1. An approach to the economic analysis of water use
Brussels, 1-2 October 2013
We would like to thank the COM for the organization of this workshop on economic aspects that we find pretty necessary to improve the economic studies of the first RBMP and to help to face those of the 2 and 3rd cicle.
We agree that the point of view on how the water helps the economic development, the employment and the social well-being should be integrated into the decision-making processes, taking also into account the requirements of the WFD

2. Legal framework analysis
PRESENTATION INDEX
Legal framework analysis
Integral vision chart
Linking water use, income and employment
Most cost-effective combination of measures
(Some questions and case study analysis)
As yesterday my colleague Jose Angel presented the cost-recovery dilemma in Spain, today we are going to introduce the economic analysis of water uses, keeping in mind that both questions should be updated before the end of the year through the art. 5 reports

3. To be updated every 3 years
LEGAL FRAMEWORK
BLUEPRINT
Art. 9 – Annex III
To be updated every 3 years
Arts. 5 & 13
WATECO
The requirements for these studies are in Art. 9 and annex III of the WFD
The 2003 WATECO GUIDANCE helpS to interpret and the BLUEPRINT to analized the outcomes and the orientation to the future
The study must be repeted every 3 years following art. 5 and 13 of the WFD, the former art. to give support to the Schema of Important Issues (to discuss alternatives) and the latter to give support to the RBMPs (on the updating of the decissions and PoM).
NATIONAL
LEGISLATION 3

4. An approach to the economic analysis of water use
ECONOMIC ANALYSIS REQUIREMENTS:
The economic analysis shall contain enough information (…) in order to:
(…) take into account the principle of recovery of the costs of water services.
make judgements about the most cost-effective combination of measures (…), to be adopted.
Source: Annex III, WFD
Lets remember what say the different legislation on the issue

5. An approach to the economic analysis of water use
Hydrological Planning Regulation (HPR) . Art (General description of the characteristics of the river basin)
The economic analysis of water use shall contain:
The Institutional map of the water related services
The information required to calculate the recovery of the costs of water services
Forecasts of the cost of measures to carry out the cost-efficiency analysis
Economic analysis of water use, including the trend analysis
These rules, have been carried into the Spanish legislation through the HPR and the technical instruction for water planning, where the technical requirements to carry out the work are established.

6. SUPPORTING DECISION SYSTEM
LINKING PRESSURES-STATUS-MEASURES E1 E2 E3
PRESSURES Art STATUS - MEASURES Art.11
E C O N O M I C A N A L Y S I S
INFORMATION SYSTEM
SUPPORTING DECISION SYSTEM
Art. 9
Art
The need for a wide integral vision
The picture shows the case study of a river, divided into different water bodies, that following Art. 8 have their own gauge stations, following art. 5 suffer pressures conditioning the state and of course following art 11 that condition in turn the PoM gathered in the RBMP. In this scenario, the economic analysis (Art.5), help to choose the most appropriated alternatives.
RBMP (Art.13)

7. MOST COST-EFFECTIVE COMBINATION OF MEASURES
OTHER FUNCTIONS OF THE ECONOMIC ANALYSIS
Development the economic analysis of the water use in each river basin district. How does the use of the water affect the capital income and the employment?
Determining the trends in the use of water and in its associated investments.
Designating HMWB taking into account the economic impact on the water uses and the cost of the alternatives to reach the objectives.
Supporting the selection of measures
The WATECO guidance again shows us different aspects of the economic analysis, pointing out other functions of it.
A concrete example in that, regards…
Source, 2003 WATECO Guidance

8. Precipitation 46.200 3.000 Evapotranspiration 33.800 Returns 9.400
MOST COST-EFFECTIVE COMBINATION OF MEASURES
HOW CAN THE WATER USE INFLUENCE INCOME AND EMPLOYMENT?
GREEN
BLUE
TOTAL
AGRICULTURE
10.600
2.600
13.200
ENERGY
300
OTHER INDS.
100
FOREST
10.700
REST OF NAT.
12.500
TOTAL:
33.800
3.000
36.800
Precipitation
46.200
3.000
Evapotranspiration
33.800
Returns
9.400
This is an schema of the water balance in the Duero RBD
In this basin the average rainfall is hm3/per year, of this total return to the athmosphere through the evapotranspiration producing an average runoff of hm3/year, of that total 9400 go to Portugal and the real water consumption is of about 3000 hm3 per year of blue water in the different uses displayed in the table, helping the GAV and the employment
But pay attention that the other hm3 per year evapotranspired help the economy as green water, because are consumed in agriculture helping therefore the GAV and the employment.
Contribution
12.400
to Portugal
Water flows values given in hm3/año. Average 1980/ /06
Example: Duero draft RBMP, March 2012.

9. Water Footprint of the Duero RBD
MOST COST-EFFECTIVE COMBINATION OF MEASURES
HOW CAN THE WATER USE INFLUENCE INCOME AND EMPLOYMENT?
Water Footprint of the Duero RBD A B C D E F
Suma
B-C+E-F
A+B+D+E
FINAL
Consumption
Export
Import
Total FP
Balance
Internal consumption
Urban supply. 66
Industry 28 9 8 45 1 37
Energy 30
270
300
Livestock 15
Agriculture
6.724
3.876
2.520
1.679
965
735
16.499
1.586
13.244
Total:
1.818
1.244
743
16.925
1.857
13.662
10.600
3.062
The water footprint analysis, carried into the national legislation through the thecnical instruction for water planning explains the virtual water movements in the same basin, differentiating between the green water and the blue water
These values, calculated for the whole basin would be of great interest if calculated for subasins or for water exploitation systems to help the water allocations or to calculate the environmental restrictions such as the E-Flows.
Water flows values given in m3/año
Wa Ef
Example: Duero draft RBMP, March 2012.

10. 45.000 millions GAV Average apparent productivity of blue water
MOST COST-EFFECTIVE COMBINATION OF MEASURES
HOW CAN THE WATER USE INFLUENCE INCOME AND EMPLOYMENT?
Average apparent productivity of blue water
500 €/m3
3,3 €/m3
millions GAV
5 €/m3
GAV: gross added value
Colors from top to bottom represent, services, construction, energy, industry, and agriculture and livestock
Therefore the consumption of the blue water, which management capacity is more clear through the RBMP, produce an average apparent productivity in the different economic sectors (that of course it is not the unique production factor)
Globaly, in the Spanish part of the DueroRBD, the average apparent productivity of the blue water consumpted is about 3,3 eur/m3
What does that value mean?
455 €/m3
0,23 €/m3
0,35 €/m3
What does it mean?
Example: Duero draft RBMP, March 2012. .

11. MOST COST-EFFECTIVE COMBINATION OF MEASURES
HOW CAN THE WATER USE INFLUENCE INCOME AND EMPLOYMENT?
GAV per sectors
The chart shows the evolution of the GAV in Spain. Apparently the agrifarm sector is clearly the largest consumer of green and blue water seems to be of scarce importance, but HOW WOULD ITS DISEAPPEARANCE IMPACT IN THE REST OF THE SECTORS? (caso del tomate y del chocolate belga)
We are talking about the gap between the price paid to the producer and that of the final consumer
And if the producto disappears , how is it value its impact in the rest of the sectors

12. Most cost-effective combination of measures How can the water use influences income and employment?
WATER ACCOUNTS
Water accounts models, currently under the field of action of the new CIS, could be a good instrument to deal with the issues comented, but at the moment are quite behind and the to solve our problems we need something urgently and easy to apply and harmonize but above all useful.
Something feasible to answer questions such as…

13. Final questions
We may know how much costs water, but, what is its real value?
How economically efficient are the PoM investments?
How can we calculate the net profit of the measures changing water use? Which is the extent of its effect in the economic chain?
If such measures represent an econimic benefit (through the economic procesess) far from the ones who consume water, who should pay the measure? Or what level of cost recovery is the right one?