Environmental and resource costs assessment

Definitions and Methodology

Princing of the water resource, a tool for implementing the WFD Why ? The polluter pays principle Transparency Incentive pricing to change behavior What ? Financial costs Environmental costs Resource costs

What is the cost of an environmental good ? Environmental externalities Economic externalities Opportunity costs Costs of capital Operation and maintenance costs Full costs Economic costs Production costs

Cost-based methods Assess costs that would appear if a good / service disappeared or was altered Avoided costs Substitution costs Replacement costs

Revealed preference methods Behaviors reflect the value assigned to the environment. Market Hedonic prices Transportation costs

Declared preference methods Behaviors reflect the value assigned to the environment. Contingent valuation Joint analysis

Implementation by the French Water Agencies

Why did we use CBA ? To compare costs and benefits of the PoM for people affected by the measures When did we use CBA? When the cost of measures was disproportionate compared to the willingness to pay  Joint choice of actions and goals Cost-Benefit Analysis (CBA)

Benefits included in our CBA Direct Benefits Good status Market benefits : reduction in water treatment costs Non-market benefits : increased user satisfaction Indirect Benefits reduction in health costs reduction of costs associated with erosion and flooding improving soil quality biodiversity Derived Benefits no litigation increase in the tourism- related business

Assessing benefits UseTodayIf/When good status ValueBenefits Bathing Bathing forbidden « days » 30€/day/capita € Boat 5000 days /yr3000/days/yr30€/yr per boat € >Avoided costs >Which water uses allowed by good status?

Market benefits : treatment costs avoided Treatment cost : 0,05- 0,48 €/m 3 % of surface water treated against pesticides If nothing is done If status improving offsetting costs paid by households : 197 M € /y

Non-market benefits : user satisfaction x x &

SN Basin : economic interest of achieving good status Indirect and induced benefits Plus 140% to 500% of actualized costs. 14

15 Is going " beyond the law" a justified expense ? 2 scenarios : 1.Catching up on delayed implementation guidelines 2.Comply with regulations + Improve the quality of drinking water + Improve the tourism potential Sèvre nantaise : an exemple of sub-basin CBA

“Only the law” scenario Costs > Benefits

Ambitious scenario Costs < Benefits

CBA Practical issues Benefits are very difficult to quantify and to assess in monetary terms Above all for non market benefits : value transfer choices (cf population) long–time ecological process Local stakeholders got rarely interested in CBA… … or tried to divert its goal in order to not implement restoration measures

Limitations and difficulties encountered 19 Example of Languedoc-Roussillon Water bodyVidourleLez-Mosson Number of inhabitants (Montpellier) Ecological interest Similar Costs27,6 M euros27,4 M euros Benefits13,4 M euros (Tourism and canoe) 125 M euros (only due to the presence of Montpellier) Costs are disproportionate Costs are not disproportionate Source: agences de l'eau

Food for thoughts In the framework of PoM, ability to pay seems more appropriate CBA, used in a more qualitative way (to show the diversity of benefits) could be used at a river basin scale (for big political choices) or for very specific projects where good status is at stake (cf MEFM) Multi-criteria analysis Look at indirect and induced benefits Use other indicators (increase in health, wellbeing...)