water.europa.eu Indepth assessment economic analysis progress report SCG meeting May 2008 Maria Brättemark, Unit D.2, DG Environment, European Commission

water.europa.eu Slide 2 Outline Recall the 1st implementation report Scope of the in-depth assessment Initial conclusions Way forward

water.europa.eu Slide 3 Implementation Results Article 5 analysis - 7 Information available on cost recovery

water.europa.eu Slide 4 Implementation Results Article 5 analysis - 8 Information available on costs considered for cost recovery

water.europa.eu Slide 5 Scope : in-depth assessment – annex III The economic analysis shall contain enough information in sufficient detail (taking account of the costs associated with collection of the relevant data) in order to: (a)make the relevant calculations necessary for taking into account under Article 9 the principle of recovery of the costs of water services, taking account of long term forecasts of supply and demand for water in the River Basin District and, where necessary: –estimates of the volume, prices and costs associated with water services, and –estimates of relevant investment including forecasts of such investments; (b)make judgements about the most cost effective combination of measures in respect of water uses to be included in the programme of measures under Article 11 based on estimates of the potential costs of such measures.

water.europa.eu Slide 6 Scope : in-depth assessment – article 9 principle of recovery of the costs of water services, including environmental and resource costs, the polluter pays principle. that water pricing policies provide adequate incentives for users to use water resources efficiently, and thereby contribute to the environmental objectives of this Directive; an adequate contribution of the different water uses, disaggregated into at least industry, households and agriculture, social, environmental and economic effects of the recovery + the geographic and climatic conditions of the region or regions affected. funding of particular preventative or remedial measures in order to achieve the objectives of this Directive. established practices for a given water use activity, where this does not compromise the purposes and the achievement of the objectives of this Directive.

water.europa.eu Slide 7 Why now ? 2009 RBMP shall include -the planned steps towards implementing paragraph 1 which will contribute to achieving the environmental objectives of this Directive and on the contribution made by the various water uses to the recovery of the costs of water services. -summary of the art 5 reports economic analysis Reality check on how the economic principles of the WFD are implemented – but of 2005 progress… Reporting formats to be developed. Legal action - further dialogue with MS on progress towards RBMP, key problems encountered – possibly workshop Testing a methodology for 2010 in-depth assessments Helps us to get early warning on poor performance …

water.europa.eu Slide 8 Questions asked indepth assessment All relevant economic issues to be analysed and reported: 1.Definition of water services and consideration of water uses 2.Level of cost recovery/which costs are included and how 2a.Sub-topic: Calculation of cost recovery 2bSub-topic: Environmental and resource costs 2cSub-topic: Incentive pricing 3.Baseline scenario 4.Information base for making judgements on cost effectiveness of measures

water.europa.eu Slide 9 Overall impressions Quality is diverse – but quality generally too poor Mixture of poor reporting and/or poor analysis Low level of technical links between economic analyis and P&I analysis Level of detail reported often insufficient for the preparation of implementation of article 9 Low level of international coordination Few MS have reached sufficient “scores” – efforts are needed; No MS sufficient efforts in all areas. A number of “good practices” however identified…

water.europa.eu Slide 10 Specific comments (1) Definition of water services and consideration of water uses : -Some work done on water uses in most Member States, but links with P&I weak -Links between water uses and the water services not well developed -Narrow application of the term water services in a larger number of cases -Different approaches to inclusion of self-services – examples of excluded “self abstraction” for instance by industry is reported to be about 30 % - significant ! Cost recovery : -Big gaps in information on certain uses, in particular agriculture -Little work on water uses contribution to the costs of water services -Little consideration of environmental and resource costs – an even less quantified information on ERC

water.europa.eu Slide 11 Specific comment (2) Cost recovery (cont’d) -No substantial information on considerations of polluter pays principles and little consideration of incentive properties of water pricing – core requirements of art 9 Baseline scenarios : -Some work done projections of trends, but rarely beyond WATECO recommendations on baseline rarely followed Cost effectiveness analysis : -At the time of reporting these issues, one of the least developed areas were basis for developing cost-effective set of measures.

water.europa.eu Slide 12 Environment and resource costs ERC mentioned (of 21 completed assessments) : -Agriculture : 6/21 -Industry : 8/21 -Households :8/21 -Other :5/21 ERC calculated (of 21 completed assessments) :  Agriculture : 4/21 *  Industry : 5/21 *  Households :5/21 *  Other :3/21 * *Partial calculations !

water.europa.eu Slide 13 Specific estimates water service volumes, prices and costs (of 23 completed assessments) : -Whole supply chain : 9/23 (partial 5/23) -Waste water treatment : 5/23 (partial 9/23) -Abstraction : 2/23 (partial 6/23) -Impoundment :0/23 (partial 0/23) -Storage :0/23 (partial 0/23) -Treatment : 0/23 (partial 2/23) -Distribution : 1/23 (partial 3/23)

water.europa.eu Slide 14 Way forward Finalisation of these internal reports – to support the legal assessments of compliance with the WFD requirements Workshop - to seek dialogue on MS progress and COM expectations on the economic components of the RBMP Request to Water Directors to update the list of contact persons on water economics, for the purpose of this report, but also other issues. Reporting formats – with WG D and network of economists – to improve the reporting next time Legal action ?

water.europa.eu Slide 15 Other economic projects - Handbook on economic assessment – contracted to COWI. - Competitiveness study - Aquamoney - Water scarcity : water demand scenarios. - New projects in pipeline - Exemptions - see other presentation