.1.3 CE and CV: Which method to use? ........................................................................................... 52
5.2 Application of Stated Preferences valuation methods in the DEMOWARE project ...................... 53
5.2.1 Application of the CE method for the Sabadell Case Study: short insight ............................... 53
5.2.2 Application of the CV method for the Braunschweig Case Study: short insight ...................... 56
6 Discussion and conclusions .................................................................................................................... 59
iii
7 References .............................................................................................................................................. 60
Annex I – Full list of input data and output indicators of the DEMOWARE CBA Tool ................................... 62
Context description ‐ Input data to be entered in the Tool ...................................................................... 62
Financial analysis ........................................................................................................................................ 63
Input data to be entered in the Tool: .................................................................................................... 63
Output indicators provided by the Tool: ............................................................................................... 64
Economic analysis ....................................................................................................................................... 65
Input data to be entered in the Tool: .................................................................................................... 65
Output indicators provided by the Tool: ............................................................................................... 67
Annex II‐ Sabadell Choice Experiment questionnaire .................................................................................... 68
Annex III‐Braunschweig Contingent Valuation questionnaire ....................................................................... 87
Listoffigures
Figure 1 The three layers of the DEMOWARE CBA Tool ......................................................................... 19
Figure 2 Flows and stakeholder relation in water reuse systems ........................................................... 20
Figure 3 Payment flows in water reuse systems ..................................................................................... 21
Figure 4 Supplier cost mapping of a water reuse system ....................................................................... 22
Figure 5 Schematic representation of a baseline scenario depicting the different users and water flows ........................................................................................................................................... 26
Figure 6 Schematic representation of one potential water reuse system (Option 1) ........................... 26
Figure 7 Schematic representation of a potential water reuse system (Option 2) ................................ 27
Figure 8 Schematic representation (sources, flows, users) of water supply system including alternative supply options (Option 3) ....................................................................................... 28
Figure 9 Layout of alternative treatment and supply options for a water reuse system....................... 29
Figure 10 Mapping the costs of water reuse projects .............................................................................. 30
Figure 11 Identification of environmental impacts in the flow diagram for water reuse scheme option 2 ...................................................................................................................................... 32
Figure 12 Basic logical path underlying the DEMOWARE CBA Tool ......................................................... 35
Figure 13 Logical framework of the DEMOWARE CBA Tool: data flows, processes and outputs ............ 36
Figure 14 The DEMOWARE CBA Tool – Illustrative summary graphs on the context oft he projected water reuse project ................................................................................................................... 37
Figure 15 The DEMOWARE CBA Tool – Building a project scenario ......................................................... 38
Figure 16 Using the DEMOWARE CBA Tool – Entering data on financial costs of each treatment unit .. 39
Figure 17 Using the DEMOWARE CBA Tool – Entering and visualizing data on financial costs and revenues .................................................................................................................................... 39
Figure 18 Using the DEMOWARE CBA Tool – Output of the financial analysis ........................................ 40
Figure 19 Using the DEMOWARE CBA Tool – Entering data on economic costs and benefits ................ 42
Figure 20 Using the DEMOWARE CBA Tool – Creation of new economic costs and benefits ................. 42
Figure 21 Using the DEMOWARE CBA Tool – Changing cost parameters to test their impact on the financial feasibility of the project scenario ............................................................................... 43
Figure 22 Structure of a typical CV questionnaire .................................................................................... 47
iv
Listoftables
Table 1 Review of existing CBA applications and available CBA frameworks for water reuse projects ...................................................................................................................................... 13
Table 2 Distribution of investment and O&M costs along the project life ........................................... 29
Table 3 Using the DEMOWARE CBA Tool – Data input to define the context of the projected water reuse project .............................................................................................................................. 37
Table 4 Using the DEMOWARE CBA Tool – Data input to describe the different project scenarios under evaluation ....................................................................................................................... 37
Table 5 Using the DEMOWARE CBA Tool – Data requirements for performing the financial analysis ....................................................................................................................................... 38
Table 6 Using the DEMOWARE CBA Tool – Data requirements for performing the financial analysis ....................................................................................................................................... 41
Table 7 Improvements and novelties provided by the DEMOWARE CBA Tool ..................................... 44
Table 8 Types of payment vehicle .......................................................................................................... 48
Table 9 Advantages and drawbacks of the most commonly used value elicitation formats for CVs ... 49
Table 10 Using WTP follow‐up questions to determine valid responses ................................................ 50
Table 11 Example of a choice set in a CE value elicitation question ....................................................... 51
5
Deliverable D4.3
ExecutiveSummary
The appraisal of investment decisions –thus including investments in water reuse systems‐ cannot over‐
look the economic aspects and, in particular, the evaluation of the welfare changes attributable to the
proposed project. The application of cost‐benefit analysis (CBA) to appraisal allows for a more efficient
allocation of financial resources, as well as for demonstrating the convenience for society of a particular
intervention against the possible alternatives (EC, 2014b). CBA identifies and compares the costs and
benefits brought by the proposed project, including social and environmental costs and benefits, and it
provides: (i) a decision rule: benefits should exceed costs; and (ii) a criterion for comparing and ranking
project alternatives: the size of net benefits, known as Net Present Value (FAO, 2010).
In principle, CBA is meant to compare not only financial costs, but also external costs and benefits, thus
including environmental and social costs, and it can thus be an appropriate tool to evaluate the trade‐offs
and the economic feasibility of a project; it provides in fact a basis for rational thinking about losses and
gains subject to decision. The assessment and valuation of external costs and benefits (mainly social and
environmental costs and benefits) remains one of the main challenge of applying CBA to water reuse
projects, and few evaluation frameworks have been developed so far (Godfrey et al, 2009).
Task 4.2 of Work Package 4 of the DEMOWARE project had the following objectives:
Develop an on‐line, user‐friendly CBA Tool which can be used in any water reuse plant across
Europe by filling in the necessary information (the DEMOWARE CBA Tool);
Assess and assign a monetary value to the social and environmental benefits of water reuse in
two case studies in Europe;
Perform a CBA in the two case studies by using the DEMOWARE CBA Tool.
This deliverable (D4.3) presents the theoretical and methodological aspects of: (i) the DEMOWARE CBA
Tool; and (ii) the application of stated preference techniques to the evaluation of the economic benefits
of water reuse systems in two pilot sites (Sabadell and Braunschweig). A second deliverable (D4.4), draft‐
ed in parallel, illustrates the results of the evaluation of economic benefits in the two pilot sites, and it
illustrated the preliminary application of the DEMOWARE CBA Tool to one of these sites.
The DEMOWARE CBA Tool took as a source of inspiration the Water Reuse Foundation Toolkit1, an eco‐
nomic framework (based on excel spreadsheets) developed to support water managers in the identifica‐
tion, estimation and communication of the costs and benefits of water reuse.
In addition, existing approaches to CBA for water reuse projects in Europe and elsewhere were reviewed.
All proposed frameworks include some environmental benefits; however, the definition and the selection
of benefits taken into account is not homogeneous across the different studies.
The review of existing experiences of applying CBA to water reuse projects highlighted two key challeng‐
es, and in particular:
The identification and valuation of external benefits (positive externalities), which often do not
have a market value. All proposed frameworks include some environmental benefits; but none of
them is comprehensive and accurate (as also observed Kihila et al, 2014). The economic value of
these projects is often underestimated due to the failure of properly accounting for and quantify‐
ing the many benefits of water reuse (e.g. watershed protection, local economic development,
improvement of public health), which often have a non‐monetary nature (e.g. Godfrey et al,
2009); and
1 https://watereuse.org/watereuse‐research/03‐06‐an‐economic‐framework‐for‐evaluating‐benefits‐and‐costs‐of‐water‐reuse/
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DEMOWARE GA No. 619040
Benefits of water reuse projects can be site specific, and so can be the costs. Thus, every case
study has to be analyzed from a demand‐driven perspective. In the literature, many case studies
can be found, but no universal tool has been developed for the moment as CBA is site‐specific.
The DEMOWARE CBA Tool aims at addressing current challenges and shortcomings of the application of
CBA to water reuse projects. In particular:
The Tool is specifically designed and customized for implementing CBA for water reuse projects,
thus reflecting their characteristics and specificities;
As mentioned earlier, the application of CBA to water reuse project is very site and case specific.
Thus a CBA tool must be flexible enough so that its application can be customized to the specific
case under evaluation;
In addition, the tool must facilitate the evaluation of water reuse projects by assisting decision
makers and/or plant managers in gathering data input, calculating indicators and providing
graphic representations of results.
To achieve the first two objectives, the Tool must be built on an appropriate conceptual and methodolog‐
ical framework. To achieve the third objective, the Tool must also support and guide decision makers in
the evaluation of water reuse project. For these reasons, the DEMOWARE CBA Tool is built on three lay‐
ers (as also shown in the figure below):
1. Generic water reuse system framework: this layer defines and designs a generic water reuse
system so that it can include different treatment processes, different water sources and different
uses of treated wastewater. This system is as generic as possible so that it can be adapted to each
specific site, and it constitutes the basic layer upon which the DEMOWARE CBA Tool is built;
2. Cost‐benefit analysis framework: the second layer of the DEMOWARE CBA Tool defines and de‐
signs the different steps to be followed in CBA, and it allows for representing all flows occurring
among stakeholders and physical components of the system (physical flows such as wastewater
and treated water, financial flows, flows of non‐monetary costs and benefits);
3. A user‐friendly interface to support and guide decision makers in the evaluation of water reuse
project.
The three layers are described in detail in this deliverable. The user interface, in particular, provides oper‐
ational information on how to proceed when performing CBA with the DEMOWARE CBA Tool, such as
required input (by the user) and output provided by the Tool. The Tool operates on four steps:
1. Project identification, context information and definition of scenarios: information on the context
(economic, social and demographic data, information on water demand and supply as well as
pricing strategies) and development of project scenarios to be evaluated;
7
Deliverable D4.3
2. Financial analysis: evaluation of the financial feasibility/ sustainability of the different project sce‐
narios, based on financial costs and benefits. Based on this analysis, the Tool provides the Net
Present Value, the Internal Rate of Return and the Benefit‐Cost Ratio (based only on financial
costs and revenues). Graphs and excel tables to illustrate results are also created;
3. Economic analysis: evaluation of the economic sustainability of the different project scenarios,
based on financial costs and benefits but also on economic costs and benefits (e.g. environmen‐
tal, social, health, cultural costs and benefits). Based on this analysis, the Tool calculates the Net
Present Value, the Economic Internal rate of Return and the Cost‐Benefit Ratio. Graphs and excel
tables to illustrate results are also created;
4. Sensitivity analysis: this is a usual (and required) step of the CBA, and the Tool makes it extremely
easy and handy to perform it. Sensitivity analysis assesses the sensitivity of results to changes in
some parameters, e.g. the impact that a change in one or more parameters could have on the fi‐
nancial and economic sustainability of the project –the Tool can in fact perform this analysis on
both the financial and economic analysis. This analysis can be done, for example, on cost parame‐
ters or on pricing strategies (i.e. assessing the impact of different pricing strategies on the finan‐
cial and economic sustainability of project scenarios).
The novelties provided by the DEMOWARE CBA Tool can be summarized as follows:
The Tool links water supply and demand (both for conventional and reused water), taking into ac‐
count the demand‐driven specificity;
The Tool assesses the impact of reused water consumption on freshwater consumption, as well
as cross‐price elasticity of water demand;
The Tool is easily accessible for an effective use by plant managers and decision makers, as it is a
web‐based application for which no specific software is needed. The Tool is also easy to maintain
and update.
The current version of the Tool also has some shortcomings. The tool is particularly tailored to a situation
where a new water reuse project is considered, which is driven by an existing (high) demand for water ‐
and where water treatment is linked to this reuse. In this case it is particularly relevant: (i) to take into
account the different (alternative) water providers (including public water supply); and (ii) to consider all
treatment costs in the framework of a cost‐benefit analysis. However, these two basic functionalities of
the tool are not of interest in a situation where wastewater treatment already exists or where the only
alternative to wastewater reuse consists in private water abstraction. In addition, the tool is designed for
carrying out ex‐ante CBA’s, whereas in the case of ex‐post CBA slightly different approaches need to be
applied (see for example EC, 2014b; CSIL & DKM, 2012).
Nevertheless, the current version of the DEMOWARE CBA Tool is to be considered as preliminary: the
Tool is in fact being tested in two case studies (Sabadell and Braunschweig), and further testing will be
done before the end of the project. Based on the outcomes of the testing phase, shortcomings and limi‐
tations of the Tool will be addressed whenever possible. The final version of the CBA Tool will be made
available online before the end of the DEMOWARE project.
As previously mentioned, a comprehensive identification and valuation of economic, environmental and
social benefits of water reuse projects is of paramount importance when conducting a CBA. In many cas‐
es, these benefits do not have a market value, but they are indeed valued by society (e.g. recreational
services provided by a constructed wetland for water purification). Economic valuation thus refers to the
assignment of money values to non‐marketed assets, goods and services, where the money values have a
particular and precise meaning. Non‐marketed goods and services refer to those which may not be di‐
rectly bought and sold in a market place (Hanley and Barbier, 2009)
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DEMOWARE GA No. 619040
Several valuation techniques exist for the valuation of non‐market benefits. In the DEMOWARE project,
stated preference techniques were selected to evaluate the environmental benefits of water reuse in the
demo sites of Sabadell and Braunschweig. Stated preference approaches on the other hand are based on
constructed markets, i.e. they ask people what economic value they attach to those goods and services.
In other words, the economic value is revealed trough a hypothetical or constructed market based on
questionnaires (Pearce et al. 2002). In particular, two techniques were used:
Contingent Valuation (CV) methodology involves asking a random sample of respondents for their
willingness to pay (WTP) for a clearly defined good, or willingness to accept (WTA) a loss. This
value are elicited by the means of questionnaires distributed to a sample of the relevant popula‐
tion. This technique was used in the Braunschweig case study to assess the value of the preserva‐
tion and recharge of local groundwater resources, and the protection of the water quality of the
nearby river Oker;
Choice Experiment (CE) methodology differs from CBA only in respect of the valuation scenario
component, and the way this is elicited in questionnaires. This technique was used in the Sabadell
case study to assess the social value given to indirect benefits stemming from securing, with re‐
used water, different urban water uses in the city even during drought restrictions.
In summary, this deliverable presents the conceptual and methodological framework developed and ap‐
plied to CBA in the DEMOWARE project. Deliverable 4.4 goes hand in hand with the present deliverable,
as it presents the results of the practical application of: (i) stated preference techniques for the evalua‐
tion of economic benefits of water reuse; and (ii) the DEMOWARE CBA Tool. These two elements were
applied in practice in the Sabadell and Braunschweig sites.
9
Deliverable D4.3
1 Introduction
1.1 Cost‐benefitanalysisintheDEMOWAREproject:overviewofthetask
The appraisal of investment decisions –thus including investments in water reuse systems‐ cannot over‐
look the economic aspects and, in particular, the evaluation of the welfare changes attributable to the
proposed project. The application of cost‐benefit analysis (CBA) to appraisal allows for a more efficient
allocation of financial resources, as well as for demonstrating the convenience for society of a particular
intervention against the possible alternatives (EC, 2014b). CBA identifies and compares the costs and
benefits brought by the proposed project, including social and environmental costs and benefits, and it
provides: (i) a decision rule: benefits should exceed costs; and (ii) a criterion for comparing and ranking
project alternatives: the size of net benefits, known as Net Present Value (FAO, 2010).
In principle, CBA is meant to compare not only financial costs, but also external costs and benefits, thus
including environmental and social costs, and it can thus be an appropriate tool to evaluate the trade‐offs
and the economic feasibility of a project; it provides in fact a basis for rational thinking about losses and
gains subject to decision. The assessment and valuation of external costs and benefits (mainly social and
environmental costs and benefits) remains one of the main challenge of applying CBA to water reuse
projects, and few evaluation frameworks have been developed so far (Godfrey et al, 2009).
Against this background, the objectives of WP4, Task 4.2 were the following:
Develop an on‐line, user‐friendly CBA Tool which can be used in any water reuse plant across
Europe by filling in the necessary information (the DEMOWARE CBA Tool);
Assess and assign a monetary value to the social and environmental benefits of water reuse in
two case studies in Europe;
Perform a CBA in the two case studies by using the DEMOWARE CBA Tool.
Task 4.2 involved the following steps:
Critical literature review of existing CBA frameworks for water reuse projects and their applica‐
tion to case studies;
Development of the preliminary CBA tool, presented in this deliverable;
Assessment of the environmental benefits of water reuse in the two case study sites, by applying
the choice experiment method (in Sabadell – ES) and the contingent valuation method (in Braun‐
schweig – DE), presented in this deliverable;
Testing the CBA tool for the case study sites (Sabadell – ES and Braunschweig – DE), building on
the information collected for each case study (in particular: “reference scenario” and “develop‐
ment scenario”, financial costs and revenues under these different scenarios, etc.). The testing
phase aims at identifying adaptations that are required for accounting for the entire range of
costs and benefits to be considered. The testing phase is on‐going, and some preliminary consid‐
erations on strengths and weaknesses of the DEMOWARE CBA Tool are included in this delivera‐
ble;
Implementing proposed adaptations of the CBA tool following the testing. This will be done in the
coming months, and before the end of the project;
Writing the tool’s “users' manual” which will be delivered in month 36 together with deliverable
D4.7.
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DEMOWARE GA No. 619040
1.2 Structureandcontentsofthisreport
Based on the outcomes of Task 4.2 of the DEMOWARE project two deliverables have been developed:
Deliverable D4.3: CBA approach suited for water reuse schemes (the present report) – this deliv‐
erable presents the theoretical and methodological sides of Task 4.2 activities; and
Deliverable D4.4: Show cases demonstrating the relevance of the social and economic benefits of
water reuse schemes to the local communities – this deliverable focuses on the results of Task
4.2, and in particular it presents the findings of the two case studies: Sabadell (ES) and Braun‐
schweig (DE).
The two reports have been drafted in parallel, as they are presenting two parts of the same task.
More in detail, the present deliverable includes:
Chapter 2 – Applying CBA to water reuse projects: literature review. This chapter includes:
o Some general concepts on CBA;
o A review of international experience in the application of CBA to water reuse projects;
and
o An overview of the specificities and challenges of applying CBA to water reuse projects;
Chapter 3 – Building the backbone of the DEMOWARE CBA Tool. This chapter illustrates the con‐
ceptual and methodological framework based on which the DEMOWARE CBA Tool was devel‐
oped. It includes:
o An illustration of the generic system built to frame the analysis. The CBA DEMOWARE
Tool was developed based on this framework; and
o A step‐by‐step illustration of the CBA analysis;
Chapter 4 – Using the DEMOWARE CBA Tool to perform cost‐benefit analysis of a water reuse
project. This chapter presents the Tool from the users’ perspective. In particular, it provides:
o An overview of how the DEMOWARE CBA Tool works in practice;
o A presentation of the user interface: what it looks like, the data to be entered, the output
provided by the Tool;
o A highlight of the advantages of the Tool, as compared to other CBA frameworks for wa‐
ter reuse projects; and
o A discussion on the current limitations of the DEMOWARE CBA Tool. As the testing phase
is on‐going, this section only presents some preliminary considerations based on experi‐
ences with testing so far.
Chapter 5 – Valuing the environmental benefits of water reuse systems: this chapter provides the
theoretical basis of the stated preference valuation techniques applied in the two case studies, as
well as a description of the methodology applied in the two sites (the results are presented in de‐
liverable D4.4). The chapter presents and compares the two valuation techniques adopted in Task
4.2, and in particular:
o Contingent Valuation technique;
o Choice experiment;
o CV and CE: what method should be used?
11
Deliverable D4.3
2 ApplyingCBAtowaterreuseprojects:literaturereview
2.1 Cost‐benefitanalysis:somegeneralconcepts
Cost‐Benefit Analysis (CBA) is an analytical tool for evaluating the economic advantages or disadvantages
of an investment decision, and it assesses the costs and benefits in order to assess the welfare changes
attributable to it. In this analysis, cost and benefits must be all expressed in monetary terms, which allows
for comparing cost and benefit items of different nature (e.g. market and non‐market benefits of a pro‐
ject). The project overall performance is measured by indicators, and namely: the Net Present Value
(NPV, the Internal Rate of Return (IRR) and the’ Cost‐Benefit Ratio (BCR); these indicators allow compara‐
bility and ranking for project alternatives (EC, 2014b). The main strength of the CBA is thus to facilitate
the comparison of seemingly different kinds of costs and benefits, providing evidence for decision makers
to decide on the scheme of water reuse that is likely to deliver the highest net benefits.
Some basic concepts underlie CBA (FAO 2010):
There are always alternatives. When undertaking a CBA for a specific project, other alternative
solutions should also be assessed, so that the best available solution is selected. The best availa‐
ble solution should be the most effective in reaching project objectives, as well as (or at least) the
most feasible (e.g; practical, timely, acceptable); in addition, it should be the most cost‐effective
option. CBA allows for analysing available options and rank them based on their respective net
benefits;
The business‐as‐usual (BAU) option, also called the do‐nothing option or counterfactual scenario,
must be considered, as the net costs and benefits of the different project options must be care‐
fully weighed and compares against the present situation. In other words, the BAU options pro‐
vides the benchmark against which the project is evaluated;
Resources used in the project options normally have alternative uses, and this implies an oppor‐
tunity costs (their value to society in their best alternative use). These costs must be considered
in CBA;
CBA is a quantitative decision tool, which means that costs and benefits should be quantified (as
much as possible) –otherwise they cannot be taken into account in the analysis. In case some
cost and benefit items are not quantified (e.g. environmental benefits and costs), this must be
clearly specified;
The time diming of costs and benefits –and, consequently, the choice of a correct time horizon‐ is
a crucial aspect of CBA, as this analysis has a long term perspective –and it is generally applied to
projects whose life extends well into the future, such as for example irrigation system and
wastewater treatment/ reuse projects. The long life of the projects under evaluation requires the
use of discounting, which reflects both society’s time preference and what the capital employed
could earn in alternative uses.
CBA typically involves the following steps (CSIL & DKM, 2012; Garcia and Pargament, 2015):
1. Project identification, based on: (i) self‐sufficiency of the investments; and (ii) pertinence and tim‐
ing of the investments;
2. Selection of the appropriate time horizon;
3. Definition of the counterfactual scenario (BAU);
4. Demand analysis: forecasting the future and testing the assumptions;
5. Selection of the appropriate discount rate;
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DEMOWARE GA No. 619040
6. Quantification of costs and benefits, including: (i) financial costs and benefits (to be used in the
financial analysis); (ii) direct effects; (iii) externalities and indirect impacts (both positive and neg‐
ative); (iv) avoided costs; and (v) non‐quantifiable effects;
7. Determination of shadow prices; and
8. Calculation of CBA indicators (NPV, IRR, CBR);
9. Economic sensitivity analysis, to investigate the robustness and reliability of CBA results.
The choice of the discount rate is an important issue in CBA. People generally assign greater importance
to present benefits rather than future benefits. Comparison of costs and benefits with different time‐
paths is facilitated by discounting them to their “present day” values using a discount rate, which is com‐
parable to an interest rate. The further a cost or benefit is placed in the future, the lower its “present”
value will be.
The choice of the appropriate time horizon is closely linked with the concept of discounting. An invest‐
ment will have a certain lifespan, and in general this should determine the time‐frame used in the CBA,
although in many cases a standard timeframe such as 30 years is used. Sometimes the lifespan will vary
for different parts of the investment, e.g. a waste water treatment plant will have longer‐lived buildings
and shorter‐lived pumps and electronic equipment. The choice of the timeframe will obviously have an
impact on the present value of costs and benefits which will be realized in the future, as well as the
choice of the discount rate. For example, the rate traditionally used in Ireland for public projects, as rec‐
ommended by the Department of Finance (1994), is 5% real (i.e. net of inflation). Controversy arises be‐
cause many environmental benefits and costs accrue long into the future, and discounting means that
their present values can be negligible.
The following sections present existing applications of CBA to water reuse projects, as well as an overview
of the main specificities and challenges of the application of CBA to water reuse projects.
2.2 CBAforwaterreuse:reviewofinternationalexperience
Water reuse closes the loop between water supply and wastewater disposal. After appropriate treat‐
ment, wastewater becomes again a resource which can be used for different purposes. In particular in‐
creasing situations of water scarcity are putting water reuse more and more on the political agenda, as an
alternative source of water supply. The significant potential for further development of water reuse pro‐
jects in the EU has been widely recognized (EC, 2014a).
In parallel, cost benefit analysis (CBA) applied to the reuse of treated wastewater effluent has gained
interest. Both scientists and water managers want to understand whether investing in water reuse can be
viable or not by looking not only at technological and financial aspects, but also at environmental ones
(Kihila et al, 2014).
Investment costs incurred in the construction of a wastewater treatment plant are generally the largest
cost component of water reuse projects (Molinos‐Senante et al., 2011). The minimization of costs is
therefore a major issue, next to environmental standards which have to be complied with (Hussain et al.,
2002). Urkiaga et al. (2008) found that the cost‐effectiveness of water reuse projects is directly related to
the volume of wastewater used: “the larger the quantity of water treated and reused, the more cost‐
effective the project becomes” (Kihila et al., 2014). This applies also to water treatment in general: larger
treatment plants are more cost‐effective than smaller ones (Hernández‐Sancho and Sala‐Garrido, 2009).
CBA tries to incorporate all social costs and benefits of an investment in monetary terms (whether they
have a market price or not), and in doing so it determines whether benefits exceed costs. Where market
prices are not available, some other means of deriving monetary values must be used. An important ad‐
vantage of CBA is that by reducing all cost and benefit components (thus including environmental and
13
Deliverable D4.3
non‐environmental, private and social costs and benefits) to monetary terms and assessing them with a
consistent methodology, policy makers and planners can effectively “compare apples and oranges”. That
is, they can compare projects within and across different fields of public policy (e.g. roads, hospitals, wa‐
ter treatment plants) and prioritize public investment policy according to which projects give the greatest
return to society.
Existing “best practice” examples of project CBA for WWTPs do an excellent job in capturing beneficiaries’
willingness‐to‐pay for improved water supply and sanitation services. In some cases, external environ‐
mental impacts have also been taken into account in the CBA. The challenge is to correctly identify these
external effects―both benefits and costs―and bring them into the analysis. Table 1 provides an overview
of some of the existing applications of CBA to water reuse projects.
Table 1 Review of existing CBA applications and available CBA frameworks for water reuse projects
Case study Project description CBA framework: description
Environmental bene‐fits considered
Results
Akrotiri aquifer
(Birol et al, 2009)
Aquifer recharge with treated wastewater
Long‐run CBA with declining social discount rate over the selected time horizon, to better account for future benefits
Benefits valuation: Choice experiment
Willingness to pay for quality and quantity improve‐ment by farmers and residents
NPV= 28.51 ÷ 71.1 million EUR
Greywater reuse in residential schools in Madhya Pradesh,
India
(Godfrey et al, 2009)
Greywater treat‐ment and reuse system in residential schools. Treated greywater is used for toilet flushing and irrigation of food crops.
Feasibility of grey‐water reuse is worked out by quan‐tifying benefits in monetary terms and comparing with cost of greywater reuse system. The system considers both in‐ternal and external benefits and costs.
Total benefits in‐clude internal and external benefits minus opportunity costs.
Benefits considered in the CBA include: savings in tankered water, avoided in‐frastructure costs, avoided groundwa‐ter exploitation, avoided pollution, availability of vege‐tables, reuse of pollutants, water protection, health benefits.
Annualized invest‐ment and O&M costs: EUR 157/year
Environmental ben‐efits: EUR 1 656/year
Health benefits: EUR 10 596/year
Benefits >> Costs
The benefit to cost ratio is higher than those for water resource projects.
CBA of a decentral‐ized water system for wastewater reuse and environ‐mental protection
(Chen and Wang, 2009)
The general model was applied to a decentralized reuse system in a newly developed residen‐tial area. Two differ‐ent scenarios were considered: (1) wa‐ter reuse for garden‐ing only; and (2) water reuse for gardening and re‐plenishment of an
Net benefit value (NBV) approach. Equations are pro‐vided for calculating each cost and bene‐fit category.
Benefits included in the model: water savings, labour sav‐ings, wastewater discharge, environ‐mental improve‐ment, health protec‐tion
Scenario 1 – NBV= 159 EUR
Scenario 2 – NBV= 24966 EUR
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DEMOWARE GA No. 619040
Case study Project description CBA framework: description
Environmental bene‐fits considered
Results
artificial pond.
CBA of water reuse for environmental projects in Spain
(Molino‐Senante et al, 2011)
The proposed ap‐proach is applied to 13 wastewater treatment plants in the Valencia region of Spain that reuse effluent for envi‐ronmental purposes.
The proposed ap‐proach considers the internal benefit, external benefit and opportunity cost. It provides the equa‐tions by which each of the parameters can be computed.
The approach pro‐vides the sum ot total internal and external benefits.
Total internal bene‐fits: internal income (e.g. reuse of nutri‐ents in agriculture, – internal costs
Total external bene‐fits: external bene‐fits (estimated through shadow pricing) – external impacts
Average total bene‐fits over the 13 wastewater treat‐ment plants:
3.9 Million EUR/year
1220 EUR/m3
Reusing wastewater to cope with water scarcity in Israel
(Garcia and Par‐gament, 2014)
Development of a CBA methodology for water reuse systems
Case study: water reuse replenishment of the Yarqon river, for environmental improvement and for indirect reuse in irrigation. Three scenarios were in‐vestigated: pessimis‐tic, base‐case and optimistic.
Five‐step approach:
Selection and evalu‐ation of the water reuse plan;
Estimation of inter‐nal costs (invest‐ment and O&M costs);
Estimation of exter‐nal trade‐offs (costs and benefits);
Implementation of CBA;
Sensitivity analysis.
External benefits: reliable water sup‐ply, fertilization, less restrictions on water use, consumer atti‐tudinal impact, re‐duced pollution, provision of ecosys‐tem services
Pessimistic scenario – NPV= ‐24 mio. EUR
Base‐case scenario: NPV= 4.3 mio. EUR
Optimistic scenario: NPV= 35.6 mio. EUR
As also confirmed by the sensitivity analy‐sis, relevant exter‐nalities might have a strong impact on the economic feasibility of the wastewater reuse projects
Water reuse in the Po valley: compari‐son of natural and conventional treatment for water reuse
(Verlicchi et al, 2012)
Project to reuse part of the final effluent from the Ferrara wastewater treat‐ment plant for irri‐gation and to devel‐op the site for rec‐reational purposes.
Treatment technol‐ogy: natural polish‐ing (e.g. artificial lagoons)
Traditional CBA methodology
Agricultural reuse of reclaimed wastewater (im‐proved water avail‐ability)
Environmental ben‐efit for the quality of the Po di Volano canal
Financial benefit (reduction in energy consumption)
Recreational benefit for the users of the park (through con‐tingent valuation)
NPV= 40 000 EUR
Benefit‐Cost ratio (BCR)= 1.007
Internal Rate of Return (IRR)= 5% (exactly equal to the applied discount rate)
Development of a CBA approach for water reuse in irri‐gation
A CBA method for water reuse in irriga‐tion was developed, based on existing
The net benefit value approach (Chen and Wang, 2009) was adapted and customized to
Additional water made available, with nutrients
Improved crop pro‐
The methodology developed in the paper is not applied to a specific case
15
Deliverable D4.3
Case study Project description CBA framework: description
Environmental bene‐fits considered
Results
(Kihila et al, 2014) approaches water reuse in irriga‐tion, taking into consideration the benefits that can be realized when the reuse type is for agricultural produc‐tion.
duction
Job creation
Environmental ben‐efits: reduced pollu‐tion and improved water quality, im‐proved public health, environmen‐tal protection and reduced impact on ecosystems
study
Overall, some messages can be drawn from the literature reviewed:
If environmental and social benefits are considered, total benefits of water reuse projects exceed
costs;
All proposed frameworks include some environmental benefits; however, the definition and the
selection of benefits taken into account is not homogeneous across the different studies. The se‐
lection and quantification of external benefits can have a strong impact on the evaluation of the
feasibility of a project (as revealed by CBA);
Total benefits and project’s NPV increase with rising ambition of the project: the more the final
uses for reused water, the largest the benefits (e.g. the benefits of water reuse for gardening and
environmental purposes are larger than the benefits provided by the same project if reused wa‐
ter is only used for gardening).
2.3 SpecificitiesandchallengesofapplyingCBAtowaterreuseprojects
The review of existing experiences of applying CBA to water reuse projects highlighted two key challeng‐
es, and in particular:
The identification and valuation of external benefits (positive externalities), which often do not
have a market value; and
Benefits of water reuse projects can be site specific, and so can be the costs.
These challenges are presented in more detail in the paragraphs below.
Valuation of non‐market costs and benefits
The valuation of benefits is thus a key point of CBA for water reuse projects. Although it is in theory pos‐
sible to have monetary values for calculating impacts, water reuse projects create a series of externalities
for which no explicit market exists, so in such cases the valuation must use hypothetical scenarios
(Hernández et al., 2006). Despite the availability of some attempts to do cost benefit analysis, none of the
available approaches and case studies have been comprehensive and accurate (as also observed by Kihila
et al., 2014; see also Table 1). This is in particular due to the fact that regarding water reuse projects,
there is no universal way that can fit all cases due to differences in local circumstances (Chen and Wang,
2009).
When applying CBA to water reuse projects, it is often highlighted that the economic value of these pro‐
jects is often underestimated due to the failure of properly accounting for and quantifying the many ben‐
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DEMOWARE GA No. 619040
efits of water reuse (e.g. watershed protection, local economic development, improvement of public
health), which often have a non‐monetary nature (e.g. Godfrey et al, 2009).
In general, this is perhaps the most controversial aspect of CBA. Environmental goods and services that
are not normally bought and sold in the marketplace cannot readily be valued. Growing recognition of the
importance of these goods and services has been matched by increased attempts to develop monetary
valuations techniques. And this is particularly pertinent in the economic evaluation of water supply and
wastewater treatment projects. A variety of approaches has been developed to value environmental
goods and services. Two broad categories are Stated Preference and Revealed Preference techniques.
In addition, the benefits of water reuse projects can often be distributed among different entities, entities
which might not bear the costs of projects (Garcia and Pargament, 2015). Therefore one needs to be
careful in defining the group of beneficiaries (or losers) from an environmental or social change caused by
a water reuse project. While the people living in the vicinity are an obvious group, those who occasionally
visit the area will also be affected, as in fact will those who never visit it but assign a value on the contin‐
ued existence and quality of the environmental goods and services at stake. Indeed, the latter two groups
often outnumber the first, though the value they assign to the environmental goods or services may be
lower. Hedonic and Travel Cost methods, for example, have limitations in measuring these “non‐use”
valuations.
Among available techniques, also the so‐called benefit transfer poses limitations to an accurate valuation
of environmental changes. Sometimes policy makers require cost‐benefit analyses to be undertaken,
without wishing to commit the time and resources to analyse directly the benefits or costs arising from
the specific project. In these cases, valuations are generally taken from studies undertaken elsewhere,
applying a technique known as “Benefit Transfer”. Methodological issues with Benefit Transfer have pro‐
voked a lively debate and empirical testing (Brower and Spaninks, 1999). A notable case in the UK was the
1998 Public Inquiry into a proposal to extract borehole water from near the River Kennet in Wiltshire,
located in an area of outstanding natural beauty and a site of special scientific interest. The inquiry re‐
jected the Environment Agency’s CBA on the proposal, which had based its valuations on a Benefits Man‐
ual prepared by the Foundation for Water Research (1996). This example indicates that there is the need
to calibrate values of benefits and costs that have been taken from elsewhere.
Site specificity/demand driven assessments
In general, application of CBA is in fact very site and case specific. A lot depends on who are the users
and suppliers, what types of water quality is expected and desired, what level of technological innovation
is in place and can be put in place. Thus, every case study has to be analyzed from a demand‐driven per‐
spective. In the literature, many case studies can be found, but no universal tool has been developed for
the moment as CBA is site‐specific.
In the case of water reuse, developing new techniques for cost benefit analysis or customization of exist‐
ing approaches is particularly important in order to adapt them to the local situations (Kihila et al., 2014).
The link between supply of wastewater and demand for treated wastewater should be carefully investi‐
gated, so that users and beneficiaries can be identified. Some costs and benefits of a water reuse project
can also be site‐specific. The analysis of the previous models or approaches for cost‐benefit analysis indi‐
cates that most of them do not comprehensively account for all the cost and benefit elements for water
reuse in irrigation or for other users. Hence, customization of the most appropriate model is necessary.
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Deliverable D4.3
2.4 ExistingCBATool:theWaterReuseFoundationToolkit
Besides approaches and frameworks, a specific Tool (based on excel spreadsheets) was developed for
carrying out CBA for water reuse projects.
The Water Reuse Foundation developed an economic framework to support water managers in the iden‐
tification, estimation and communication of the costs and benefits of water reuse. In particular this
framework: (i) described the full range of market and non‐market costs and benefits of water reuse pro‐
jects; (ii) developed approaches to value benefits and costs; and (iii) assigned unitary monetary value to
costs and benefits. On this basis, the Water Reuse Foundation developed a spreadsheet model for use by
local planners: key variables for water, wastewater and water reuse projects can be entered, and the Tool
provides appropriate monetary values for cumulative benefits and costs.
This Tool was thoroughly analysed in the context of this project, and served as a source of inspiration for
the development of the DEMOWARE CBA Tool.
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DEMOWARE GA No. 619040
3 BuildingthebackboneoftheDEMOWARECBATool
The DEMOWARE CBA Tool aims at addressing current challenges and shortcomings of the application of
CBA to water reuse projects. In particular:
The Tool is specifically designed and customized for implementing CBA for water reuse projects,
thus reflecting their characteristics and specificities;
As mentioned earlier, the application of CBA to water reuse project is very site and case specific.
Thus a CBA tool must be flexible enough so that its application can be customized to the specific
case under evaluation;
In addition, the tool must facilitate the evaluation of water reuse projects by assisting decision
makers and/or plant managers in gathering data input, calculating indicators and providing
graphic representations of results.
To achieve the first two objectives, the Tool must be built on an appropriate conceptual and methodolog‐
ical framework. A framework provides principles and practices to conduct a cost‐benefit analysis. For
example the Guide to Cost‐Benefit Analysis of Investment Projects published by the European Commission
(EC, 2014b) is a sort of framework. It provides backbone on how to conduct an analysis. Step by step, the
reader is guided through tasks and functions needed to conduct an effective CBA.
This framework is a specific adaptation for water reuse project of the widely accepted methodology of
cost‐benefit analysis. It provides insights on what to take into account in the procedure and how to trans‐
form and combine data to sort useful indicators. Those indicators are then used to compare different
project and select the one providing the largest level of welfare.
However, in order to compare the efficiency of different projects (or project options) in providing wel‐
fare, the exact same methodology needs to be used. For example, when comparing cost‐benefits ratio of
two projects, the indirect effects must be taken into account for both projects, or otherwise nothing can
be inferred on such a comparison. To avoid bias, a framework has to define boundaries of what is includ‐
ed and what is not. What is inside these boundaries can be named a system.
A system is defined by stakeholders and flows between them. There are four main stakeholders in a wa‐
ter reuse system: consumers, producers (fresh water and reclaimed water), State and the environment.
Those four main stakeholders have interaction through flows such as goods (water), payments and pollu‐
tion. Consumers need to pay producers in order to enjoy specific water quality and quantity. Producers
need to cover their costs with the payments of consumers and with state subsidies. The costs of produc‐
ing reclaimed water depend on the different processes involved, as well as on output water quality ‐the
cleaner is the water the more expensive is the treatment. Producing reclaimed water has environmental
costs and benefits that need to be taken into account.
A system is composed by stakeholders of the project and the different flows binding them. Stakeholders
are interacting through those flows.
Such flows can be:
1. Money transfer such as payment, fees and taxes;
2. Flows of goods between producers and consumers;
3. Externality created by the consumption or the production (pollution).
Once boundaries of the system are set, and flows between stakeholders are known, listing of costs and
benefits can be conducted enabling the user to calculate indicators to help decision.
The framework described here aims to provide a specific system for the projects of water reuse, but it is
general enough to take into account a diversity of situations. This framework helps different users to
conduct a cost‐benefit analysis of water reuse projects in a comparable way.
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Deliverable D4.3
The DEMOWARE CBA Tool was developed on a conceptual and methodological framework built on two
levels:
1. Generic water reuse system framework: this layer defines and designs a generic water reuse
system so that it can include different treatment processes, different water sources and different
uses of treated wastewater. This system is as generic as possible so that it can be adapted to each
specific site, and it constitutes the basic layer upon which the DEMOWARE CBA Tool is built;
2. Cost‐benefit analysis framework: the second layer of the DEMOWARE CBA Tool it defines and
designs the different steps to be followed in CBA, and it allow for representing all flows occurring
among stakeholders and physical components of the system (physical flows such as wastewater
and treated water, financial flows, flows of non‐monetary costs and benefits).
These two layers constitute the backbone of the DEMOWARE CBA Tool. In addition, the Tool must also
support and guide decision makers in the evaluation of water reuse project: to do this, a user‐friendly
interface must be built. The user interface is thus the third layer of the DEMOWARE CBA Tool: it rests on
this two‐layer conceptual and methodological framework, as illustrated in Figure 1 below.
Figure 1 The three layers of the DEMOWARE CBA Tool
This chapter illustrates in detail these two layers composing the conceptual and methodological frame‐
work which underlies the DEMOWARE CBA Tool. The user interface is described in the next chapter.
Please note that the current version of the DEMOWARE CBA Tool is to be considered as preliminary: the
Tool is in fact being tested in two case studies (Sabadell and Braunschweig), and further testing will be
done before the end of the project. Based on the outcomes of the testing phase, shortcomings and limi‐
tations of the Tool will be addressed whenever possible. The final version of the CBA Tool will be made
available before the end of the DEMOWARE project.
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DEMOWARE GA No. 619040
3.1 Waterreusecost‐benefitsframework: settingagenericwaterreusesystemtoframetheanalysis
3.1.1 Settingboundariesofthesystemanddescribingflowsandstakeholders
The description of the system is based on a simplified diagram of water flows between stakeholders as
depicted in Figure 2. This diagram is then used to describe the different flows such as payment and exter‐
nalities (pollution). Each time a table is used to provide a quick description of the stakeholders and how
to describe them in the specified dimension.
Figure 2 Flows and stakeholder relation in water reuse systems
On the consumer side (yellow box) there are five different customers. A customer is an agent (person or
institution) that consumes water for a precise need. In the case of reused water, several customer groups
can be identified, depending on the final use: domestic water for potable use and domestic water for
toilet flushing and gardening, agricultural use for fresh food production (direct consumption) or agricul‐
tural use for industrial crops, industrial use for high pressure boiling or industrial use for cooling tower,
environmental uses (e.g. wetland restoration/ creation, improvement of river quality; in the case, the
environment can be said to be a customer). Those different customers have different needs in term of
water quality. For example, water for potable use needs to be of better quality than water for agricultural
use. A very high water quality can be used for every use that needs high quality water, but also for uses
that need a lower quality. This is the common baseline situation. Users are buying high water quality even
for uses that doesn't need such quality. The challenge is to match the quality needed for the consumer
and the quality provided by the supplier.
On the production side, there are three different suppliers (blue boxes). Fresh water sources combined
with water pumping and treatment units are the traditional suppliers of water. They provide high water
quality for potable use. But some of that water is used for less quality‐demanding use such as toilet flush‐
ing, cleaning, etc…
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Deliverable D4.3
Alternatives sources of water are private wells. Their quality and the amount of consumption is unknown
because some of these well are not declared. For some industrial use, wells are normally declared and
can be taken into account.
The last source of water is the reclaimed water coming from the treatment plant. The treatment plant
can provide different water quality levels to different users. The water quality depends on the treatment
process. Sometimes, the treatment plant provides only one water quality, which is good enough for a
many possible uses. In addition, another set of pipeline is needed to distribute reclaimed water because it
is not as clean as fresh water.
3.1.2 Paymentflows
Different payment flows between the different stakeholders of water reuse systems can be mapped as
depicted in Figure 3. In this diagram there are six new stakeholders that take part in the system. Two
stakeholders ‐water treatment plant and water company‐ are included in the diagram because they are
the managing entity of the treatment plant of grey water and the treatment unit of fresh water. The oth‐
er new stakeholders are the state, the population of the state, the suppliers of the water treatment plant
and the suppliers of the treatment unit.
Figure 3 Payment flows in water reuse systems
As previously seen, consumers can receive water from three different sources (fresh water from the wa‐
ter company, reclaimed water from the water treatment plant company, water from privately managed
well). Different pricing schemes apply to these three different sources.
A pricing scheme is often composed by a fixed part and a variable part. The fixed part is paid on an annual
basis to the supplier. It is paid every year. The variable part depends on water consumption by each con‐
sumer. Ideally, the final price of water (fixed + variable components) should reflect the costs of providing
this water: according to this principle, high‐quality recycled water could be more expensive than conven‐
tional water of the same quality level, as its provision can involve additional treatment procedures. How‐
ever, in this case consumers are likely to opt for conventional water, and this could be in conflict with
water efficiency objectives –in fact, using recycled water increases the overall efficiency of the system. To
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DEMOWARE GA No. 619040
overcome this, freshwater price schemes and reclaimed water price schemes can be set in coordination,
so that funds transfers can be created between the water company and the water treatment plant
through state taxes in order to achieve full cost recovery. Such a balance needs to be found by predicting
evolution of consumption and prices and cross prices elasticities.
However, in many cases taxpayers do not match with freshwater users and recycled water users: con‐
sumers are only a part of the total population. Thus a part of that population paying taxes for enabling
the water treatment plant to operate even though they do not uses water sources belonging to the sys‐
tem being analysed (because they are not located in the operational area of the studied water company
and the water treatment plant). In this situation, there is no full cost recovery, and the water system (in‐
cluding conventional and recycled water) need public subsidies to operate.
3.1.3 SupplierCostmappingandwatertreatment
The different costs occurring to the different suppliers are mapped (Figure 4). In the diagram, we can see
that water treatment processes (or water pumping and production) are linked to the customer. Thus,
each process has its own cost and exists to serve a specific customer group.
Figure 4 Supplier cost mapping of a water reuse system
Knowing this, we can define a process and a treatment unit. A process is a chain of treatment units. At
the end of the process, the water has reached the quality needed by the customer that is served. A pro‐
cess’s overall cost is then the sum of the costs of all treatment units for a given amount of treated water
(or pumped water). In this diagram, the water company has only one process made of 2 units (pumping
unit and treatment unit), and the water treatment plant has 5 processes where each are composed by a
different number of treatment units. For example, process A has three different treatment unit (First and
second treatment, A1, A2 and A3).
A treatment unit is a (mechanical, chemical, radiative) water treatment process that takes water of a cer‐
tain quality, improves that water quality in one or more quality dimensions (quantity of bacteria, sus‐
pended solid, viruses, minerals...) and pumps out that treated water. Multiple treatment units are needed
in a process because only one treatment unit cannot provide enough improvement on all water quality
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Deliverable D4.3
dimensions. Thus, each treatment unit is specialized in treating few quality criteria. This is another reason
explaining why a succession of treatment units is needed in a process of water treatment.
Each treatment unit has specific costs. Such costs can be divided into two categories: investment costs
and operational costs. These two types of costs are further divided into two categories: labor unit needed
to operate or build the treatment unit (multiplied by salary) and inputs (multiplied by costs of each kind
of inputs). For the investment costs, the overall cost is given by the effective building of the treatment
unit. For the operational costs, the overall cost is related to a given amount of treated water. Each treat‐
ment unit needs a defined minimum quantity of water to operate, a defined maximum capacity of treat‐
ment and an average quantity of treated water.
It is interesting to note that, as for the first and second treatment, a treatment unit can provide water for
different processes. Another element to take into account is the cost of building and maintaining pipes
for each use. Such cost can be calculated by multiplying a cost for a given distance of maintaining or
building a pipe multiplied by the overall distance.
This way of mapping costs makes it easier to compare costs of processes with revenues resulting from
water tariffs paid by consumers, and it also shows whether full cost recovery (without state intervention)
is occurring. Indeed, we know which amounts are paid by consumers (see payments flows diagram) for a
given amount of water and what are costs of the process of treating the same given amount of water for
that consumer. As we saw earlier, there are fixed costs and variable costs (annual payment for reim‐
bursement of investment costs could be defined as fixed costs) as well as fixed fees and variable pay‐
ments from customers (depending on quantity of water consumed). Thus, it is easy to compare fixed
costs and fixed revenues with the best situation is where fixed revenues are recovering fixed costs.
Furthermore, as previously seen, water quality can be defined by different dimension. Each customer
needs a water quality standard. A water quality standard is defined with lowest (and sometimes highest)
boundaries of various water quality determinants (e.g. BOD, COD, N, pH, etc.).
The environment is the last ‐but not the least‐ stakeholder that is not yet represented in the diagram.
Avoiding water shortages during drought periods is not the only benefits of water reuse. Water reuse
generates also other environmental benefits. Depending on the characteristics of a specific water treat‐
ment plant and the geographical settings, those benefits could be significant or marginal. On the other
hand, water reuse can also generate costs.
On the cost side, for example, operating a water treatment plant produces CO2 emissions. Using the flow
diagram for cost mapping, we see that a water treatment plant hosts multiple processes. These processes
are a chain of treatment units. We saw earlier that each treatment unit is characterized different mone‐
tary costs. It is possible to add another layer of cost within each treatment unit. For example, when build‐
ing the treatment unit, some energy needs to be used. Production of that energy could involve CO2 emis‐
sions and CO2 can be monetized. The international market price of CO2 tons can be retrieved and use to
calculate the total costs. The exact same reasoning can be applied to the energy used to operate treat‐
ment units for a given amount of treated water.
The chemical mechanisms needed to operate treatment units are another source of environmental costs.
These mechanisms can emit CO2 (or other carbon dioxide equivalent gases). Such emissions need to be
taken into account.
Furthermore, there might be additional environmental costs associated with pollutant emissions. Some‐
times it is not possible to assign a monetary value to these emissions. For example, operating some
treatment units could generate types of waste that cannot be monetized. Amount in kilograms of dispos‐
als created for a given amount of treated water needs to be known.
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DEMOWARE GA No. 619040
On the benefit side, water reuse can generate benefits linked to a less intensive use of water pumping,
creation of downstream habitat and environmental restoration.
3.2 WaterreuseCBAframework
Once the generic system is built, the second step in the setting up of the DEMOWARE CBA Tool was the
development of the CBA Framework. In other words, the framework is the underlying logic of the Tool,
and it established the logical order of the operations executed by the Tool, as well as the overall method‐
ology applied by the Tool when conducting the CBA.
Within the DEMOWARE CBA Tool, the cost‐benefit analysis is conducted following four steps:
1) Project identification, socio‐economic context and mapping of institutional context, definition of
scenarios;
2) Financial analysis;
3) Economic analysis; and
4) Risk assessment and sensitivity analysis.
In the Tool, each step of the CBA is modelled on the generic water reuse system presented in the previ‐
ous section.
First, a water reuse project has to be identified. Project objectives address previously identified issues
about water (water shortage or scarcity, ecosystem pollution...). Then the socio‐economic context has to
be described and issues must be sorted. In this description, the socio‐economic and institutional context
needs to be simplified, so that it can be projected on the hydrological diagram presented in the previous
section. Once the actual situation is mapped, the different most pertinent options for water reuse need
to be described and mapped using the same system scheme.
The second step is the financial analysis. This step can be broken down in 3 stages:
1) Identification and accounting of costs and benefits
2) Discounting of costs and benefits; and
3) Calculation of financial performance.
To conduct the financial analysis, all the financial costs and benefits of the projects needs to be identified.
Financial costs belong to two categories: operating costs and investment costs. Such costs must be identi‐
fied and assessed for each proposed scenario and for each year of the lifetime of the project. Identically,
revenues from reclaimed water and fresh water supply have to be estimated. Once such costs and reve‐
nues are known several indicators are calculated: Financial Net Present Value and Financial Internal Rate
of Return of the project of reclaiming water.
The third step is the economic analysis. The economic analysis is carried out following five steps:
1) Conversion of market prices to accounting prices;
2) Monetary valuation of non‐market impacts;
3) Inclusion of additional indirect effects;
4) Discounting of the estimated costs and benefits;
5) Assessment (calculation) of the economic performance.
In some cases, market prices can differ from accounting price inducing bias in the results of the costs‐
benefits analysis. Such prices thus need to be modified so that the economic analysis can be conducted.
Non‐market impacts (in our case environmental and social impacts) have to be identified and monetized.
Monetary valuation can be done with different methodology (price transfer, declared preference meth‐
ods, revealed preferences methods). Still, not all impacts can be valued, and these must be kept in mind
during the evaluation –and a quantitative measure, although non‐monetary, should also be provided.
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Deliverable D4.3
Economic costs and benefits are then discounted, and indicators of economic performance are calculat‐
ed.
The last step aims at evaluating the resilience of the project to different shocks, such as for example price
shock, increased costs, unplanned events, increasing investment needs, etc…
This step involves three phases:
Sensitivity analysis;
Options analysis;
Risk analysis.
The following sections describe in more detail each of these steps.
3.2.1 Qualitativedescriptionoftheactualsystemandthedifferentoptionsoftheproject
3.2.1.1 Linkingsocio‐economiccontextandprojectobjectives
Understanding the socio‐economic context and the need for a water reuse project is the first step of the
whole analysis. The socio‐economic context analysis aims to answer several questions:
Questions about the macroeconomic context: How is the macroeconomic context? Is the popula‐
tion growing? Is GDP growth likely to lead to more water demand in the future?
Questions about the relevance of the project: do water shortages hinder economic development
in the area? Would an additional source of water be needed for the industrial, agricultural and/or
domestic sectors?
Questions about stakeholders: which stakeholders are affected by water issues in the area? What
are they using water for? Could they be reached by a water treatment centralized system?
Answers to those questions may help the analyst to set priorities, define objectives of the project and
establish a baseline.
3.2.1.2 Describingthesystembaselineanddefiningoptionsoftheproject
Identifying stakeholders helps constructing a simplified representation of the system. First of all, a simple
representation of the actual system is needed as well as some data about it.
The baseline system has to be described and depicted (see example in Figure 5). Based on that baseline
system, the baseline scenario has to be drawn. The baseline scenario could be a “do‐nothing” scenario
where there will be no additional capital expenditures. The baseline scenario could be a “do‐minimum”
scenario where there are some capital expenditures in order to comply with legislation or avoid deterio‐
ration.
Some data (in red in the diagram) have to be retrieved, such as water production by the water supplier,
water consumption, quantity of grey water produced and treated water released. For each piece of data,
the expected trend in the coming years is also needed. Such data give indication of who are (or will be)
the largest water consumers. By comparing consumption level with stakeholder who needs additional or
secured water supply it is possible to have a first estimation of the size of the project.
At this stage, potential user groups for recycled water must be identified. For example, farmers could be
concerned because they need water during summer (even during drought). Or the environment might be
concerned, if pollution of water bodies by brine must be avoided. Or it could be both. Once potential user
groups are listed, different options for a water reuse system must be developed –options which can re‐
spond to the water needs of priority user groups.
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DEMOWARE GA No. 619040
Figure 5 Schematic representation of a baseline scenario depicting the different users and water flows
For each option, the different flows of water from different sources to various users are easily illustrated
in a flow diagram. In the example below (Figure 6), the projected water reuse system will only target the
agricultural sector.
Figure 6 Schematic representation of one potential water reuse system (Option 1)
In this diagram, users that have not been served by the projected water reuse system were grouped to‐
gether. Farmers can now buy water from two sources (conventional irrigation water and reclaimed wa‐
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Deliverable D4.3
ter). At that stage the quantity of treated water that will be bought by farmers and the respective reduc‐
tion in consumption of fresh water need to be estimated. That decrease in consumption of fresh water
will reduce the quantity of fresh water produced by the water company and relieve the fresh water
source from that pressure.
A second development option can target both agriculture and the environment at the same time (Figure
7). Recycled water can in fact also be used for water body replenishment to avoid freshwater pollution by
salt water.
Figure 7 Schematic representation of a potential water reuse system (Option 2)
The release of reclaimed water into the river will have no effect on freshwater consumption, whereas it
will substantially decrease the risk of pollution of freshwater sources by brine. With this option, the water
reuse scheme will mainly deliver environmental benefits, which will be assessed in the context of the
economic analysis –thus they will not be part of the financial analysis.
In case it is relevant, alternative water sources must also be considered in the analysis –for example im‐
porting water from other water basin. An example of how these alternative options can be included in
the diagram is provided in Figure 8.
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DEMOWARE GA No. 619040
Figure 8 Schematic representation (sources, flows, users) of water supply system including alternative supply options (Option 3)
For example, in the case of water imports, imported water has the same quality as the freshwater
pumped locally and can then be used for a large variety of usage.
Water quality is an important parameter to take into account. As previously illustrated, a consumer is an
agent using water of a specific quality level. The specificity of a water reuse project is that output water
quality can be tailored for a specific use. In fact, the less important is the treatment, the cheaper is the
water. The link between type of water use, necessary water quality level and adequate treatment process
thus needs to be specified when developing options for water reuse.
Viewing options components as a combination of three elements: a treatment process / a water quali‐
ty standard / a customer group
In Option 2 as depicted in Figure 9, two user groups are targeted by the water reuse system –agriculture
and the environment. In this case, the treatment process must be further specified: in fact, these two
users need two different water quality levels, and thus two different treatment processes.
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Deliverable D4.3
Figure 9 Layout of alternative treatment and supply options for a water reuse system
3.2.2 Financialanalysis
For carrying out the financial analysis, financial costs and benefits of each project option can be modelled
on the basis of the full flow diagram built so far; if the diagram does not include all necessary information,
some cost and benefit information will likely be overlooked in the financial analysis.
3.2.2.1 Costs
Financial costs of water reuse projects include: (i) investment costs (required to build the plant and the
pipeline network), occurring only at the beginning of the project and for five years maximum; and (ii)
operation and maintenance costs, occurring each year for the entire lifetime of the project.
The overall costs are summarized in Table 2, where the intensity of the colour tone reflects the amount of
occurring costs:
Table 2 Distribution of investment and O&M costs along the project life
years 0 1 2 3 4 5 6 7 x
Investment costs
Operation and
maintenance costs
Investment costs are composed by two main elements: the costs of building the plant and the costs for
setting up the pipeline network. The costs for setting up the pipeline network depend on the situation
where it is developed (city, campaign…) and the type of materials used. Several cost elements are in‐
volved in building the water treatment plant. The DEMOWARE CBA Tool offers the possibility to compare
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DEMOWARE GA No. 619040
financial and economic efficiency of supplying different water quality levels. This makes project options
comparable. Different project options will involve different treatment processes, and thus different costs.
Investment costs also involve general costs, which are independent on the type of treatment; these in‐
clude costs for land purchase, administrative buildings etc. These costs are mapped as exemplified in
Figure 10.
Operation and maintenance (O&M) costs, e.g. for energy, are also linked to the pipeline network and the
plant itself; in the latter case, O&M costs are also dependent on the type of treatment and thus on the
required input water quality.
Figure 10 Mapping the costs of water reuse projects
3.2.2.2 Revenues
In a water reuse project, revenues can come from different sources. On this basis, two categories of rev‐
enues can be identified:
Revenues accounted for in the calculations of cost‐recovery levels: these revenues come from
users’ payments for either conventional or reused water. Generally, customers are charged a
two‐part tariff, consisting of: (i) a fixed part, paid annually and irrespective of the volumes con‐
sumed; and (ii) a variable (volumetric) part, charged on the basis of the actual volumes of water
used. The fixed part is meant to recover the fixed costs of providing water, whereas the volumet‐
ric component is meant to recover variable costs –that is, those costs depending on the quantity
of water delivered to consumers. In water reuse projects, the price of recycled water depends on
the quality of the water delivered: the higher the quality, the higher the costs of treating it. Thus,
consumers receiving water of different quality levels will face different price levels (if subsidies
are not in place).
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Deliverable D4.3
Revenues not accounted for in the calculations of cost‐recovery levels: this category includes all
revenues that do not come from water sales and, in particular, all subsidies from the state, mu‐
nicipalities or water agencies. These revenues are not only generated by recycled water users,
but by all citizens. These revenues must of course be taken into account in the financial analysis,
but they are not taken into consideration when assessing cost‐recovery levels.
3.2.2.3 Estimatedevolutionofdemandandprices
The projected future trends of water demand and prices can be inferred from the analysis of the socio‐
economic context of the area served by the water reuse project, based on the projected demographic
trends.
3.2.2.4 Calculationofthefinancialindicators
Once financial costs and revenues are known for each scenario, these figures can be used to calculate
financial indicators, which will give the decision maker some insight about the financial viability of the
project. A viable, sustainable project will be able to cover its costs through its revenues; in other words,
the financing sources must match disbursements each year.
Because costs and revenues are distributed through time it is needed to take into account time prefer‐
ence with a discounting factor. Choice of a discounting factor depends on different parameters as infla‐
tion rate, type of project, geographical situation, etc.
The first indicator to be calculated is the discounted cash flow for each year, for the whole project life‐
time. The sum of that discounted cash flow is the financial net present value (FNPV).
A project with a negative FNPV is not financially sustainable, meaning that the water reuse system would
need grant or subsidies to operate. One of the pitfall (and advantage) of this indicator is that it is ex‐
pressed in monetary terms and it depends on the scale of the project.
However, it is difficult to compare and evaluate water reuse projects of different size using the FNPV only.
A second indicator is needed: the financial internal rate of return (FIRR). This is defined as the discount
rate which produces a FNPV equal to zero: a project with a negative FIRR, or a FIRR lower than the ap‐
plied discount rate is not financially sustainable. Water reuse projects of different size can then be com‐
pared and evaluated based on the FIRR.
3.2.2.5 Waterusergroups:whowins?wholoses?
Under this framework, it is possible to assess which user groups would win or lose from the water reuse
project under evaluation. In fact, in order to achieve full cost‐recovery, some user groups may pay more
than the marginal price of water to subsidize other user groups (mechanism also known as cross‐
subsidization). For example, to provide an incentive to use recycled water, the price of reused water can
be kept slightly lower than the full cost of provision, whereas the price of traditional water can be kept
slightly higher than the full cost of provision, so that the overall provision costs of reused and convention‐
al water are recovered by users. The financial CBA allows for identifying these mechanisms.
3.2.3 Economicanalysis:fromfinancialvaluestoeconomicvalues
Switching from financial analysis to economic analysis is switching from the point of view of the owner of
the project to the point of view of the social planner who seeks to maximize welfare of the whole society.
The estimation of the overall welfare created by a water reuse project implies multiple steps. First of all, if
market prices and values included in the financial analysis do not fully reflect their social opportunity cost,
these have to be translated in accounting prices and values. Secondly, all positive and negative impacts
on the overall societal welfare must be identified and listed –thus including environmental, social and
economic impacts, as well as risk management aspects. A monetary value must be estimated for each
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DEMOWARE GA No. 619040
impact, and all values must be integrated in the financial analysis; Indicators such as the Economic Net
Present Value (ENPV) and Economic Internal Rate of Return (EIRR) can then be computed.
A water reuse project can involve several non‐market impacts, and their identification can be a time con‐
suming task. The monetary valuation of these impacts can also be very challenging, although several
methodologies are now available.
3.2.3.1 Environmentalimpacts
The environmental impacts of water reuse projects are normally extremely significant: a large share of
the value generated by these projects is in fact linked to environmental protection. Without an accurate
accounting of all environmental benefits, a scenario that would have a positive ENPV could be rejected.
The flow diagram of each project option can also be used to identify environmental impacts. An example
of an identification of such benefits is presented for option 2 in Figure 11. As shown, a water reuse pro‐
ject can generate both environmental benefits and costs.
Figure 11 Identification of environmental impacts in the flow diagram for water reuse scheme option 2
In option 2, environmental benefits are manifold, and some of them are linked to a specific treatment
process. The treatment process C, for example, supplies high quality water for water body replenishment.
This process does not generate financial revenues but it does deliver environmental (economic) benefits,
which must be accounted for in the economic analysis. Two main benefits of water body replenishment
can be identified: (i) the decline of groundwater levels is reversed; and (ii) a barrier against seawater in‐
trusion is created. In addition, also the provision of reclaimed water for irrigation purposes indirectly de‐
livers environmental benefits: reclaimed water is in fact used as a substitute of freshwater, and thus
freshwater abstraction is reduced. This also implies a reduction in CO2 emissions linked to water pump‐
ing.
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Deliverable D4.3
In some cases, however, it is difficult to link environmental benefits to a specific use. For example, the
reduction of pollutant discharges into the river is associated to both the provision of reclaimed water to
agriculture and the re‐injection of reclaimed water into the ground. Pollution reduction is a cumulative
effect of these two processes, and it is impossible to establish the extent to which each process contrib‐
utes to pollution reduction.
One of the major benefits of implementing a water reuse project is that the overall water supply system
can better respond to drought events. Drought events reduce available freshwater resources, resulting in
declining supplies to consumers. Recycled water can mitigate water shortages by (at least partly) filling
the gap between water demand and availability.
The monetary value of this important benefit can be assessed using two parameters: the probability of
bankruptcy or relocation of existing economic activities with and without the provision of reclaimed wa‐
ter, and the value added of each of these activities.
Water reuse projects also involve environmental costs, but these are less significant than environmental
benefits –and it is much easier to assess their monetary value. These costs stem from plant operations
(water treatment plant and pumping and treating fresh water) and, in particular, to energy use –in fact,
energy consumption involves CO2 emissions.
For each treatment unit, both direct energy consumption (used by the treatment unit) and indirect ener‐
gy consumption (waste treatment) must be assessed. The total quantity of energy consumed allows for
calculating overall greenhouse gas emissions –to assess this, the energetic mix used in the country (or in
the area) must be known.
Other environmental costs can occur outside the water treatment plant. In the case of water body re‐
plenishment, the quantity of reclaimed water re‐injected underground is smaller than the quantity of
fresh‐water previously abstracted from ground water bodies. The quality of re‐injected water will also be
different, so that water body replenishment might cause an increase in salinity due to brine disposal.
3.2.3.2 Socialimpacts
Social impacts can also include both social benefits and costs.
In the case of social benefits, it might be difficult to assign them a monetary value; however, it is im‐
portant to list them, so that at least a qualitative comparison between project options can be conducted.
Recreational possibilities created by the water treatment plant are the most straightforward type of so‐
cial benefit –water reuse activities can in fact create recreational areas along the river (in‐stream and
near‐stream recreation). Reused water supply can also be used to irrigate public parks or golf courses,
thus creating additional recreational opportunities. Additional reused water supply can also contribute to
the cultural or aesthetic value of recreational sites. Different methodologies exist to assess the monetary
value of these benefits.
In turn, social costs are mainly associated to plant activities, and in particular to odor issues and the loss
of the aesthetic value of landscape around the plant location.
Health impacts are a particular category of social impacts, as they can be manifold. Reclaimed water can
in fact be ingested (e.g. from the tap, when swimming in the river, indirectly by consumption of fresh
food irrigated with reclaimed water) or inhaled (from sprinkle irrigation or cooling towers, when recycled
water is used).
The potential impact on health of ingesting reclaimed water depends on the quality of recycled water
(and thus on the treatment process). Consuming reclaimed water tailored for potable use is not danger‐
ous in principle, but what happens if the treatment process fails? And what could be the effects of inhal‐
ing sprinkled water leaking from a cooling tower using reclaimed water?
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DEMOWARE GA No. 619040
This framework uses a probabilistic approach to assess the monetary value of health impacts associated
to the use of reclaimed water. This approach is based on four parameters: the probability of ingesting/
inhaling reclaimed water, the probability of a failure in the treatment process, the number of people af‐
fected, and the costs of being treated / hospitalized / deceased from the consumption/inhalation of the
reclaimed water. The probability of failure, in particular, derives from the probability of failure of each
treatment unit, as the impact of failure can differ across different units.
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Deliverable D4.3
4 UsingtheDEMOWARECBATooltoperformcost‐benefitanalysisofawaterreuseproject:theuserinterface
4.1 TheDEMOWARECBATool:howdoesitworkinpractice?
The user interface is the third layer of the DEMOWARE CBA Tool, and it aims to facilitate evaluation of
water reuse projects by assisting decision makers in gathering data input, calculating indicators and
providing graphic representations of results.
The user interface is built in logical order, and guides users in entering the necessary data to perform
CBA. The user has to enter such data into the appropriate fields of the tool. Once data are entered, the
tool calculates indicators (FNPV, ENPV) and graphs that can guide decision makers in the choice of the
most viable option for a water reuse system. The basic logic of the user interface is presented in Figure
12.
Figure 12 Basic logical path underlying the DEMOWARE CBA Tool
This process is applied to each step of a standard cost‐benefit analysis of investment projects, as illustrat‐
ed in Figure 13.
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DEMOWARE GA No. 619040
Figure 13 Logical framework of the DEMOWARE CBA Tool: data flows, processes and outputs
Some results of the financial analysis are used as input to the economic analysis; similarly, results from
both financial and economic analysis are then used as input to the sensitivity analysis. In the diagram
presented above, sensitivity analysis is performed at the end of the process, but it can also be conducted
twice –after the financial analysis and after the economic analysis.
4.2 Theuserinterface:howdoesitlooklike?
This section aims at illustrating, step by step, how to proceed with performing cost‐benefit analysis with
the DEMOWARE CBA Tool from a user’s perspective. The full tables of input data and output indicators
are provided in Annex I.
4.2.1 Projectidentification,contextinformationanddefinitionofscenarios
As a first step, the user is asked to enter information on the context, such as economic, social and demo‐
graphic area in which the water reuse project will be implemented, as well as information on the water
market (demand and supply, pricing strategies). These data are listed in Table 3.
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Deliverable D4.3
Table 3 Using the DEMOWARE CBA Tool – Data input to define the context of the projected water reuse project
Context description
Data input Macro‐economic context, estimated GDP growth in the country/area, social context, demo‐
graphic context, estimated annual population growth in the country/area, occurrence of water
shortages, sectors in need of additional water supply/ affected by water shortages/ likely to be
affected by shortages in the future, water users by sector, water shortages by sector, percentage
of users reachable by a water reuse system (also by sector), description of existing water supply
system, existing supplier, water quality levels needed by each user
Based on this information, the Tool creates some illustrative and summary graphs, presented in Figure
14.
Figure 14 The DEMOWARE CBA Tool – Illustrative summary graphs on the context oft he projected water reuse project
As a second step, the user must enter in the Tool the information on each scenario to be evaluated –
scenarios must clearly be built before running the Tool. For each scenario, the data to be entered are
listed in Table 4.
Table 4 Using the DEMOWARE CBA Tool – Data input to describe the different project scenarios under evaluation
Description of project scenarios and related water flows
Data input For each scenario:
Context description of scenario, existing and projected suppliers for each sector, estimated
annual growth of water users (also by sector), number of customers (per supplier and per
sector), average yearly water consumption by user (by sector and supplier), total yearly water
consumption by sector and supplier, annual water volumes entering the water treatment
plant, annual water volumes re‐injected into the river, annual water volumes lost by the sys‐
tem (leakages)
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DEMOWARE GA No. 619040
Different scenarios for the same water reuse project can include different treatment options and differ‐
ent groups of users of recycled water. The Tool allows for selecting different user groups. For each user
group, different types of treatment units can be created and selected. This is shown inFigure 15.
Figure 15 The DEMOWARE CBA Tool – Building a project scenario
4.2.2 Financialanalysis
For each scenario, financial data on costs and revenues must be entered; these data requirements are
listed in Table 5.
Table 5 Using the DEMOWARE CBA Tool – Data requirements for performing the financial analysis
Data input (to be entered by users)
Financial analysis – Finan‐
cial costs
For each scenario:
Unit price of pipeline work by user sector, length of pipeline to link supplier and user
(by sector), unitary price for general investment costs for suppliers, quantity of
unitary investment costs (per year), cost of building treatment units (per each unit),
overall cost of building the entire treatment process (by sector), unitary price for
pipeline maintenance (per sector), unitary O&M general costs for suppliers, quantity
of unitary general costs (per year), unitary O&M cost for each treatment unit, quan‐
tity of unitary O&M cost per year
Financial analysis – Finan‐
cial revenues
Unitary price of reused water delivered by sector, total revenues of water supplier
from providing water (by sector), total amount of yearly subsidies to the supplier
In practical terms, when building the project scenarios, for each treatment unit the Tool requires the user
to enter data on financial costs, as shown in Figure 16.
User groups
Treatment units
serving each
group
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Deliverable D4.3
Figure 16 Using the DEMOWARE CBA Tool – Entering data on financial costs of each treatment unit
Other costs and revenues, as well as the selected discount rate, can be inserted in the page as illustrated
in Figure 17.
Figure 17 Using the DEMOWARE CBA Tool – Entering and visualizing data on financial costs and revenues
From the results of the financial analysis, the Tool creates graphs and excel tables to illustrate results, as
shown in Figure 18.
For each treatment unit, cost information must be entered
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DEMOWARE GA No. 619040
Figure 18 Using the DEMOWARE CBA Tool – Output of the financial analysis
As main outputs of the financial analysis, the Tools provide the Net Present Value, the Internal Rate of
Return and the Benefit‐Cost Ratio (based only on financial costs and revenues).
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Deliverable D4.3
4.2.3 Economicanalysis
For each scenario, data on economic costs and benefits must be entered; these data requirements are
listed in Table 6.
Table 6 Using the DEMOWARE CBA Tool – Data requirements for performing the financial analysis
Economic analysis
Data input‐ Conversion
factors
Conversion factors for all unitary costs and prices entered in the financial analysis
(both costs and revenues)
Data input – environmental
costs
For each scenario:
Set‐up phase: Qualitative description of pollution types (during building of general
services and treatment units), volumes of pollution emissions for each pollution
type, unitary cost of pollution emissions for each pollution type
During operation phase: Qualitative description of pollution types (due to operation
of general services and treatment units), volumes of pollution emissions for each
pollution type, unitary cost of pollution emissions for each pollution type
Data input – environmental
benefits
For each scenario:
General environmental benefits from water reuse: Qualitative description, quantity,
unitary monetary value
Environmental benefits induced by decreased provision of conventional water:
Qualitative description, quantity unitary, monetary value
Environmental benefits induced by supplying reclaimed water to a specific sector:
Qualitative, quantity, unitary monetary value
Water security and increased resistance to drought events: probability of bankrupt‐
cy, relocation out of the area concerned by the water reuse system (by sector),
value added of each sector
Data input ‐ social costs For each scenario:
General social costs: qualitative description, quantity, unitary monetary value
Social costs due to increased or decreased activity of water suppliers: qualitative
description, quantity, unitary monetary value
Health costs: proportion of consumers (agents) affected in case of a failure of the
treatment process (by sector), probability of failure (by sector), cost of treatment in
case of failure (by sector)
Data input ‐ social benefits For each scenario:
Qualitative description of social benefits, quantity of social benefits, unitary mone‐
tary value of social benefits
In practical terms, data must be entered for each economic cost or benefit as shown Figure 19; economic
costs and benefits can be entered at the factory level (whole treatment plant) or at the treatment unit
level.
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DEMOWARE GA No. 619040
Figure 19 Using the DEMOWARE CBA Tool – Entering data on economic costs and benefits
Different types of economic costs and benefits can be entered, as shown in the Figure 20. By clicking on
the icons the user can select, for example, whether to enter an economic benefit, an environmental ben‐
efit, a health benefit, a benefit associated to cultural value or a benefit associated to water quality.
Figure 20 Using the DEMOWARE CBA Tool – Creation of new economic costs and benefits When creating a new economic cost or benefit, the Tool opens a new window, as shown in Figure 20. Currently, the window is titled “create new
Treatment Unit”, but it is actually a mistake of the current version that needs to be fixed in the final version. The correct title would be, obviously, “Create new economic cost or benefit”.
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Deliverable D4.3
After all economic costs and benefits have been entered the Tools produces excel tables and graphs to
illustrate the results of the analysis, similarly to what was shown for the financial analysis. Also in this
case, the Tool calculates the Net Present Value, the Economic Internal rate of Return and the Cost‐Benefit
Ratio.
4.2.4 Sensitivityanalysis
The sensitivity analysis is a particularly interesting feature of the DEMOWARE CBA Tool. Sensitivity analy‐
sis is a usual (and required) step of the CBA, and the Tool makes it extremely easy and handy to perform
it. Sensitivity analysis assesses the sensitivity of results to changes in some parameters, e.g. the impact
that a change in one or more parameters could have on the financial and economic sustainability of the
project –the Tool can in fact perform this analysis on both the financial and economic analysis.
For example, cost sensitivity can be assessed. For each treatment unit of each scenario, cost parameters
can be changed to test their impact on the financial feasibility of the project, as shown in the Figure 21.
Figure 21 Using the DEMOWARE CBA Tool – Changing cost parameters to test their impact on the financial feasibil-ity of the project scenario
The same can be done with other parameters, as for example pricing strategies: this will be particularly
useful when working on the correct pricing strategies for water reuse as part of WP4. The Tool will in fact
allow for testing the financial and economic effects of different pricing strategies and, more in detail, the
combined effects of pricing strategies for conventional water supply, reused water supply and
wastewater collection and treatment –as these three services are often linked, and can be provided by
the same operator. The Tool can also estimate the expected impact of different pricing strategies on wa‐
ter consumption by different user groups (cross‐elasticities of water demand).
4.3 ImprovementsandnoveltiesprovidedbytheDEMOWARECBATool
The DEMOWARE CBA Tool was designed to support plant managers and planners in the evaluation of
alternative water reuse projects and in the selection of the most viable one. In particular, it is aimed at
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DEMOWARE GA No. 619040
simplifying the complex task of conducting a CBA analysis, by providing a simpler data collection frame‐
work as compared to usual CBA analysis. The Tool also performs analysis and elaborates graphs which
allow for evaluating the impact of different decisions on the overall financial and economic viability of a
project option – for example, it allows for evaluating the viability of alternative pricing strategies. Overall,
the DEMOWARE CBA Tool is tailored on the specific characteristics of water reuse projects.
Table 7 illustrates the main improvements and novelties of the DEMOWARE CBA Tool as compared to
other available CBA frameworks.
Table 7 Improvements and novelties provided by the DEMOWARE CBA Tool
Main improvements and novel‐
ties
What does the DEMOWARE CBA Tool provide?
Linking supply and demand, taking
into account the demand‐driven
specificity of reclaimed water mar‐
ket
Link between supply, quality of water and demand to estimate costs and benefits : treatment process, water quality and customer
Estimate of financial cost and benefits of each project option
Definition of the treatment process as a succession of treatment units matching consumer expected standards
Estimate of the costs of the treatment process of a given quality stand‐ard
Comparison of costs and benefits for each treatment process and pro‐ject option.
Assessing the impact of reused wa‐
ter consumption on freshwater
consumption
Estimation of the potential decrease in consumption of freshwater in favor of reclaimed water
Estimation of the economic impact of less fresh water abstraction (val‐ue transfer)
Definition of cross‐price elasticity of demand
Estimation of the impact of different price of reclaimed water on fresh water consumption.
Improving accessibility of the tool
for an effective use by plant manag‐
ers and decision makers
The Tool is a web‐based application
The Tool is accessible from anywhere upon login
Work can be saved online
No specific software is needed
The Tool is easy to maintain and update
4.4 LimitationsoftheDEMOWARECBATool
The tool is particularly tailored to a situation where a new water reuse project is considered, which is
driven by an existing (high) demand for water ‐ and where water treatment is linked to this reuse. In this
case it is particularly relevant:
1) to take into account the different (alternative) water providers (including public water supply),
and
2) to consider all treatment costs in the framework of a cost‐benefit analysis.
However, these two basic functionalities of the tool are not of interest in a situation where wastewater
treatment already exists or where the only alternative to wastewater reuse consists in private water ab‐
straction. In the first case, where wastewater treatment is already existing, the treatment costs are exist‐
ing independently from reuse (e.g. due to compliance with current regulation, health or environmental
reasons), and shall within a CBA not be attributed to the reuse. This would otherwise represent an over‐
estimation of the actual costs of introducing reuse.
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Deliverable D4.3
In the second case, where in the absence of reuse the water is privately abstracted – e.g. from groundwa‐
ter – the avoided costs of groundwater abstraction can be accounted for as benefits of the reuse. How‐
ever, this does not require the consideration of different pricing strategies as foreseen by the tool, as the
water users directly cover the costs of water abstraction in the form of investment and operational costs
of water pumping – without any intermediate water supplier which would price their service.
The tool is furthermore designed for carrying out ex‐ante CBA’s, meaning planned investments in water
reuse which consider different options at the planning stage. In the case where existing reuse projects
want to analyse the cost‐benefit ratio of past investments or of current operational costs (ex‐post CBAs),
slightly different approaches to CBA need to be applied (see for example EC, 2014b; CSIL & DKM, 2012). It
still remains to be checked in how far the DEMOWARE CBA tool can be adapted in order to be used also
for ex‐post CBA’s.
Other limitations of the tool consist in the fact that it focuses only on the “water part” of the wastewater
reuse. The reuse of nutrient components or the sludge is not specifically foreseen, although in particular
when the treated effluent is used for irrigation, the benefits linked to the simultaneous distribution of
nutrients can play an important role. Costs and benefits linked to nutrient use can, however, be added
within the tool manually, in the same way as for example monetarised environmental benefits.
The testing of the tool is an ongoing exercise, and further limitations – and advantages – will be deter‐
mined through this process.
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5 Valuingtheenvironmentalbenefitsofwaterreusesystems
Economic valuation refers to the assignment of money values to non‐marketed assets, goods and ser‐
vices, where the money values have a particular and precise meaning. Non‐marketed goods and services
refer to those which may not be directly bought and sold in a market place (Hanley and Barbier, 2009)
For example, environmental goods and services provide many benefits to humans and other organisms,
but their value is very often not expressed in monetary terms since users (often) do not pay for their use;
thus they are typically viewed as non‐marketed goods. Examples of environmental goods and services
would be clean air, clean water, landscapes, green transport infrastructures (footpaths, greenways etc.)
public parks, rivers, mountains, forests, beaches etc. Another kind of non‐marketed goods and services
refer to social values which are often produced as externalities of a particular economic or human activi‐
ty, but not accounted for in any market or not having any tangible monetary value.
In the case water reuse, there exist environmental and social externalities not accounted for in the price
of reused water that could be taken as non‐marketed goods or services since the potential benefits of
recycled water extend beyond its mere use. For example, water recycling can provide indirect benefits
such as: sustainable water use, leaving higher quality water available for drinking water supplies; reduced
disposal of wastewater into the environment (rivers, oceans etc.); increased flows in rivers when recycled
water is used to augment flows, or reduce water off take; watering of amenity sites such as parks and
wetlands; etc.
In terms of policy or project appraisal, the basic rationale for assigning economic values to non‐marketed
goods or services is that they need to be accounted for in decision making processes. Since these goods
and services are actually valued by society, even if not having a direct monetary value, it would be mis‐
leading to exclude them from decision making processes that seek to maximise social well‐being (Pearce
et al. 2002) One form of policy appraisal making full use of all underlying economic values of a given pro‐
ject or investment (including non‐marketed externalities) is Cost‐Benefit Analysis (presented in the previ‐
ous section). As previously mentioned, failure to properly account for non‐market benefits of water reuse
project can result in misleading CBA results –i.e. a water reuse project might seem economically unsus‐
tainable just because not all economic, environmental and social benefits have been properly taken into
account and valued. Hence, there is the need for economic valuation techniques that allow estimating
the value of said non marketed goods and services.
Several valuation techniques exist for the valuation of non‐market benefits. In the DEMOWARE project,
stated preference techniques were selected to evaluate the environmental benefits of water reuse in the
demo sites of Sabadell and Braunschweig. This chapter illustrates in detail the techniques which were
applied; the results will be presented in deliverable D4.4.
5.1 Statedpreferencevaluationsurveys
Broadly, there are two ways of estimating the economic values attached to non‐marketed goods and
services (and “bads”): using revealed preferences or stated preferences. Revealed preference approach‐
es identify the ways in which a non‐marketed good influences actual markets for some other good, i.e.
value is revealed trough a complementary (surrogate or proxy) market2. Stated preference approaches
on the other hand are based on constructed markets, i.e. they ask people what economic value they at‐
tach to those goods and services. In other words, the economic value is revealed trough a hypothetical or
constructed market based on questionnaires (Pearce et al. 2002). “Choice Experiment” and “Contingent
2 An example of a revealed preference approach would be the measurement of the economic value of noise nuisance as reflected in house
prices: house in noisy areas are likely to be cheaper than comparable houses in quieter but otherwise similar areas.
47
Deliverable D4.3
Valuation” are both valuation methods which stem from the stated preference valuation approach. Both
techniques are similar in principle, in that they use survey instruments (questionnaire) to assess people’s
value of a particular good or service by estimating their willingness to pay for that good or service. None‐
theless both methods have their advantages and weaknesses and are better suited for use depending on
the context and nature of the valued good or service. The next sections will provide an overview on both
valuation techniques and insights on when and how they should be used.
5.1.1 ContingentValuation
Contingent Valuation (CV) methodology involves asking a random sample of respondents for their will‐
ingness to pay (WTP) for a clearly defined good, or willingness to accept (WTA) a loss. It uses direct elici‐
tation by asking questions that take the form: “what are you willing to pay?” or “are you willing to pay X
€?” (Hanley and Barbier, 2009).
The structure and essential components of a typical CV questionnaire are shown in this section, and vari‐
ous alternative approaches to value elicitation questions are presented. Each component in the ques‐
tionnaire fulfils an important role. Taken together, they introduce the respondent to the context and
relevant background in progressively more detail, and also gather information about the respondent and
their understanding of the scenario which are needed to report the results or to establish the validity of
the response. The questionnaire must ensure that three specific conditions are upheld in order to ensure
the validity of the results: the non‐market good must be carefully defined; the scenario must provide a
plausible means of payment; and there must be a plausible mechanism for making the trade‐off be‐
tween consumption of private goods and the good in question (Pearce et al. 2002).
Figure 22 sets out the structure of a typical Contingent Valuation questionnaire. A Choice Experiment
questionnaire has more or less the same structure but the contents of the valuation scenario and the
description of the good will differ. Each stage is briefly discussed below.
Introduction and warm up
The valuation scenario:
Payment vehicle
Value elicitation question
Follow up questions
Attitudinal questions
Socio economic characteristics
Figure 22 Structure of a typical CV questionnaire Source: Pearce et al. 2002
Parts 1, 3 and 4 of the questionnaire are there to support the economic valuation question. Their primary
purpose is either to clarify the information presented in the valuation question, or to provide with addi‐
tional information that will allow a more in depths analysis of the estimated values. Because these com‐
ponents build on each other, the order of the structure presented above is recommended although it is
not strictly required. Two basic rules for survey order are as follows. First, any background information
about the good being valued must be presented before the valuation question. Second, questions that
respondents might find intrusive (income, environmental habits, household information etc.) should be
placed at the end of the survey (Thatcher et al. 2011).
The survey introduction should briefly explain the purpose of the survey and why it is important for the
recipient to complete the survey. The context should be as realistic as possible in order to encourage
realistic and truthful responses. The interviewers should explain who they are (e.g. conducting a survey
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on behalf of what organisation), and should assure respondents that their answers will be confidential
(Pearce et al. 2002).
The next stage consists of a series of warm up questions related to the knowledge on the subject and on
the good being valued. This part should prepare respondents to start answering questions and get them
familiar with the subject of the valuation study (Thatcher et al. 2011). Also warm up questions allow re‐
trieving interesting information about respondents knowledge and perception of the good being valued;
this information may be useful to better understand respondents willingness to pay. Also, depending on
the good or service being valued, questions aimed at distinguishing users from non‐users can be included
in this section.
The valuation scenario defines the good in question and the nature of the change in the provision of that
good. There are many challenges in writing this section. Descriptions must be synthetic and yet thorough
enough to clearly answer the questions of an average respondent. Also information must be presented in
a neutral way not to bias respondents view. It is crucial to provide respondents with all the necessary
information about the valued good and the change in provision of the good. This information makes up a
scenario and it is this scenario that respondents will value. Several scenarios may be presented but care
has to be taken not to “overload” respondents so that they become confused about what they are being
asked to value. The design of the scenario is a critical feature of a questionnaire: poorly defined scenari‐
os will elicit meaningless answers (Pearce et al. 2002).
Also, following the description of the good, it is common to include questions about the individual’s opin‐
ion on the information presented. These questions are designed to encourage respondents to focus on
the information presented and consider their opinion on the good before asking to assign it a monetary
value. The added benefit of these questions is that they can be used in the analysis to verify that respons‐
es to the valuation question are consistent and reliable.
After the valuation scenario has been described, the payment vehicle describes the way in which the
respondent is (hypothetically) expected to pay for the good (see Table 8). There are no precise rules for
choosing between payment vehicles. The nature of the good matters: for example, if it is entirely a local
good, a national tax would not be chosen as the payment vehicle (Pearce et al 2002).
Table 8 Types of payment vehicle Source: Pearce et al. 2002
Coercive Voluntary
National tax
Local tax
Fee/Charge
Price increase
Donations
Problem: Respondents may be hostile to the agency responsible (e.g. hostility to national tax increases may lead to non‐responses)
Problem: voluntary payments invite free riding. General‐ly not recommended by CV practitioners.
The value elicitation question is the most important component of an economic valuation survey and is
designed to draw out peoples’ willingness to trade goods (or impacts) for money. It is essential to elicit
either the maximum willingness to pay or the minimum willingness to accept in order to be consistent
with the underlying theory of economic valuation (Pearce et al. 2002). Before respondents proceed to
answer the value elicitation question, it is recommended to include reminders of the importance of
truthful WTP revelation (for example by stating their choices can guide future policy decision making).
Also it is important to encourage respondents to provide answer as if they were likely to pay in reality the
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Deliverable D4.3
stated monetary amounts, and remind them that they won’t be able to spend this money in other goods
or services (this allows reducing the “hypothetical bias” e.g. respondents may have a tendency to over‐
state their true WTP since no money is actually involved) (Hanley and Barbier, 2009).
The most widely used elicitation formats are: open‐ended, bidding game, payment card, and single‐
bounded or double‐bounded dichotomous choice. Open‐ended elicitation asks “What is your maximum
WTP?” In a bidding game respondents are faced with several rounds of discrete choice questions or bids,
with the final question being an open‐ended WTP question. Payment cards present respondents with a
visual aid containing a large number of monetary amounts. Respondents choose the maximum sum they
are willing to pay. In single‐bounded dichotomous choice (the “referendum method”) respondents say
yes or no to a single WTP amount or bid (and bids are changed amongst respondents). With double‐
bounded dichotomous choice, the respondent says yes or no to a stated sum and is then asked to say yes
or no to higher/lower bids (initial bids are changed amongst respondents) (Thatcher et al., 2011). There is
a substantial debate in the literature about the best way to formulate elicitation questions and the pros
and cons of the main formats are listed in Table 9.
Table 9 Advantages and drawbacks of the most commonly used value elicitation formats for CVs Source: Pearce et al. 2002
Open‐ended elicitation
FOR:
Straightforward
No anchoring bias (does not provide indications about what the value of the change might be
Informative since maximum WTP can be indentified for each respondent
Requires relatively straightforward statistical techniques
AGAINST:
Leads to large non protest rates, protest an‐swers, zero answers and unrealistically large bids (outliers). This is because it may be very difficult for respondents to come up with their true max‐imum WTP for a change they are unfamiliar with and have never thought about valuing before.
Bidding game elicitation
FOR:
may facilitate respondents’ thought processes and en‐courage them to consider their preferences carefully
AGAINST:
Anchoring bias may exist
Leads to large numbers of outliers and to “yea saying” bias (e.g. giving affirmative but possibly false responses)
Payment card elicitation
FOR:
Reduces anchoring bias (though bids are still linked to the first amount)
Number of outlier reduced compared to the previous formats
Requires relatively straightforward statistical techniques
AGAINST:
Vulnerable to biases relating to the range of the numbers used in the card
Single bounded dichotomous choice (referendum method)
FOR:
Simplifies the cognitive task faced by respondents
Minimizes non response and avoids outliers
AGAINST:
Empirical studies have revealed that values ob‐tained from dichotomous choice elicitation are significantly larger those resulting from compa‐rable open‐ended questions
Sensible to “yea saying” bias
Less information is available for each respondent (only reveals whether WTP is above or below a
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certain amount), thus requires larger samples and stronger statistical assumptions
Possible anchoring bias
Double bounded dichotomous choice
FOR:
More efficient than single bounded dichotomous choice since more information is elicited about each respond‐ent’s WTP
AGAINST:
All the limitations of the single bounded proce‐dure still apply
The choice of elicitation format is of considerable importance: different elicitation formats typically pro‐
duce different estimates. Payment cards and dichotomous choice formats are both the most recom‐
mended formats. The former is more informative and cheaper to implement than the latter and is supe‐
rior to both direct open ended questions and bidding games. The latter may be incentive compatible (en‐
courages truth telling) and facilitates the respondents’ valuation task (Pearce et al. 2002).
Finally, it is important to follow up the answers to WTP elicitation questions in order to understand the
motives behind these answers. Follow‐up questions are especially useful where there is some form of
protest or unwillingness to pay for the good in question. A protest may show up as unwillingness to give
any answer at all. But zero valuations are no necessarily protests: individuals may genuinely not be will‐
ing to pay anything for the good. Nonetheless, some zero bids may conceal protest motives. Besides help‐
ing to clarify the motives and validity of responses follow‐up questions can also be used to test the credi‐
bility of the scenario. Some examples are summarised in Table 10.
Table 10 Using WTP follow-up questions to determine valid responses Source: Pearce et al. 2002
Possible reasons for unwillingness to pay Possible reasons for willingness to pay (deter‐
mine the type of value attributed to the good)
I cannot afford to pay
The change is too small to be of importance
I think this problem is not a priority
I would be satisfied with the future situation
I am not interested in this matter
There are many other similar goods around
Spending should be on all water sources , not just this one (protest)
I object to pay higher water rates (protest)
It’s not me who should pay for this (protest)
I’m not sure my financial contribution will be used properly (protest)
I don’t believe in your scenarios (protest)
I think this problem is important
I would like to avoid further deterioration of the river
I use this river
I’m interested in this river
I want to use the river in the future although I don’t use it now
We should protect the environment for the animals and plants concerned
We should protect the environment for future gen‐erations
We should protect the river for other people to enjoy
The next stage seeks respondents attitudes to general issues related to the good in question. Attitudinal
questions, for example on environmental habits, can be included if they can provide with useful insights
on the underlying motivations of respondents answers to the valuation questions (Thatcher et al. 2001).
The final section of the questionnaire asks for the socio economic characteristics of the respondents.
This component usually retrieves personal information about respondents that may be affecting willing‐
ness to pay for the good in question such as education, income, sex, household size etc (Pearce et al.
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Deliverable D4.3
2002). Also, this information is used to test if WTP answers are congruent with theoretical expectations
(for example, if WTP varies with income) and may allow checking if survey respondents are representa‐
tive of the population that is being studied.
5.1.2 ChoiceExperiment
Questionnaires for CEs differ from those for CV (explained in the previous section) only in respect of
the valuation scenario component. The Choice Experiment method adopts a particular view on how the
demand for a given good is pictured, known as the characteristics theory of value. This says that the value
of a given good or service is best explained in terms of the characteristics or attributes of that said good
(e.g. individuals derive utility from the characteristics of a good). Thus CEs differ from CVs in that they
present the valued good as comprised of a list of characteristics or attributes; each attribute having vari‐
ous potential levels with one level typically associated to the current situation (status quo). A money or
price indicator is always included as one of the attributes in order to be able to elicit monetary values.
From this list of attributes, “different” compositions or alternatives of the good in question can be creat‐
ed by combining the levels in different ways. Choice sets are created by putting two or more of these
alternatives together (Hanley & Barbier, 2009).
The task for the respondent is to decide which alternative he prefers within a particular choice set; by
analysing people’s choices, it is possible to derive monetary values for the good in question but also for
each of the attributes of the good. Thus CEs are interesting if one is not only interested in the total value
of the good but also in knowing what are the determinants of the value people place on the good.
The value elicitation question presents to respondents with a baseline scenario (usually corresponding to
the status quo or current situation) and several alternative options in which specified attributes levels are
changed. The number of attributes (and their potential levels) should be limited to ensure that all infor‐
mation can be handled by respondents. An example of a choice set is presented in Table 11. Respondents
are asked to state their choice of A, B or choosing the status quo (no costs are incurred by choosing the
status quo).
Table 11 Example of a choice set in a CE value elicitation question Source: Pearce et al. 2002
Option A Option B Status quo Change in levels from A to B (+ better and – worse):
illustrative only
Attribute A1
A2
A3
A4 (price)
B1
B2
B3
B4 (price)
S1
S2
S3
0 (price)
+
‐
+
+
The common design stages for Choice Experiments are the following (Pearce et al. 2002):
1) Selection of attributes: select the relevant attributes of the good to be valued. This is usually
done trough literature reviews, focus groups and discussions with experts. Attributes may be
chosen because they are the ones most likely affected by a given policy decision, or because they
are perceived as the most relevant for the value of the good in question (context dependent). A
monetary cost is defined as one of the attributes to allow the WTP estimation. Choosing the cost
levels and the payment vehicle raises the same challenges as in CVs. A good rule of thumb, is not
to choose more than 4 or 5 attributes (too much cognitive burden for respondents leads to
meaningless estimations)
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DEMOWARE GA No. 619040
2) Assignment of levels: the attributes levels should be realistic and span the range over which re‐
spondents can be expected to have preferences. Levels should also include the “do nothing”
which corresponds to the status quo.
3) Choice of experimental design: Statistical design theory is used to combine the levels of the at‐
tributes into a number of alternative scenarios to be presented to respondents. The objective is
to maximise the information retrieved when analysing people’s choices between different alter‐
natives. Use of statistical design theory reduces the number of alternative options to be present‐
ed to respondents (which otherwise can reach unwieldy numbers)
4) Construction of choice sets: the different alternative options identified by the experimental de‐
sign are then grouped into choice sets to be presented to respondents. Profiles can be presented
in pairs, or in groups according to the technique being used. Each choice set should not exceed
more than 4‐5 alternatives. Usually a random paired allocation of scenarios works well (but there
is the need to check for choice sets presenting dominated alternatives (e.g. an alternative that
would be strictly preferred to another by any rational respondent) since these do not reveal any
information about respondents preferences)
5) Measurement of preferences: Choice of survey procedure and conduct of survey. The issues
here are common to those met in CV
5.1.3 CEandCV:Whichmethodtouse?
In general, a contingent valuation is a much more straightforward and simpler method to apply. The value
elicitation question directly asks respondents WTP and requires less cognitive efforts for respondents,
thus potential biases related to misunderstanding of the information are reduced. Also, depending on the
format chosen for the value elicitation question, generally statistical analysis is simpler (sometimes re‐
quires only calculation of mean and median WTP). Nonetheless compared to a choice experiment, CV will
assess a single change in provision of the valued good (though several elicitation questions can be includ‐
ed to obtain more information). Also, CVs are more sensible to “yea saying” bias (respondents giving af‐
firmative but possible false responses of WTP, e.g. respondents always answering “yes” independently of
the information presented) due to the nature of the value elicitation question.
CE on the other hand, requires a more sound understanding of the valued good since it needs to be de‐
scribed in terms of different attributes and potential levels these might take while remaining realistic. It is
important to keep the cognitive burden in line since many studies have shown that too much information
leads to biased or meaningless estimations; if this also applies to CVs, the cognitive burden imposed by
CEs is usually higher. Moreover, if a given non marketed good or service cannot be decomposed into ob‐
servable attributes in a realistic manner, then a CE is not appropriated (Adamowicz et al. 1994). CE is also
a much more technical and time consuming method since it requires experimental design theory and a
more complex statistical analysis to obtain estimated monetary values. Nonetheless CEs can provide
more information on the valued good than CVs, and allow inquiring about potential tradeoffs respond‐
ents are willing to make with respect to the characteristics of the good in question. This ability to better
incorporate quality changes for different attributes is an advantage over CVs to optimally determine pre‐
ferred policy designs or to better model management decisions with respect to environmental goods or
services. Also, since respondents are faced with multiple choices in a CE, choices are of a less “extreme”
nature than in CVs (usually “all or nothing scenario”); respondents have more flexibility of response thus
solving the “yea saying bias” and allowing for more opportunities to express their true preferences (Han‐
ley et al., 1998).
Overall, both methods have been stated to produce reliable estimates when used properly. Depending on
the objectives and the context of the valuation study, either method can be used. In general, when the
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Deliverable D4.3
researcher is only interested in assessing the value of a given non marketed good or the value given to an
environmental change, a Contingent Valuation is appropriated. If more information about the potential
tradeoffs respondents’ are willing to make between different attributes of the good or the change in
question, then a CE will be more suited (Adamowicz et al. 1994).
5.2 ApplicationofStatedPreferencesvaluationmethodsintheDEMOWAREproject
As seen in the previous section related to CBA methodology, an economic analysis must be carried out to
appraise any given project or policy contribution to social welfare. As part of this economic analysis, non‐
market impacts need to be accounted for. In other words, impacts generated on project users due to the
use of a new or improved good or service, which are relevant for society, but for which a market value is
not available, should be included as project direct benefits in the economic analysis of project appraisal.
In principle, the WTP estimated for the use of the service should capture these effects and facilitate its
integration in the analysis. Examples of (positive) non‐market impacts are: savings in travel time; in‐
creased life expectancy or quality of life (improved environmental quality); prevention of fatalities; inju‐
ries or accidents; improvement of landscape; noise reduction; increased resilience to current and future
climate change and reduced vulnerability and risk etc.
As part of work package 4 of the DEMOWARE project, task 4.2 requires the application of CBA methodol‐
ogy to illustrate the environmental and social benefits of water reuse schemes. Two case studies were
chosen amongst several water reuse sites from across Europe and Israel involved in the DEMOWARE pro‐
ject: the Sabadell site in Spain and the Braunschweig site in Germany. Thus, for both case studies, it was
planned to account for non‐market impacts, on local communities, of existing reuse schemes and/or re‐
lated to potential developments of said reuse schemes; this task was evidently conditional on the identifi‐
cation of relevant environmental or social non marketed impacts stemming from each reuse scheme.
Both case studies will be presented in detail in deliverable 4.4 “Show cases demonstrating the relevance
of social and economic benefits of water reuse schemes on local communities”.
The next sections will provide an overview of why a given stated preference valuation method was cho‐
sen for each case study and how both methods were implemented.
5.2.1 ApplicationoftheCEmethodfortheSabadellCaseStudy:shortinsight
5.2.1.1 Introduction
In order to understand the reuse system in place in the city of Sabadell, a site visit was organized in De‐
cember 2014. During this visit, interviews with local experts were carried out. A literature review was also
undertaken based on detailed documents about the reuse scheme in place and planned developments of
the scheme. All these actions allowed for the proper understanding of the system in place, and the identi‐
fication of potential non marketed impacts that were relevant for valuation.
Briefly described, Sabadell is located in a region which is subject to water scarcity problems and regular
drought periods. The reuse system in place allows for the use of reused water for urban uses (the munici‐
pality being currently the only direct user) and in particular for the irrigation of green areas, parks and
street cleaning activities (it also provides water for fountains). Envisioned future developments of the
reuse system include increasing the volumes of reused water for current uses (only a small fraction of the
total water demand for irrigation of parks, green areas and street cleaning is covered with reused water,
the rest is still covered with water from the distribution network), including new industrial users, and
developing a network for commercial and residential uses (toilet flushing and other non potable uses).
The system indirectly also allows for the maintenance of the ecological flow of the Ripoll river, which suf‐
fers from water imbalances due to industrial abstractions and from extremely reduced water flows during
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DEMOWARE GA No. 619040
summer and drought periods. One last point worth mentioning is the fact that the “Catalan Drought De‐
cree” (Decreto de Sequia Catalan3) foresees measures to preserve available water resources only for pri‐
ority uses in the occurrence of drought situations (ensuring the provision to households and other activi‐
ties strongly dependant of a regular provision from the distribution network). Part of these measures
consists on a progressive application of restrictions on different water uses depending on the severity of
the drought, going from restrictions on lower priority uses, such as water for fountains, street cleaning
and irrigation of public parks, to restrictions on higher priority uses such as water for swimming pools
(private or public), restrictions on some domestic uses (outside uses) and in the worst scenarios partial
water cuts to households.
5.2.1.2 Potentialbenefits:Choiceofvaluationtechniqueandsurveymethod
The initial benefits which were identified as potential environmental or social non marketed impacts
stemming from the system are:
Reduced pressures on aquifers (in a water scare region)
Maintenance of the ecological flow of the Ripoll River (and thus biodiversity and recreational
amenities along its course through the city)
Avoiding restrictions on urban water uses and thus securing either direct use (not of interest
since users would pay for the water) or indirect benefits
Given the context of water scarcity in the region and the fact that there have been several drought peri‐
ods during the past decade, it was interesting to focus on the social value given to indirect benefits
stemming from securing, with reused water, different urban water uses in the city even during drought
restrictions. Particularly the reuse scheme currently allows:
Securing the irrigation of parks and green areas in the city and thus maintaining aesthetic values
of said areas even in the occurrence of drought restrictions.
Securing water volumes for street cleaning activities and thus maintaining clean streets even dur‐
ing the occurrence of drought restrictions
Depending on the future foreseen developments of the reuse scheme the system could also allow:
Avoiding restrictions on some domestic uses during droughts and thus securing some domestic
water uses even in the occurrence of drought restrictions
Considering that besides assessing the value given to water reuse as a means of securing aggregated indi‐
rect social benefits stemming from securing urban water uses in the city, it would also be interesting to
assess the value given to each indirect benefit individually; it was decided that a CE was a more suited
method. As was seen explained in the previous section, a CE provides more flexibility for estimating the
underlying components of value people attribute to a particular non marketed good or service than a CV.
Once the proper valuation technique was identified, it was decided that the survey method to be used
was a “CATI” (Computer‐assisted telephone interviewing) type of administration. This implies that re‐
spondents would answer the questionnaire from their own computers while at the same time having an
interviewer over the phone to rectify any doubts or misunderstandings of the information. This method
has been proven to be robust and consistent for the presentation of rich information while minimising
comprehension errors. The sample population to be interviewed is a representative sample of 300 Saba‐
dell residents based on: income, socio professional category and age.
The main steps presented in the previous section were followed in order to construct the CE survey.
3 http://aca‐web.gencat.cat/aca/sequera/es/decret‐de‐sequera.jsp
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Deliverable D4.3
5.2.1.3 Identificationoftheattributes,attributelevelsandExperimentalDesignTheory
Three attributes were chosen:
1) The extent of public parks and green for areas in the city that are kept irrigated, even during
drought restrictions, thanks to water reuse.
Three levels were defined: the status quo level (based on current areas irrigated with reused wa‐
ter), an intermediate level which increases the green areas and parks of the city irrigated with re‐
used water, and a third level in which all green areas and parks are irrigated with reused water
2) The streets of Sabadell that are kept cleaned with reused water even during drought restrictions,
tanks to water reuse.
Two levels were defined: the status quo level in which only the most circulated and commercial
streets are kept clean during drought restrictions (current situation) and a second level in which
all the streets are kept clean during drought restrictions
3) Domestic uses covered with reused water during severe drought restrictions
Three levels were defined: the status quo level (which represents the current situation with no
reused water available for any domestic use), an intermediate level which includes reused water
for outside uses and toilets flushing, and a third level which introduces reused water for outside
uses, toilets flushing, and also water for potable uses in the occurrence of water shortages to
households
4) Additional amount spent on monthly water bill
Four levels were defined (based on a literature review on CEs used to asses different values as‐
sociated to water reuse schemes and recycled water): 0€ for the status quo (no developments of
the current reuse system), 3€/month, 8€/month, 13€/month
Once attributes and their levels have been finalized, experimental design theory was used to construct
the design providing with optimal combinations of the different attributes and their levels to best elicit
respondents WTP (using R statistical software). A main effects orthogonal design was used. Essentially a
main effects orthogonal design will allow capturing the values attributed to each of the individual attrib‐
utes, their individual levels (including dummy variables for each level) and their aggregation. It is a simple
design, commonly used in CE valuation studies, which has been stated to produce reliable results. The
main effects orthogonal design yielded 12 alternative scenarios to be presented to respondents. A sec‐
ond set of 12 scenarios was then created using the mix and match method, and then scenarios of each
set were paired with each other by random allocation. Finally the “status quo scenario” was introduced
manually to each of the 12 choice sets, which were finally composed of two alternative scenarios and the
“status quo scenario”. In order to avoid presenting all respondents with 12 choice sets (when a maximum
of 6‐8 choice sets is recommended in valuation literature) a blocking factor was introduced (respecting
orthogonality of the design) in order to create 3 blocks of four choice sets; each respondent of the sam‐
ple will be allocated one of the three blocks with the only condition being that all blocks are presented
the same number of times to respondents in the sampled population (in this study the sampled popula‐
tion is of 300 individuals, thus 100 respondents being randomly allocated to each block).
5.2.1.4 Constructionofthequestionnaire
The survey consists of four main parts, each part providing with either valuable information which will
feed in the analysis of underlying choices and WTP estimations or providing general information about
respondent’s general knowledge and perception about water reuse and the system in place (to see the
questionnaire go to Annex II).
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DEMOWARE GA No. 619040
Introduction, knowledge and perception on the subject
This part of the survey introduces respondents with the subject of water reuse, and recovers valuable
information regarding their knowledge and perception of water reuse in Sabadell. More precisely this
part allows inquiring about:
General Knowledge on water reuse
Perception of water reuse in Sabadell
Perception of scarcity and drought risks
Presentation of the reuse system
This section presents respondents with the necessary information about the reuse system in Sabadell, its
benefits and its potential developments. A graphic representation of the system was used to facilitate
understanding. Also after presenting respondents with all the information about the system, a series of
question was introduced in order to assess respondents’ perception of the current system.
Value elicitation exercise
After the reuse system has been properly described, this section prepares respondents to answer the
value elicitation questions. It provides respondents with a reason why the reuse system would be further
developed and explains how these developments would affect them by presenting each of the selected
attributes and their levels (visual aids were used to facilitate respondents understanding). Finally it ex‐
plains the valuation task; each respondent is presented with four choice sets and for each choice set, they
need to choose their preferred scenario amongst two scenarios (stemming from potential developments
of the current reuse system) and a third “status quo scenario” (do nothing with respect to current situa‐
tion). Each choice set was presented as a table (look Annex II for details). Before respondents proceeding
to choose between scenarios, reminders to reduce “hypothetical bias” were introduced. Finally a follow
up question to identify true zeros from protest zeros was included.
Attitudinal questions and socio economic characteristics
The last section of the questionnaire inquires about interesting attitudinal habits respondents might have
which could explain their choices (as gardening activities, car washing or not, practising outside activities
in parks and green areas in the city etc.). Also socio economic characteristics potentially influencing WTP
are recovered in this section.
5.2.2 ApplicationoftheCVmethodfortheBraunschweigCaseStudy:shortinsight
5.2.2.1 Introduction
In preparation of the work on the Braunschweig case study within the DEMOWARE project, a site visit
was organised in 2014. Complemented with a thorough literature review and semi‐structured interviews
with key stakeholders (the plant manager and members of the Sewage Board), a case study description
was elaborated. These actions were complemented by a targeted literature review on stated preference
valuation studies assessing environmental benefits stemming from water reuse schemes.
Agricultural wastewater reuse in Braunschweig has a long history, going back to the middle of the 20th
century. Whereas the treatment of the wastewater had been the primary purpose at the beginning, reuse
also continued after the completion of the wastewater treatment plant Steinhoff in 1990. Today, from
the 22 million m3 of water treated per year, about 40 % are directed to infiltration fields, where the water
receives a biological post‐treatment. The remaining 60 % of the effluent are mixed with digested sewage
sludge and are directed to the agricultural fields of the Braunschweig Sewage Association. On the fields,
crops for the production of bio energy are produced as well as crops which are consumed after transfor‐
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Deliverable D4.3
mation. The farmers which are members of the Sewage Board are benefitting from the provision of both
the irrigation water and the nutrients transported with it. This is particularly interesting as the region is
characterised by a seasonal water deficit as well as sandy and nutrient‐poor soils, making irrigation and
the application of fertilisers necessary for agricultural activities. Irrigation based only on groundwater
would put the local resources under pressure. At the same time, diverting some of the treated effluent to
the agricultural fields helps keeping nutrients discharges to the near surface water body under the regula‐
tory limits, and is also linked to advantages for the management of the treatment plant (e.g. reduced
sludge disposal costs).
5.2.2.2 Potentialbenefits:Choiceofvaluationtechniqueandsurveymethod
In contrast to many other water reuse sites, Braunschweig is not lying in a region with pronounced prob‐
lems of water availability and the population is currently not experiencing situations of water scarcity.
However, abstraction of significant quantities of water for agricultural irrigation would put pressure on
local groundwater resources. Using treated effluent for irrigation avoids this pressure. In addition, more
water is applied on the fields than what is used by the crops. The excess water is infiltrating into the soil
and is recharging the groundwater bodies. Furthermore, in the absence of agricultural reuse, all treated
effluent would be led to the infiltration fields for post‐treatment. This would increase the amount of nu‐
trients discharged into the local surface water body, increasing the risk of eutrophication. Given this situ‐
ation, the environmental benefits chosen for the evaluation are the following:
Preservation and recharge of local groundwater resources
Protection of the water quality of the nearby river Oker
Given that information allowing for a more detailed decomposition of the identified benefits was not
available, and given that it seems more reasonable to assess the aggregated value people give to the re‐
use system as means of preserving both groundwater sources in a quantitative manner and surface water
bodies in qualitative manner, a CV seems more appropriated for such an assessment.
The “CATI” survey administration format was also chosen for Braunschweig for the same reasons than for
the Sabadell survey. Given that the valuation exercise was intended to elicit the value of the reuse sys‐
tem’s non marketed benefits for the local community, the sampled population was composed of a repre‐
sentative sample of Braunschweig residents (300 residents) based on income, socio professional category
and age.
The main steps presented in the previous section on Contingent Valuations, were followed in order to
construct the survey.
5.2.2.3 ConstructionoftheCVquestionnaire
The survey consists of four main parts, each part providing with valuable information which will feed in
the analysis of underlying WTP estimations or either provide with useful information about respondent’s
general knowledge and perception about water reuse and the system in place (to see the questionnaire
go to Annex III).
The questionnaire has the same structure as the questionnaire for the Sabadell case study:
Introduction, knowledge and perception on the subject
This part of the survey introduces respondents with the subject of water reuse, and recovers valuable
information regarding their knowledge and perception of water issues and water reuse in Braunschweig.
More precisely this part allows inquiring about:
General knowledge and perception on potential water issues (quantitative and qualitative prob‐
lems of local water bodies) in the region and their causes
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DEMOWARE GA No. 619040
General knowledge and perception on water reuse
Presentation of the Braunschweig reuse system
This part of the survey presents respondents with the main characteristics of the reuse system in Braun‐
schweig (how and why wastewater treatment is necessary, how wastewater and its nutrients are current‐
ly recycled and reused for agricultural irrigation and how the infiltration fields are a natural post treat‐
ment of the treated effluent). Also, after presenting this information, a series of question were intro‐
duced to assess respondents’ perception of the system (what potential benefits and downsides and the
degree of support and trust in the system). This information is not only interesting by itself but also pro‐
vides means of verifying if respondents WTP answers are coherent with their view of the system and how
this affects WTP.
Value elicitation exercise
This part of the survey sets up the hypothetical market necessary for eliciting WTP answers. Respondents
are presented with information regarding the system’s impact for the preservation and recharge of local
ground waters and for the protection of the Oker river. Afterwards a hypothetical scenario is introduced.
Respondents are asked to assume that for financial reasons, agricultural reuse activities would cease and
all that all the treated volumes would be discharged in the infiltration fields. Respondents are told this
would double the amount of pollutants (nutrients) reaching the river and that this could affect the eco‐
logical balance of the river (increased algae growth and eutrophication risks). Moreover respondents are
told that water for agricultural irrigation would be taken from the local groundwater bodies, and that this
would exhaust or even exceed the locally available and sustainably usable yearly groundwater reserve.
Respondents are then asked if they would be willing to contribute financially in order to maintain the
current reuse system in place, and thus its benefits in terms of preservation of the local river and
groundwater bodies. Finally respondents are told this contribution is not a support to local agriculture
(since farmers are already paying for the water and their revenues would not change compared to a situ‐
ation where they use groundwater for irrigation) but rather a support for an environmental program to
support the system and its benefits.
Those answering “no”, are then asked to state their reason for not contributing in order to differentiate
true zeros from “protest zeros”. Those answering “yes”, are presented with a payment card presenting
different monetary amounts. Respondents are then asked to choose, amongst the presented monetary
values in the card, the maximum amount that they (entire household) would be willing to pay in terms of
a monthly increase in their water bills.
Before respondents choose their preferred amount, reminders to reduce hypothetical bias are intro‐
duced.
Attitudinal questions and socioeconomic characteristics
The last section of the questionnaire inquires about interesting attitudinal habits respondents might have
which could explain their choices (practice or recreational activities in the Oker and environmental hab‐
its). Also socio economic characteristics potentially influencing WTP are recovered in this section.
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Deliverable D4.3
6 Discussionandconclusions
This deliverable (D4.3) presents the theoretical and methodological aspects of: (i) the DEMOWARE CBA
Tool; and (ii) the application of stated preference techniques to the evaluation of the economic benefits
of water reuse systems in two pilot sites (Sabadell and Braunschweig). A second deliverable (D4.4) sum‐
marises the results of the evaluation of economic benefits in the two demonstration sites, and it illustrat‐
ed the preliminary application of the DEMOWARE CBA Tool to one of these sites. The two deliverables
were produced in parallel, and need to be read consecutively.
The current version of the DEMOWARE CBA Tool is to be considered as preliminary: the Tool is in fact
being tested in two case studies (Sabadell and Braunschweig), and further testing will be done before the
end of the project. At present, the complete testing of the Tool has not been possible, as some infor‐
mation on operational costs and investments costs of the case studies was not yet available. Based on the
outcomes of the testing phase, shortcomings and limitations of the Tool will be addressed whenever pos‐
sible. The final version of the CBA Tool will be made available before the end of the DEMOWARE project,
and the Tool users’ manual will be produced.
The DEMOWARE CBA Tool was designed to support plant managers and planners in the evaluation of
alternatives of water reuse projects and in the selection of the most viable one. In particular, it is aimed
at simplifying the complex task of conducting a CBA analysis, by providing a simpler data collection
framework as compared to usual CBA analysis. The Tool also performs analysis and elaborates graphs
which allow for evaluating the impact of different decisions on the overall financial and economic viability
of a project option. Nonetheless, even if the DEMOWARE tool can simplify the task of conducting a CBA
for a given project, it is important to keep in mind that very detailed information about a projects finan‐
cial and economic inflows and outflows is required, and getting this information can be cumbersome and
time consuming. Thus one of the main challenges for its use is the recovery of all the necessary infor‐
mation and particularly information related to financial costs (namely operation and investments costs).
The tool should be used only once all this information is available and structured in a coherent manner.
Moreover, the tool is as generic as possible in order to be able to model any, or at least most, water reuse
schemes but is rather designed for ex ante valuation. It still remains to be checked in how far the
DEMOWARE CBA tool can be adapted in order to be used also for ex‐post CBA’s. One advantage of the
tool is that data about different inflows or outflows of a given reuse scheme, currently not accounted by
the tool, can be inserted “manually” thus providing some flexibility for its use. The testing of the tool is
still an ongoing exercise, and limitations and advantages will be further detailed once this process is final‐
ized.
Related to the assessment of social and environmental benefits of water reuse systems for both case
studies, one of the strong points of the chosen approach is that valuation techniques (CE and CV) were
developed and applied for each case study individually and at the local scale. This implies that results
produced will be well adapted for demonstrating the potential non‐market benefits each water reuse
system provides. Moreover, other than providing values given to particular non‐market benefits, the cho‐
sen valuation techniques can provide with a lot of information on peoples’ perception about water reuse
and related environmental subjects. The results from both the application of the tool, and from both sur‐
veys will be presented in deliverable 4.4 “ Show cases demonstrating the relevance of the social and eco‐
nomic benefits of water reuse schemes to the local communities”.
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DEMOWARE GA No. 619040
7 References
Adamowicz, W. L., Boxall, P. C., Louviere, J. J., Swait, J., & Williams, M. (1994). Stated preference methods
for environmental valuation (Vol. 94, No. 7). Department of Rural Economy, Faculty of Agriculture
and Forestry, University of Alberta.
Brower, R., Spaninks, F.A. (1999). The validity of environmental benefits transfer: further empirical
testing. Environmental and Resource Economics, 14 (1): 95‐117
Chen, R. and Wang, C. (2009) Cost–benefit evaluation of a decentralized water system for wastewater
reuse and environmental protection. Water Science & Technology 59 (8): 1515–1522
CSIL (Centre for industrial studies) and DKM (Economic Consultants) (2012) Ex post evaluation of
investment projects co‐financed by the European Regional Development Fund (ERDF) of Cohesion
Fund (CF) in the period 1994‐1999. Ten projects observed. Prepared for EC DG Regional Policy.
Milan, Italy.
David Pearce et al. (2002) Economic Valuation with stated preference techniques: Summary Guide.
Department for Transport, Local Government and the Regions: London
European Commission (2014a) Background document to the public consultation on policy options to
optimise water reuse in the EU.
http://ec.europa.eu/environment/water/blueprint/pdf/water_reuse/Background_Public%20cons
%20_Water%20Reuse_en.pdf
European Commission (2014b) Guide to Cost‐Benefit Analysis of Investment Projects. Economic appraisal
tool for Cohesion Policy 2014‐2020. European Union.
http://ec.europa.eu/regional_policy/sources/docgener/studies/pdf/cba_guide.pdf
FAO (2010). The wealth of waste – The economics of wastewater use in agriculture. FAO Water Reports
No. 35
Foundation for Water Research. (1996). Assessing the Benefits of Surface Water Quality Improvements
Manual. Foundation for Water Research, Report No. FR/CL0005.
Garcia, X., Pargament, D. (2015). Reusing wastewater to cope with water scarcity: Economic, social and
environmental considerations for decision‐making. Resources, Conservation and Recycling 101
(2015) 154‐166
Godfrey, S., Labhasetwar, P. Wate, S. (2009) Greywater reuse in residential schools in Madhya Pradesh,
India‐A case study of cost‐benefit analysis. Resources, Conservation and Recycling 53 (5): 287‐293
Hanley, N., Barbier, E. B., (2009) Pricing nature: cost‐benefit analysis and environmental policy. Edward
Elgar Publishing
Hanley, N., Wright, R. E., & Adamowicz, V. (1998) Using choice experiments to value the environ‐
ment. Environmental and resource economics, 11(3‐4): 413‐428
Hernández, F., Urkiaga, A., De las Fuentes, L., Bis, B., Chiru, E., Balazs, B. and Wintgens, T. (2006)
Feasibility studies for water reuse projects: an economical approach. Desalination 187 (1–3): 253‐
261
Hernández‐Sancho, F., and Sala‐Garrido, R. (2009) Technical efficiency and cost analysis in wastewater
treatment processes: A DEA approach. Desalination 249 (1): 230‐234
Hussain, I., Raschid, L., Hanjra, M. A., Marikar, F. & van der Hoek, W. (2002) Wastewater use in
agriculture: Review of impacts and methodological issues in valuing impacts. Working Paper 37.
Colombo, Sri Lanka: International Water Management Institute.
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Kihila, J., Mtei, K.M. & Njau, K.N. (2014) Development of a cost‐benefit analysis approach for water reuse
in irrigation. International Journal of Environmental Protection and Policy 2(5): 179‐184
Molinos‐Senante, M., Hernández‐Sancho, F. & Sala‐Garrido, R. (2011) Cost‐benefit analysis of water‐reuse
projects for environmental purposes: A case study for spanish wastewater treatment plants.
Journal of Environmental Management 92 (12): 3091‐3097
Pearce, D., Ozdemiroglu, E. (2002). Economic valuation with stated preference techniques – Summary
guide. Department for Transport, Local Government and the Regions: London. March 2002.
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/191522/Econo
mic_valuation_with_stated_preference_techniques.pdf
Thatcher, J., Marsee, M., Pitts, H., Hansen, J., Chermark, J., Thomson, B., (2011) Assessing Costumers
Preferences and Willingness to Pay: A Handbook for Water Utilities. New Mexico Albuquerque:
Water Research Foundation
Urkiaga, A., de las Fuentes, L., Bis, B., Chiru, E., Balasz, B. & Hernández, F. (2008) Development of analysis
tools for social, economic and ecological effects of water reuse. Desalination 218 (1–3): 81‐91
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AnnexI–FulllistofinputdataandoutputindicatorsoftheDEMOWARECBATool
Contextdescription‐InputdatatobeenteredintheTool
Description of the situation
1 Description of the macro‐economic context
2 Estimated GDP growth of the country
3 Estimated GDP growth of the area
4 Description of the social context
5 Description of demographic context
6 Estimated population annual population growth of the country
7 Estimated population annual population growth of the area
8 Description of the water shortage context
9 Listing of sector needing more water, suffering from water shortage, will suffer of water shortage
10 Context description of shortage for sector #
11 Description of the user type # of water by sector #
12 Context description of shortage for user type # of sector #
13 percentage of agent of user type # of sector # reachable by a water treatment centralized system
14 Context description of water supply
15 Context description of water supplier #
16 Description of water quality needed by user type # of sector #
Water flows description of scenarios
17 Context description of scenario #
18 Does supplier # supply water for sector # in the scenario # ?
19 Does supplier # supply water for user type # of sector # in the scenario # ? (water supplier can be the water treatment plant in case of reclaimed water)
20 Estimated annual growth of number of user type # of sector #
21 Quantity of agent of user type # of sector # consuming water from water supplier #
22 Average annual quantity of water consumed by each agent of user type # of Sector # consuming from water supplier #
23 Total annual quantity of water consumed by user type # of Sector # consuming from water supplier #
24 Annual quantity of water supplied to user type # of sector # from water supplier #
25 Annual quantity of water entering the treatment plant
26 Annual quantity of water rejected in the river
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Deliverable D4.3
27 Annual quantity of water lost inline
Financialanalysis
InputdatatobeenteredintheTool:
Financial description of scenarios
Financial costs
28 Unit price for pipeline work # to link water supplier # to usertype # from sector #
29 Distance of pipeline work # of year # to link water supplier # to usertype # from sector #
30 Unit price for investment general cost # of the water supplier #
31 Quantity of unit of investment general cost # of the water supplier # of year #
32 Cost of building treatment unit # in the water supplier # plant for providing water to user type# of sector # of year #
33 Overall cost for builiding the entire treatment process for the water supplier # to provide water to user type # of sector #
34 Unit price for pipeline maintenance# to link water supplier # to usertype # from sector #
35 Distance of pipeline maintenance # to link water supplier # to usertype # from sector # of year #
36 Unit price for OM general cost # of the water supplier #
37 Quantity of unit of OM general cost # of the water supplier # of year #
38 Unit price (for a given amount of water) of operating and maintening treatment unit # in the water supplier # plant for providing water to user type# of sector # of year #
39 Quantity of water of operating and maintening treatment unit # in the water supplier # plant for providing water to user type# of sector # of year #
40 Overall cost of operating and maintening the entire treatment process for the water supplier # to provide water to user type # of sector # of year #
Financial revenues
41 Unit price of water delivered to user type# of sector # from water supplier #
42 Revenue of water supplier # from providing water to user type # of sector #
43 Amount of subsidies to water supplier # from grantor # the year #
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DEMOWARE GA No. 619040
OutputindicatorsprovidedbytheTool:
Variable #
Input Description
Investment Cost calculation Pipeline
C1 [28,29] Total investment cost in pipeline type # of water supplier # by year # for user type # of sector #
C2 C1 Total investment cost in pipeline type # of water supplier # for user type # of sector #
C3 C2 Total investment cost in pipeline of water supplier # for user type # of sector #
C4 C3 Total investment cost in pipeline for user type # of sector #
C5 C4 Total investment cost in pipeline for sector #
C6 C5 Total investment cost in pipeline
Investment Cost calculation General services
C7 [30,31] Total investment in general services # of water supplier # for year #
C8 C7 Total investment in general services # of water supplier #
C9 C8 Total investment in general services of water supplier #
C10 C9 Total investment in general services
Investment Cost calculation Treatment unit
C11 32 Total investment cost in Treatment unit # for year # from water supplier # to provide water to usertype # of sector #
C12 C11 Total investment cost in Treatment unit # from water supplier # to provide water to us‐ertype # of sector #
C13 C12 Total investment cost in Treatment unit (=process) from water supplier # to provide water to usertype # of sector #
OM Cost calculation Pipeline
C14 [34,35] Total OM cost in pipeline type # of water supplier # by year # for user type # of sector #
C15 C14 Total OM cost in pipeline type # of water supplier # for user type # of sector #
C16 C15 Total OM cost in pipeline of water supplier # for user type # of sector #
C17 C16 Total OM cost in pipeline for user type # of sector #
C18 C17 Total OM cost in pipeline for sector #
C19 C18 Total OM cost in pipeline
OM Cost calculation General services
C19 [36,37] Total OM in general services # of water supplier # for year #
C20 C19 Total OM in general services # of water supplier #
C21 C20 Total OM in general services of water supplier #
C22 C21 Total OM in general services
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Deliverable D4.3
OM Cost calculation Treatment Unit
C22 [38,39] Total OM cost in Treatment unit # for year # from water supplier # to provide water to usertype # of sector #
C23 C22 Total OM cost in Treatment unit # from water supplier # to provide water to usertype # of sector #
C24 C23 Total OM cost in Treatment unit (=process) from water supplier # to provide water to usertype # of sector #
Revenues calculation Water sales
C24 [41,42] Revenue of water supplier # from providing water to user type # of sector #
C25 C24 Revenue of water supplier # from providing water to sector #
C26 C25 Revenue of water supplier # from providing water
C27 C26 Revenue from providing water
Economicanalysis
InputdatatobeenteredintheTool:
Economic description of scenarios
Conversion factor
44 Conversion factor of Unit price for pipeline work # to link water supplier # to usertype # from sector #
45 Conversion factor of Unit price for investment general cost # of the water supplier #
46 Conversion factor of Cost of building treatment unit # in the water supplier # plant for providing water to user type# of sector # of year #
47 Conversion factor of Unit price for pipeline maintenance# to link water supplier # to usertype # from sector #
48 Conversion factor of Unit price for OM general cost # of the water supplier #
49 Conversion factor of Unit price (for a given amount of water) of operating and maintaining treatment unit # in the water supplier # plant for providing water to user type# of sector # of year #
50 Conversion factor of Unit price of water delivered to user type# of sector # from water supplier #
Environmental costs
51 Qualitative description of pollution type # emitted during building of general services # of the water supplier #
52 Quantity of pollution type # emitted during building of general services # of the water supplier #
53 Unit price of pollution type # emitted during building of general services # of the water supplier #
54 Qualitative description of pollution type # emitted during the building of treatment unit # destinated to pro‐vide water to user type # of sector # during year #
55 Quantity of pollution type # emitted during the building of treatment unit # destinated to provide water to user type # of sector # during year #
56 Unit price of pollution type # emitted during the building of treatment unit # destinated to provide water to user type # of sector # during year #
66
DEMOWARE GA No. 619040
57 Qualitative description of pollution type # emitted during OM of general services # of the water supplier #
58 Quantity of pollution type # emitted during OM of general services # of the water supplier #
59 Unit price of pollution type # emitted during OM of general services # of the water supplier #
60 Qualitative description of pollution type # emitted during the OM of treatment unit # destinated to provide water to user type # of sector # during year #
61 Quantity of pollution type # emitted during the OM of treatment unit # destinated to provide water to user type # of sector # during year #
62 Unit price of pollution type # emitted during the OM of treatment unit # destinated to provide water to user type # of sector # during year #
Environmental benefits
63 Qualitative description of general environmental benefits # from water reuse
64 Quantity of general environmental benefits # from water reuse
65 Unit Price of general environmental benefits # from water reuse
66 Qualitative description of environmental benefits # induced by decreasing activities of water supplier #
67 Quantity of environmental benefits # induced by decreasing activities of water supplier #
68 Unit Price of environmental benefits # induced by decreasing activities of water supplier #
69 Qualitative description of environmental benefits # induced by supply of water reclaimed to user type # of sector #
70 Quantity of environmental benefits # induced by supply of water reclaimed to user type # of sector #
71 Unit Price of environmental benefits # induced by supply of water reclaimed to user type # of sector #
Social costs
72 Qualitative description of general social costs #
73 Quantity of general social costs #
74 Unit price of general social costs #
75 Qualitative description of social cost # due to increase/decrease activity of water supplier #
76 Quantity of social cost # due to increase/decrease activity of water supplier #
77 Unit Price of social cost # due to increase/decrease activity of water supplier #
Social benefits
78 Description of social benefits #
79 Quantity of social benefits #
80 Unit Price of social benefits #
Health costs
81 Proportion of consumer (agent) of user type # of sector # touched in case of a failure of the treatment process of water supplier #
82 Probability of failure of the treatment unit # of the water supplier # providing water to user type # of sector #
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Deliverable D4.3
83 Cost of treatment # in case of failure of the treatment unit # of the water supplier # providing water to user type # of sector #
Economic activity
84 Probability of bankruptcy, relocation out of the area of economic activity of user type # of sector #
85 Value Added of user type # of sector #
OutputindicatorsprovidedbytheTool:
Input Description of output Output #
Transformation from cost/revenues calculated with market prices to cost/revenues calculated with accounting prices
[28,29,44] Total accounting cost of investment by year in pipeline C11
[30,31,45] Total accounting cost of investment by year in general services C12
[32,46] Total accounting cost of investment by year in treatment unit C13
[34,35,47] Total accounting OM cost by year of pipeline C14
[36,37,48] Total accounting OM cost by year for general services C15
[38,39,49] Total accounting OM cost by year for treating water C16
[41,42,50] Total account revenues by year from water sales C17
Calculation of environmental costs
[52,53] Monetization of pollution # for year # emitted during building of general services C18
[55,56] Monetization of pollution # for year # emitted during building of treatment unit # C19
[58,59] Monetization of pollution # for year # emitted during OM of general services C20
[61,62] Monetization of pollution # for year # emitted during OM of Treatment unit C21
Calculation of environmental benefits
[64,65] Monetization of general environmental benefits # for year # C22
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DEMOWARE GA No. 619040
AnnexII‐SabadellChoiceExperimentquestionnaire
Introduction Hello, In the context of a research project financed by the European Commission, we are conducting a study about water scarcity and potential solutions to address it. ; The study is undertaken in several European cities, Saba-dell being one of them. This is not a test of knowledge; we only want to know what citizens think about water resources and under-stand your point of view of on how to address water issues in your city. Your answers will be kept anony-mous.
The water situation Do you know where the water of Sabadell comes from?
Answer: …………………….. Who do you think are the main consumers of water in Sabadell?
(1=largest consumer…. 4=smallest consumer) Sectors Ranking Agriculture (irrigation) Municipality (parks irrigation and streets cleaning)
Industry Households Have you already been affected by water restrictions?
Yes No In your opinion, what is the frequency of water shortages in Sabadell?
Frequency Tick Never Every 1 years Every 3 years Every 10 years The “Catalan Drought Decree” foresees measures that, in the occurrence of a drought situation, seek to en-sure that water is being used exclusively for priority uses. Part of these measures consists on a progressive application of restrictions on different water uses depending on the severity of the drought, going from re-strictions on lower priority uses, such as water for fountains, streets cleaning and irrigation of public parks, to restrictions on higher priority uses such as water for swimming pools (private or public), restrictions on some domestic uses and in the worst scenarios partial water cuts to households. In your opinion, what will be the frequency and the severity of droughts in Sabadell in the next 50 years?
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Deliverable D4.3
Measures according to the Catalan Drought Decree
Never Every 1 year
Every 3 years
Every 5 years
Every 10 years
Every 20 years
Escenario de excepcionalidad de nivel 1: Start of saving measures but without restric-tive measures
Escenario de excepcionalidad de nivel 2: The first restrictive measures for non priori-ty uses are applied:
watering gardens, meadows, or-chards, green areas and sports are-as either public or private
cleaning of streets, paths or side-walks either public or private
filling swimming pools, ponds or fountains either public or private
private car washing with exception of companies dedicated to this ac-tivity
Escenario de emergencia: Restrictions are generalized for all uses:
Water restrictions of level 2
Partial water cuts on households
In your opinion, for what sector the lack of water would be the most troublesome today?
(1=most affected sector…. 4=least affected sector) Sectors Ranking Agriculture (irrigation) Municipality (parks irrigation and streets cleaning) Industry Households
Water reuse in Sabadell To your knowledge, is it possible to treat waste water in order to reuse it?
Yes No If yes then continue to question .8 else read the text below: Waste waters are treated in waste water treatment plants or WWTPs, mainly to be discharged into the envi-ronment without polluting it. But, it is also possible to increase the treatment levels in WWTPs to be able to reuse the treated water for agricultural uses, industrial uses or some urban uses, or with particularly effective treatments, for potable uses. Now, got to question 10. To your knowledge, is there any water reuse in Sabadell?
Yes No I don’t know
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DEMOWARE GA No. 619040
If yes then continue to question 9 if “no” or “I don’t know”, go to question 14. For what type of uses?
Uses Yes No I don’t know Industrial uses Agricultural irrigation Park irrigation Municipal Fountains Street Cleaning Toilet Flushing Private Gardening Municipal pools Potable consumption In your opinion, what could be the potential benefits of water reuse in Sabadell?
(1=most important benefit, 2= second most important benefit etc.) Benefits Yes No If yes, give
ranking Lower water prices Avoiding water restrictions for households during droughts
Improve the preservation of rivers, lakes and ground waters
Increased biodiversity Increase resilience of economic ac-tivities to water scarcity
Job creation Maintaining aesthetic of parks and fountains
Maintaining recreational activities Others:…….. In your opinion, what could be the potential downsides of water reuse in Sabadell?
(1=most significant downside, 2=second most significant downside etc.) Downsides Yes No If yes, give
ranking Increased water prices Increased CO2 emissions Odor Color Human health risks related to con-tamination
Increased chemicals in water Others:……..
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Deliverable D4.3
For what uses would you be willing to accept reused water?
Uses Strongly disa-gree
disagree Neutral Agree Strongly agree
Irrigation of crops for direct consumption (vegetables, fruits etc.)
Irrigation of crops for indirect consumption (crops transformed into by-products before con-sumption)
Park irrigation Industrial uses Streets cleaning Toilet flushing Gardening Municipal pools Municipal fountains Potable consumption (tap water)
For each use you chose “strongly disagree” or “disagree” in the previous question, please indicate the two mains reasons? (Prioritize them 1 and 2)
Uses Increased water prices
Increased CO2 emissions
Odor & Color
Human health risks related to contamination
Increased chemicals in water
Others : …...............
Irrigation of crops for direct consump-tion (vegetables, fruits etc.)
Irrigation of crops for indirect con-sumption (crops transformed into by-products before consumption)
Park irrigation Industrial uses Streets cleaning Toilet flushing Gardening Municipal pools Municipal fountains Potable consump-tion (tap water)
Go to section 4. Sabadell context and current water reuse situation
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In your opinion, if there was a water reuse system in Sabadell, what could be the potential benefits?
(1=most important benefit, 2=second most important benefit etc.) Benefits Yes No If yes, give rank-
ing Lower water prices Avoiding water re-strictions for households during droughts
Improve the preserva-tion of rivers, lakes and ground waters
Increased biodiversity Resilience of economic activities to water scarci-ty
Job creation Maintaining aesthetic of parks and fountains
Maintaining recreational activities
Others:…….. In your opinion, if there was a water reuse system in Sabadell, what could be the potential down-sides?
(1=most significant downside, 2=second most significant downside etc.) Downsides Yes No If yes, give rank-
ing Increased water prices Increased CO2 emis-sions
Odor Color Human health risks re-lated to contamination
Increased chemicals in water
Others:…….. For what uses would you be willing to accept reused water?
Uses Strongly disa-gree
disagree Neutral Agree Strongly agree
Irrigation of crops for direct consumption (vegetables, fruits etc.)
Irrigation of crops for indirect consumption (crops transformed into by-products before con-sumption)
Park irrigation
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Deliverable D4.3
Industrial uses Streets cleaning Toilet flushing Gardening Municipal pools Municipal fountains Potable consumption (tap water)
For each use you chose “Strongly disagree” or “Disagree” in the previous question, please indicate the two main reasons? (Prioritize them 1 and 2)
Uses Increased water pric-es
Increased CO2 emissions
Odor & Color
Human health risks related to contamination
Increased chemicals in water
Others : …...............
Irrigation of crops for direct con-sumption (vegeta-bles, fruits etc.)
Irrigation of crops for indirect con-sumption (crops transformed into by-products be-fore consumption)
Park irrigation Industrial uses Streets cleaning Toilet flushing Gardening Municipal pools Municipal foun-tains
Potable consump-tion (tap water)
Continue to section 4. Sabadell context and current water reuse situation
Sabadell context and current water reuse situation In this section, we will give you brief presentation of the current situation in Sabadell related to water reuse. The city of Sabadell has lived throughout history faced to the problem of water scarcity. The series of droughts that struck the region during the past decade have proven the importance to find solutions to ad-dress droughts situations. In the recent years, a series of actions have been developed by the municipality, jointly with Aigües Sabadell (Grupo CASSA) in order to preserve available water resources and to provide solutions to deal with droughts situation and water scarcity. One of those actions is the implementation of a water reuse system. Urban waste water is treated and purified in the Ripoll wwtp and is then discharged into the Ripoll river. Next, a pumping station (equipped with a disinfection system) in the river is responsible for extracting the water and making it available for urban uses that require lesser quality standards than water for human con-
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sumption. The current system in Sabadell is an indirect reuse system: treated water is first discharged into the river, and then collected further downstream for reuse, rather than being directly reused from the WWTP.
Reused water is being used in this way for streets cleaning, for the irrigation of municipal parks and green areas (Parc Tauli, Parc Lineal del Riu Ripoll, zona de Via Alexandra and Parc de Can Llong) and to provide water for public fountains. The only end user today is the municipality.
How supportive are you of the water reuse system in Sabadell?
# Degree of support Tick Completely against Generally against Neutral Generally supportive Completely supportive Do you see any potential problems or risks from this system?
Answer No Yes If so what are they?
Answer: …..................................... How would you best compare the risks versus the benefits of using recycled water in this way?
# Degree of support Tick The benefits greatly outweigh the risks The benefits slightly outweigh the risks The benefits and risks are equal The risks slightly outweigh the benefits The risks greatly outweigh the benefits
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Deliverable D4.3
To what extent do you trust the water service provider to manage this recycled water system in a way that protects the environment and particularly public health?
# Degree of trust Tick No trust at all Little trust Some trust A lot of trust Complete trust
The benefits and potential developments of the reuse system Costs and benefits of the current reuse system: The system reduces water abstractions on regional aquifers and thus allows a better preservation of available water resources. It creates a closed circuit in which the used water from the city provides new water re-sources, and thus allows securing the use of a determined volume of water all year long. If during the occurrence of a drought, had to be applied the restrictive measures introduced in the previous section, the current system would allow avoiding some of the restrictions on certain water uses, and thus have an impact on certain aspects related to the quality of life in Sabadell during droughts. The current system allows securing a percentage of the yearly water demand for irrigation of green areas and public parks; it thus enables to preserve some of these spaces in good conditions for recreational activities and maintain their aesthetic conditions even in the case of restrictions. Also the system allows securing a percentage of the yearly water demand for streets cleaning, thus also enabling to maintain part of these activities during drought re-strictions. Potential developments of the reuse system: Currently, reused water is used almost exclusively for streets cleaning and for the irrigation of green areas and public parks and the system covers only 24% of the yearly water demand for said uses. That is why, the municipality, jointly with CASSA, is considering different developments of the existing water reuse system. Potential developments could include, an increase in the volumes of reused water supplied for irrigation of green areas and street cleaning and, an increase in the levels of treatment of the waste water in order to be able to cover other needs that require higher water quality levels such as domestic uses, water for municipal pools or water for industrial users. Different treatment levels are required depending on the types of uses of the treated water: The next table describes the different treatment levels required for different types of uses:
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Bear in mind that increasing the volumes of reused water would further reduce abstractions on regional aqui-fers. It would also enable the municipality to secure a larger fraction of the yearly water demand for irrigation of green areas, public parks and streets cleaning thus further reducing the risks of restrictions for said uses in the case of droughts. Moreover increasing treatment levels to provide reused water for some domestic uses could prevent restrictions and water cuts on households in the case of severe droughts. This could also have a significant impact on the quality of life of inhabitants during droughts. We are interested in your opinion about possible developments of the reuse system in Sabadell. In the next section we will ask you to carefully consider a set of questions; your answers are very important and could help to guide future investments in the city. You will need to examine a set of scenarios describing certain aspects related to the quality of life in Sabadell. Each scenario is described by the 4 following characteristics:
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Deliverable D4.3
1. Theextentofthepublicparksandgreenareasinthecitythatarekeptirrigated,evenduringdroughtrestrictions,thankstowaterre‐
use:
The following maps illustrate the public parks and green areas in Sabadell that are currently irrigated with reused water and the potential developments of water reuse for park irrigation. Parks irrigated with reused water all year long are kept irrigated even during drought restrictions.
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DEMOWARE GA No. 619040
2. ThestreetsofSabadellthatarekeptcleanedwithreusedwaterevenduringdroughtsrestrictions:
The following maps illustrate the streets in Sabadell that are currently cleaned with reused water and the potential developments of water reuse for streets cleaning. Streets that are cleaned with reused water all year long are kept clean with reused water even during drought restrictions. Other streets are not cleaned with water during drought restrictions.
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Deliverable D4.3
3. Domesticusescoveredwithreusedwaterduringseveredroughts: Assume that during
the occurrence of a severe drought, households are subject to water restrictions. Watering gardens, car washing and any other outdoor uses are completely restricted and water cuts are in place from 12 pm to 8pm every day for other domestic uses. The next table describes the uses of fresh water that are (not) allowed under restrictions:
Depending on the developments of the reuse system which determine the treatment levels and the quality of the treated water, some or all domestic uses could be covered with reused water while re-strictions last:
The current system doesn’t allow covering any domestic uses with reused water: outsides uses
would remain restricted and water cuts would remain from 12 pm to 8 pm every day The next table describes the actual situation regarding reclaimed water for domestic uses:
Hence, the actual situation of allowed water uses during severe drought restrictions could be summarized as follow:
Please note that the situation concerning the availability of fresh water will not change through the different scenarios. It will remain the same for all the scenarios. That’s why the line is grey.
Depending on developments of the current reuse system:
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DEMOWARE GA No. 619040
Water reuse could provide water for outside uses and toilets flushing: restrictions on outsides us-es would be avoided, treated water would be used to avoid water cuts on toilets flushing, but other domestic uses would remain subject to water cuts. In this situation, the level of treat-ment of the reused water is 3: 99% reduction in pollution load after treatment and the treated water is free of pathogens but not apt for human consumption.
Hence, in that case, the situation of allowed water uses during severe drought restrictions could be summarized as follow:
Water reuse could provide water for all domestic uses: restrictions on outside uses would be
avoided and treated water would be used to avoid water cuts on all domestic uses. In this situa-tion the level of treatment of the reused water is 4: 99,99% reduction in pollution load af-ter treatment and the treated water is free of pathogens; the treated water is of potable quality and apt for human consumption
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Deliverable D4.3
Hence, in that situation the uses of water for domestic purposes during severe drought re-strictions could be summarized as follow:
4. Additionalamountspentonyourmonthlywaterbill: Investing in developments of the re-
use system would require additional funds. Although the water utility does receive sources of external funding, these would not be enough to cover the total investment needed, and part of the financing would have to be paid by the customers of the water utility through increases in their water bills.
Increase on monthly water bill: 0 € if no develop-
ments of the current reuse system
3 € /month
8 € /month
13 € /month
Before you start choosing your preferred scenarios, bear in mind people often say they will pay money in a survey regardless of how the truly feel because no money is actually involved. When you think about your answers, we ask you to assume you would actually have to pay the proposed increases in your water bill. Please keep in mind both the benefits and costs of the proposed scenarios and the impact it will have in your pocket. Now, you will be presented with 3 consecutive tables; each table is composed of three different scenarios: one scenario presenting the current situation related to water reuse and the other two stemming from differ-ent developments of the current reuse system. For each table, carefully consider each of the scenarios and choose the one you prefer.
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DEMOWARE GA No. 619040
Table 1: Which is your preferred scenario: Scenario A, Scenario B or the Actual Situation?
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Deliverable D4.3
Table 2: Which is your preferred scenario: Scenario A, Scenario B or the Actual Situation?
Table 3: Which is your preferred scenario: Scenario A, Scenario B or the Actual Situation?
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DEMOWARE GA No. 619040
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If you chose “Actual Situation” in all tables, please explain what your reasons were:
reason tick 1 It is not me who should pay 2 The current situation fits me 3 I'm not sure that my financial contribution will be used
properly
4 The proposed increases in the water bill are too expen-sive for me
5 I'm opposed to any form of increase in my water bill 6 I don't think that a better water reuse system would
work in Sabadell
7 I don't believe in the feasibility of your scenarios 8 Water reuse is not a priority for me
Background information How long have you been living in Sabadell?
Years: …............................. How often do you practice the following activities?
Activities At least once a week
At least once a month
At least once every three months
At least once a year
Never
1 Fishing along the Ripoll River
2 Walking along the Ripoll River Park Lineal
3 Resting, walking, sports or any oth-er recreational activity in one of the parks of Saba-dell
4 Gardening in your home
5 Washing your car What is your education level?
# Degree Tick Educacion primaria Ciclos Formativos de Grado Medio Ciclos Formativos de grado Superior Bachillerato Licenciatura Maestria
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DEMOWARE GA No. 619040
Doctorado What is your occupation?
# Status Tick 3 Student 4 Employee 5 Worker 6 Farmer 7 Craftsmen, shop or company owner (manager) 8 Profesion liberal 9 Unemployed 10 Retired 11 other
What is your household monthly revenue? (Please account for all monthly household revenues and not only your own)
Revenue Tick Less than de 250 € From 251 € to 500 € From 501 € to 750 € From 751 € to 1 000 € From 1 001 € to 1 500 € From 1 501 € to 2 000 € From 2 001 € to 3 000 € From 3 001 € to 4 500 € From 3 001 € to 4 500 € From 4 501 € to 6 000 € From 6 001 € to 7 500 € More than 7 501 € This questionnaire is over; we thank you for your time and wish you a very nice day!
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AnnexIII‐BraunschweigContingentValuationquestionnaire
Introduction In the context of an EU research project we are carrying out a study about efficient water resource manage-ment. The study is undertaken in several European cities, Braunschweig being one of them. This is not a test of knowledge. We only want to know what citizens think about water and ‘water bodies’ and understand your point of view about how to address water issues in your city. Your answers will be kept anonymous.
General understanding and perception Do you think that Braunschweig is lying in a water scarce or a water rich region?
Tick 1 Water scarce region 2 Water availability problems are occurring (only) during dry summers 3 There is sufficient water available to cover all needs 4 Much more water is available than what is needed to cover all needs 5 Sufficient water is available today, but availability problems might occur in the future
linked to climate change
6 I don’t know In particular, do you think that there is a problem of groundwater availability in the region around Braunschweig?
Tick 1 Yes 2 No 3 I don’t know Who do you think are the main consumers of water in Braunschweig?
(1 = largest consumer… 4 = smallest consumer) Sectors Ranking1 Households 2 Agriculture (irrigation) 3 Municipality 4 Industry 5 Others:… For your information, drinking water in Braunschweig is coming to more than 98% from the Harz [nearby mountains], and only a very small percentage stems from groundwater. Currently, no water availability problems are occurring in the region.
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DEMOWARE GA No. 619040
Some questions will follow on water quality issues. To your knowledge, are there any water quality problems in the river Oker?
Tick 1 Yes 2 No 3 I don’t know If yes, continue with questions 5 and 6. Otherwise go directly to question 7. What do you think are the causes of these water quality problems?
(1= main cause …. 4 = least important cause) Sector Ranking1 Agriculture (fertilizers and pesticides) 2 Municipal and private wastewater 3 Industrial discharges 4 Mining activities 5 Other: … Do you think that the water quality of the river Oker has a local negative impact on…:
Important negative
impact Small negative impact
No impact
1 Habitat of animals and plants in the water
2 Occurring fishes 3 Drinking water quality 4 Agricultural activities 5 Occurring birds 6 Recreational activities 7 Other: To your knowledge, which recreational activities are taking place on the river Oker?
(several answers are possible) Tick 1 Angling 2 Bathing 3 Canoeing 4 Observation of nature 5 Walking 6 Other: … 7 None 8 I don’t know 3. Wastewater reuse
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To your knowledge, is it possible to reuse treated waste water?
Tick 1 Yes 2 No 3 I don’t know For your information: Waste water is generally treated in waste water treatment plants, mainly to be discharged into the environment without polluting it. But, it is also possible to reuse the treated wa-ter for example for agricultural uses, industrial uses or some urban uses. In general, what do you think about the idea of reusing wastewater?
Tick 1 In general, I am in favor of this idea. 2 In general, I don’t like this idea. 3 I don’t have enough information to have an opinion on the subject. 4 I don’t care about the issue. To your knowledge, is there any water reuse in Braunschweig?
Tick 1 Yes 2 No 3 I don’t know For what uses would you be willing to accept reused water in general?
Uses Disagree Neutral Agree
1 Irrigation of crops for direct consumption (e.g. vegetables, fruits) 2 Irrigation of crops which are transformed before consumption (e.g.
cereals, sugar beets)
3 Irrigation of crops for energy production (biomass) 4 Industrial uses 5 Artificial groundwater recharge 6 Toilet flushing 7 Drinking water (tap water)
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DEMOWARE GA No. 619040
For each use you choose “disagree” in the previous question, please indicate the two mains reasons.
Uses Increased
prices
Unpleasant odor
Health risks related to the consumption of
agricultural products irrigated with reused
water
Health risks relat-ed to contact with
wastewater (e.g field workers,
walkers)
Increased chemicals in
water / drink-ing water
Reduced groundwater or surface water
quality
Pollution of agricultural soils with chemicals
Other: …
1 Irrigation of crops for direct consumption (e.g. vegetables, fruits)
2 Irrigation of crops which are transformed before consumption (e.g. cereals, sugar beets)
3 Irrigation of crops for energy production (biomass)
4 Industrial uses 5 Artificial groundwater
recharge
6 Toilet flushing 7 Drinking water con-
sumption (tap water)
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4. Current wastewater reuse in Braunschweig In this section, we will give you a brief presentation of the current situation in Braunschweig related to water reuse. The wastewater from the city of Braunschweig is directed to the wastewater treatment plant Steinhof, where different treatment processes remove pollutants. This leads amongst others to the accumulation of sewage sludge, which is a valuable fertilizer in agriculture due to its high content of nitrogen and phosphate. When leaving the plant, about half of the treated wastewater is piped to the so-called infiltration fields (Rieselfelder). In this area a natural post-treatment takes place before the effluent reaches the nearby surface water body (the Oker). The other half of the wastewater volume is directed to the agricultural fields of the Braunschweig wastewater association (Abwasserverband Braunschweig) (2700 ha). Here the treated water is mixed with sludge from the treatment plant and irrigated on the fields. This allows providing both water and nutrients for agricultural activities in the area and partly replaces the need to use industrial fertilisers. No crops for direct consumption are grown for precautionary, hygienic reasons. Instead, the cultivated crops are either further processed, or are delivered to the local biogas plant Hillerse in order to produce renewable energy. How supportive are you of the water reuse system in Braunschweig?
Degree of support Tick 1 Completely against 2 Generally against 3 Neutral 4 Generally supportive 5 Completely supportive
In your opinion, what are the three most important benefits of water reuse in Braunschweig?
(1 = most important benefit, 2 = second most important benefit, 3 = third most important benefit) Benefits Ranking1 Lower water prices 2 Support for local agriculture 3 Financial advantages for the wastewater treatment plant 4 Ensuring that sufficient water resources are available to cover the whole demand 5 Protecting water resources in view of climate change 6 Improve the preservation of rivers, lakes and ground waters 7 Increased species diversity 8 Increased resilience of economic activities to (potential) water scarcity 9 Others: … 10 I don’t see any advantages
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DEMOWARE GA No. 619040
In your opinion, what are the three most important downsides of water reuse in Braunschweig?
(1 = most important downside, 2 = second most important downside, 3 = third most important downside) Downsides Ranking 1 Increased water prices 2 Unpleasant odor 3 Reduced groundwater quality 4 Health risks related to the consumption of agricultural products irrigated with reused
water
5 Health risks related to contact with reused water (e.g. field workers, people walking through the fields)
6 Increased chemicals in water 7 Pollution of agricultural soils with chemicals 8 Other: … 9 I don’t see any downsides To what extent do you trust the water service provider to manage this recycled water system in a way that protects the environment and particularly public health?
Degree of trust Tick 1 No trust at all 2 Little trust 3 Some trust 4 A lot of trust
5. Environmental benefits of the current wastewater reuse system in Braun-schweig As explained before, the wastewater reuse system in Braunschweig has different components. In the follow-ing, however, we will concentrate only on the environmental benefits for groundwater and surface water qual-ity. The preservation and recharge of local groundwater resources During the summer, the water needs of the crops irrigated with treated wastewater in Braunschweig amount to about 3 million m3. If this amount of irrigation water would instead be taken from the two groundwater bodies lying below the fields, nearly all of the sustainably usable, local and renewable groundwater reserve would be consumed or even exceeded in try years. By using treated wastewater, not only pressure on local groundwater bodies is avoided, but in addition the recharge of the groundwater reserve promoted. Currently, more water is irrigated on the fields than what is used by the plants and in total more than 7 million m3 of water are infiltrating every year in the soil towards the aquifers. (As a comparison: The total water consump-tion of the city of Braunschweig is about 13 million m3 per year.) In general terms, recharging groundwater bodies increases the resilience regarding potential negative consequences of climate change. Protection of the water quality in the nearby river Oker About half of the yearly volume of treated wastewater is led to the infiltration fields, where part of the excess nitrogen and phosphate is removed through natural processes, before the water finally reaches the Oker. The infiltration fields are currently at their limits in terms of pollutant absorption capacities. If water reuse activi-ties for agriculture would cease, the entire wastewater volume would be discharged in the infiltration fields.
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This could lead to exceeding allowed thresholds. The amount of pollutants reaching the Oker would probably double. In the next section we will present you a hypothetical situation. Your answers to the following ques-tions are very important. Assume that, for financial reasons, agricultural water reuse activities would cease and all the treated volumes would be discharged in the infiltration fields. This would double the amount of pollutants reaching the Oker. The ecological balance of the river could be affected and e.g. an increased algae growth could occur. Moreo-ver water for irrigation would be taken from the local groundwater bodies. This would exhaust or even ex-ceed the locally available and sustainably usable groundwater reserve. Furthermore, no additional recharge of the groundwater bodies would take place. With this background, imagine that an environmental program would be set up to financially support the agricultural wastewater reuse system in Braunschweig. The program would not be a support to local agricul-ture, as it would not increase the revenue of the farmers (compared to a situation where they use groundwater for irrigation). The support would only serve to preserve the environmental benefits stemming from the agri-cultural reuse system (increased river water quality and groundwater preservation). In principle, would your household be willing to contribute to the implementation of such an environmental program with additional money collected through your monthly water bill? Tick 1 Yes 2 No If yes, then continue with the text; otherwise go directly to question 17. You have said you would be willing, in principle, to contribute to the implementation of such an environmen-tal protection program. We are very interested to know how much you would be willing to pay to ensure the implementation of the program. Using the following table as a support, what is the maximum amount that your household would be willing to pay in terms of monthly increase to your current water bill? Accepted increase in the water bill
(in euro per month and household)Tick
1 0,50 2 1,00 3 2,00 4 4,00 5 6,00 6 8,00 7 10,00 8 12,00 9 14,00 10 16,00 11 18,00 12 20,00 13 More than 20,00
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DEMOWARE GA No. 619040
While answering this question please bear in mind:
Often people say they will pay money in a survey regardless of how they truly feel. We ask you to as-sume you would actually have to pay the increase in your water bill and that you will not be able to spend this money on other things.
There are currently no water availability problems in the region. The average monthly water bill in Braunschweig is around 37 Euro per month for a two-person-
household (including drinking water and wastewater charges). It includes already about 0.55 euro for the water abstraction charge which is amongst others used to finance measures for water body pro-tection (Gewässerschutz) and for resource conservation (Ressourcenschutz).
If you chose not to pay, please explain what your main reason is:
(Please select only one answer) Reason Tick1 It is not me who should pay 2 The deterioration of the river water quality and the state of the groundwater is not a
priority for me
3 I'm not sure that my financial contribution will be used properly 4 Any increase in the water bill would be too expensive for me 5 I'm opposed to any form of increase in my water bill 6 I don't think that the environmental protection program would work 7 I am not very interested in this matter 8 The described situation does not seem realistic to me 9 The impact on the environment is too small to be important 10 I’m opposed to any form of financial support provided to agriculture 11 Other:
6. Background information To finalize the questionnaire some last questions will follow which are needed to enable the statisti-cal analysis of the survey. We can only use your questionnaire if all questions are completed. How long have you been living in Braunschweig?
Years: …............................. Do you practice any recreational activity on or along the Oker?
Tick 1 Yes 2 No
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How often do you practice any of the following activities?
Every
day At least once a week
At least once month
At least once every three months
At least once a year
Less than once a year
Never
1 Buy environmentally friendly products or products from organic agriculture
2 Donate to an environ-mental protection asso-ciation
3 Separation of house-hold waste
4 Read journals or maga-zines on environmental subjects
What is your highest educational qualification?
Qualification Tick1 No qualification 2 Completion of compulsory basic secondary schooling 3 Completion of the Realschule 4 Advanced technical college entrance qualification (Fachhochschulreife) 5 Diploma from German secondary school qualifying for university admission or matricu-
lation (Abitur)
6 Bachelor 7 Completion of the technical college of higher education (Fachhochschulabschluss) 8 University degree 9 Doctorate What is your occupation?
Status Tick1 Unemployed 2 Student 3 In training 4 Employee 5 Worker 6 Farmer 7 Self-employed in commerce, business, craft, industry or provision of service 8 Public servant 9 Housewife 10 University graduate with a liberal profession (doctor, lawyer, tax consultant, and the like) 11 Retired 12 Other:
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What is your household monthly revenue? (Please account for all monthly household revenues and not only your own)
Revenue Tick 1 Less than 250 € 2 From 251 € to 500 € 3 From 501 € to 750 € 4 From 751 € to 1 000 € 5 From 1 001 € to 1 500 € 6 From 1 501 € to 2 000 € 7 From 2 001 € to 3 000 € 8 From 3 001 € to 4 500 € 9 From 4 501 € to 6 000 € 10 From 6 001 € to 7 500 € 11 More than 7 501 € Do you have children?
Tick 1 Yes 2 No Would you like to add any remark or comment on either the questionnaire or on the subject?
Answer: … The questionnaire is now over. We thank you for your time and wish you a very nice day!