The WFD economic aspects as a powerful tool for change: NGO point of view Sergiy Moroz WWF European Policy Office
Contents • Introduction: Economic aspects in the WFD • Overview of current status of main economic elements of the WFD – Economic analysis of water uses (art 5 reports) – Cost effectiveness analysis – Disproportionate cost analysis – Pricing and cost recovery • Cross cutting “challenges” • Key messages
Economics in the WFD • WFD sets out to shift paradigm of how we use, manage, and value our water • Economics can be a powerful tool for change, needs to be used well • WFD economic elements need to be based on good technical analysis and be transparent • WFD economic elements fall into 3 broad categories – Principles (e.g. polluter pays) – Economics as a contribution to decision-making – Economic instruments as measures for meeting the WFD objectives
Economics in the WFD Article 5 analysis (2004-2005) • Analysis of pressures and impacts • Protected areas • Economic importance of water uses, baseline scenarios, cost recovery, incentive pricing Cost effectiveness analysis (2005 - 2009) • Choosing programmes of measures (including economic instruments) that are most cost-effective in reaching good water status Disproportionate cost analysis (2005 - 2009) • Economic analysis for justifying possible time exemptions and alternative (less stringent) environmental objectives River Basin Management Plans (2009) • Including financing and cost recovery considerations
Economics in the WFD Article 5 analysis (2004-2005) • Analysis of pressures and impacts • Protected areas • Economic importance of water uses, baseline scenarios, cost recovery, incentive pricing Cost effectiveness analysis (2005 - 2009) • Choosing programmes of measures (including economic instruments) that are most cost-effective in reaching good water status Disproportionate cost analysis (2005 - 2009) • Economic analysis for justifying possible time exemptions and alternative (less stringent) environmental objectives River Basin Management Plans (2009) • Including financing and cost recovery considerations
WWF/EEB survey of article 5 reports: What Objective of survey • Does economic analysis in Art 5 reports comply with WFD and follow WATECO? • Will it encourage use of economic instruments to achieve WFD objectives? FI-KY Scope of survey EE-EE SE • 20 Countries LV-LI DK-AA • 25 River Basin Districts IE-SI • Snapshot of situation in March DE-EM PL-VI NL-RD 2006 DE-WE DE-EL UK-SW BE-SC Int-ME DE-MR FR-SN Int-UR Methodology DE-DA AT-DA RO-PR HU-DA • Questionnaire SI-DA • Consistency and verification FR-RH IT PR-TR GR ES-GA
WWF/EEB survey of article 5 reports: Key findings • Comparability limited, even within RBDs • Environmental assessment – Honest, confirms NGOs concerns – Around 50% of water bodies at risk failing to achieve good status (European Commission 2007 assessment is 40%) – 22 of 25 reports identify hydromorphology as crucial environmental problem • Economic Analysis – Fails to link with environmental findings
WWF/EEB survey of article 5 reports: Key findings • Water service – Mostly very narrow: drinking water and sewerage – 50% identified self services – Services for hydropower, navigation, flood control (explicitly excluded in DE and AT, included only in 6 reports (ES, LV, RO, NL, FR, PT) • Cost-recovery – Restricted to drinking water/sewage and financial costs – Only 8 reports include and assessment of environmental costs – Only 2 reports made an effort to assess infrastructure serving hydropower and navigation (FR, LV) – Few assess contribution of uses to the costs of water services • Low transparency, lacking justifications • In only 7 cases appropriate public participation reported
2007 European Commission report on WFD implementation • Confirms the economic assessment is one of the main shortcomings in WFD implementation – Low level of information available – When available, analysis of cost recovery levels varies significantly (households: 70-100%; industry: 40-100%; agriculture 1-100%) – Few considerations of environmental and resource costs (only 5 Member States) or baseline scenarios – Shortcomings with transposition of water services definition in at least 12 Member States
Lessons from art 5 reports • Economic analysis does not integrate environmental concerns, fails to address key sectors that cause environmental degradation • Often fails to consider environmental and resource costs and shed light on financial flows • WATECO guidance document largely not followed � Wide diversity in definitions, content and focus, largely influenced by past practices, organisational set-up, absence of experience and limited expertise in water economics • “Water Services” definition too narrow in many cases – has serious implications • Participatory approach rather an exception • In current state, article 5 reports are often unfit to support WFD implementation and will hamper both informed choice and sound financing mechanisms
Economics in the WFD Article 5 analysis (2004-2005) • Analysis of pressures and impacts • Protected areas • Economic importance of water uses, baseline scenarios, cost recovery, incentive pricing Cost effectiveness analysis (2005 - 2009) • Choosing programmes of measures (including economic instruments) that are most cost-effective in reaching good water status Disproportionate cost analysis (2005 - 2009) • Economic analysis for justifying possible time exemptions and alternative (less stringent) environmental objectives River Basin Management Plans (2009) • Including financing and cost recovery considerations
Overview of current situation • As expected after art 5 reports, very “econo” diverse • Only cost effectiveness, cost-benefit, both • Different scales of analysis from water body to sub catchment to basin district • Different tools: expert knowledge, statistical analysis, modelling • Cost effectiveness versus polluter pays
Economics in the WFD Article 5 analysis (2004-2005) • Analysis of pressures and impacts • Protected areas • Economic importance of water uses, baseline scenarios, cost recovery, incentive pricing Cost effectiveness analysis (2005 - 2009) • Choosing programmes of measures (including economic instruments) that are most cost-effective in reaching good water status Disproportionate cost analysis (2005 - 2009) • Economic analysis for justifying possible time exemptions and alternative (less stringent) environmental objectives River Basin Management Plans (2009) • Including financing and cost recovery considerations
Overview of current situation • Loose definition of disproportionality • The value of benefits underestimated and narrow cost- benefit analysis • Affordability and time derogation • Affordability of public budgets and alternative financing mechanisms • Affordability versus polluter pays
Economics in the WFD Article 5 analysis (2004-2005) • Analysis of pressures and impacts • Protected areas • Economic importance of water uses, baseline scenarios, cost recovery, incentive pricing Cost effectiveness analysis (2005 - 2009) • Choosing programmes of measures (including economic instruments) that are most cost-effective in reaching good water status Disproportionate cost analysis (2005 - 2009) • Economic analysis for justifying possible time exemptions and alternative (less stringent) environmental objectives River Basin Management Plans (2009) • Including financing and cost recovery considerations
Main economic elements of the WFD • Economic instruments as measures: Cost recovery and water pricing (article 9) – adequate recovery of the costs of water services (including environmental and resource costs – adequate contribution of water uses to the recovery of the costs in accordance with polluter pays principle – Pricing policy that provides incentives to efficient water use (both quantity and quality/pollution aspects)
Overview of current situation • Water pricing, though central in WFD negotiations, has received limited attention so far • Economic instruments as measures are rather weak in the current debate on measures • Cost recovery is limited • Wide approach needed, direct sector subsidies • More work needed on environmental and resource costs
Cross cutting challenges • Complexity of analysis While important, economic methods and tools are only envisaged as making a contribution to decision making, rather than dictating any decision. • Transparency on (i) who uses and pollutes, (ii) which services are put in place, (iii) what are their costs, (IV) who pays these costs, combined with required consultation/participation, such transparency, should stimulate changes in current policies towards more sustainable/environmentally friendly practices
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