1. INTERCONNEXIONS BETWEEN ECONOMICS AND WFD
What room and what role for economics?

2. INTERCONNEXIONS BETWEEN ECONOMICS AND WFD
Where are economics in WFD process?
What input is expected from the use of economics?
What are the implications in terms of decision-making?
2/18

3. INTERCONNEXIONS BETWEEN ECONOMICS AND WFD
Where are economics in WFD process?
What input is expected from the use of economics?
What are the implications in terms of decision-making?
3/19

4. WFD BEARS THE STAMP OF ECONOMICS
debates on the economic impact of previous directives
discussions on cost recovery & tarification
From the origins...
stress on the economic dimension in the preamble
major role for economics in the design of water policies to reach WFD's key goal
prior economic justification of derogations
… to the adoption...
… and to the implementation
intensive use of economics to define measures
tarification as an incentive for an efficient use of water resources
economic and fiscal measures may contribute to the achievement of the goal
4/19
Where are eco?

5. ECONOMICS IN WFD PROCESS
12/2006
Art.8
Monitoring programme
Art.14
RBMP working progr.
12/2003
Art.3
Transposition
3/2007
Art.15
Reporting
Art.14
RBMP interim review
12/2007
Art.14
RBMP draft copies
3/2008
12/2004
Art.6
Register of protected areas
Art.5
Characterisation of the district
Identification of potential gaps
Economic analysis
Description of the district
Baseline scenario
Recovery of costs
3/2005
Art.15
Reporting
12/2009
Art.11
Programme of measures
Art.13
RBMP E
Art.4
Designation of HMWB
Deadline
Goal
Derogations
12/2012
Art.8
Combined approach
Art.15
Interim report
Art.15
Reporting
3/2010
Art.9
Water pricing policy Adequate contribution to recovery of costs
12/2010
New measures according to results of monitoring
12/2006
12/2015
Art.4
Good status
Deliverables
Main tasks
"Sub-tasks"
Actions / Measures E
Economic input
5/19
Where are eco?

6. THOUGH IMPORTANT, ECONOMICS ARE ONLY ONE INPUT
… in the decision-making process
WFD
forward-look'g
monitoring
participation
hydrology
… in the implementation
Basic measures
- implementation of directives
- controls
- licences...
Supplementary measures
- legislation
- fiscal instruments
- negotiated agreements
- codes of good practice
- education...
6/19
Where are eco?

7. INTERCONNEXIONS BETWEEN ECONOMICS AND WFD
Where are economics in WFD process?
What input is expected from the use of economics?
What are the implications in terms of decision-making?
7/19

8. CHARACTERISATION OF THE DISTRICT
Art. 5 Annex II; III
What to do?
Economic analysis of water uses and services E
What economic input?
calculations of recovery of costs of water services
taking into account long-term forecasts of supply and demand
estimates of volume, prices and costs associated with water services
estimates of relevant investments
judgements on most cost-effective combination of measures
based on estimates of potential cost of such measures
8/19
When?
December 2004
Update December 2013 and every 6 years
Economic input

9. CHARACTERISATION OF THE DISTRICT
Art. 5 Annex II; III
All WFD process is based on the initial characterisation: potential to reach the goal, trends, judgements on cost-effectiveness of measures, etc.
 pay special attention to the quality of works, data, etc.
 take into account the requirements for later stages
Balance adequately two constraints:
information shall be sufficiently detailed to allow proper implementation of WFD
costs associated with collection of the relevant data should not be excessive
9/19
Economic input

10. REGISTER OF PROTECTED AREAS
Art. 6 Annex IV
What to do?
Register all areas designated as requiring special protection under specific Community legislation
bathing waters (Dir. 76/160/EEC - 8/12/1975)
nutrient-sensitive areas: sensitive zones (Dir. 991/271/EEC - 21/05/1991); vulnerable zones (Dir. 1991/676/EEC -12/12/1991)
Natura 2000 (Dir. 92/43/EEC - 22/07/1992)… E
What economic input?
Include the areas designated for the protection of economically significant aquatic species
When?
December 2004
Kept under review and up to date
10/19
Economic input

11. DESIGNATION OF HMWB E What to do? What economic input? When?
Art. 4; 4.3 Annex II; V
DESIGNATION OF HMWB
What to do?
Identify water bodies unlikely to reach the goal by 2015 and check whether 3 conditions are simultaneously filled:
 physical alterations by human activity make it impossible to achieve the good ecological status
 and changes needed to achieve the goal would have significant adverse effects on existing uses / the wider environment
 and other environmental options to serve the same objectives are technically unfeasible and/or disproportionately costly E
What economic input?
Disproportion of costs of the required measures is the ultimate factor to designate a water body as HMWB
When?
No precise agenda
Between 2004 (characterisation) and 2006 (RBMP working programme)
11/19
Economic input

12. DEROGATIONS E What to do? What economic input? When?
Art. 4.4; 4.5 Annex II
DEROGATIONS
What to do?
Seek specific solutions for water bodies unlikely to reach the goal by 2015
Assess whether the cost of the required measures are disproportionate and/or the measures are technically not feasible
 where phased achievement of the measures allows to reach the goal under acceptable conditions (no more disproportionate costs nor technical unfeasibility): seek time derogation until 2021 or 2027
 where phased achievement doesn't suffice: seek derogation on the objective and achieve less stringent objective E
What economic input?
Disproportion of costs of the required measures is the ultimate and key factor to designate a water body as HMWB
12/19
When?
No precise agenda
Between 2004 (characterisation) and 2006 (RBMP working programme)
Economic input

13. DISPROPORTIONATE COSTS
Art. 4.3; 4.4; Annexes II; V
DISPROPORTIONATE COSTS
Disproportion of costs is a key indicator for
the designation of HMWB
the justification of derogations on deadline or on goal
Disproportionality is considered on a case-by-case basis: it changes from place to place and (often) from time to time
Disproportionality is determined with regards:
to the ability to pay of parties involved
to the benefits expected, including environmental ones
13/19
Ultimately, disproportionality is a local judgement informed by economic information
Economic input

14. PROGRAMME OF MEASURES E What to do? What economic input? When?
Art. 11 Annexes VI; III
PROGRAMME OF MEASURES
What to do?
Construct a programme of measures allowing to reach the goal combining basic measures and supplementary measures E
What economic input?
define economic measures
 basic ones : incentive water pricing policies; adequate contribution of the 3 main sectors to the recovery of the costs of water services
 supplementary ones: economic and fiscal instruments (fines, abstraction/discharge taxes…)
help constructing the programme of measures
 select the most cost-effective measures allowing to reach the goal
 make the most cost-effective combination of individual measures
14/19
When?
December 2009
Update December 2015 and every 6 years
Economic input

15. INCENTIVE PRICING POLICIES AND RECOVERY OF COSTS
Art. 5; 9 Annex III
What to do?
Use such economic instruments as contributions to the environmental objectives of WFD by:
 ensuring that water pricing policies provide adequate incentive for efficient use of water
 ensuring an adequate contribution of the different uses to the recovery of costs
Implement those measures having regards to:
 social, environmental, economic effects
 local conditions E
What economic input?
Economic measures on their own
Have regards to users' affordability and to the elasticity of the demand
15/19
When?
December 2010
Economic input

16. INTERCONNEXIONS BETWEEN ECONOMICS AND WFD
Where are economics in WFD process?
What input is expected from the use of economics?
What are the implications in terms of decision-making?
16/19

17. NOVELTY IN TERMS OF METHODS
A structured process
global process: long-term and cyclic approach
connections with other European policies: CAP, regional, etc.
stringent step by step methodology
An open process
involvement of professionals, experts and stakeholders
all aspects of water management at hydrological scales
unusual issues to be debated: disproportion of costs, recovery of costs, cost-effectiveness and cost-benefit ratios...
Clear justification of important decisions
HMWB, derogations...
based on "objective" arguments: efficiency, benefits, ability to pay of citizens...
17/19
Implications

18. NOVELTY IN TERMS OF INSTRUMENTS
Construction and use of baseline scenario
horizontal approach: impacts of other policies on water
water policy as a driver for evolutions: choices regarding water with impacts on other policies
Economic tools
cost-benefit and cost-efficiency analyses
understanding of specificities and of outputs
Unusual use of prices
pricing policies as a tool aiming at a specific goal
assessment of environmental costs: damages, resource cost...
18/19
Implications

19. ECONOMIC ANALYSIS IS NOT AN ISOLATED EXERCICE
Integrated into technical issues: water utilities, quality of water, etc..
Integrated into interdisciplinary exercise: IRBM
Decision-making oriented: concrete, operational, "ready-to-apply"
Included into public participation process: clear, understandable...
Opened to external skills
Opened to non experts
"Integration", the motto for economics under WFD
19/19
Implications

20. GO FURTHER WFD and economics Economic input in selected cases room
functions
Economic input in selected cases
HMWB
recovery of costs of water services

21. WHAT ROOM FOR ECONOMICS IN WFD?
"Water is not a commercial product like any other but, rather, a heritage which must be protected, defended and treated as such" (Preamble 1)
The general approach
art.4 - designation of HMWB / derogations
art.5 - characterisation of the district
art.6 - register of protected areas
art.9 - recovery of costs
art.11 - programme of measures
art.13 - management plan
art.16 - priority substances
art.23 - penalties
The text
Annex III: economic analysis
Annex VI: basic/supplementary measures
The annexes

22. ECONOMIC ANALYSIS: EXPLICIT AND IMPLICIT FUNCTIONS
The implicit function
other references to economic issues that will require economic analysis
various stages : designation of HMWB, choice of measures, justification of derogations…
The explicit function
economic components specifically outlined: art.5 and Annex III
main focus on recovery of costs and pricing
WATECO Guidance document is thus essential

23. FLOW CHART OF THE HMWB DESIGNATION PROCEDUREno
Do the measures required for achieving good status have significant impact on the specific use(s) / the wider environment?
Step 1 Significant adverse effect
yes
Natural water body
Heavily Modified Water Body
Are alternatives significantly better environmental options?
Can we identify technically feasible alternatives?
Are costs of alternatives disproportionate?
Step 2 Comparison with alternatives no
Natural water body
yes

24. WHO DOES WHAT IN THE HMWB DESIGNATION PROCEDURE?
Actors involved
WP: water professionals
ECO: economists
DM: decision makers
SH: stakeholders

25. The scope of implementation
Art. 9 Annex III
RECOVERY OF COSTS
The scope of implementation
Applies to "water services"
Definition: art. 2#38
Detailed comments: WATECO Guidance document
What uses of water?
Covers all costs
Financial costs
Environmental costs
Resource costs
What costs?
Two levels
By water service
By sector: domestic, industrial, agriculture
What level?

26. WATER SERVICES art.2 #38; art.9
All services which provide, for households, public institutions or any economic activity:
a) abstraction, impoundment, storage, treatment and distribution of surface water or groundwater
b) wastewater collection and treatment facilities which subsequently discharge into surface water
Examples
drinking water supply, wastewater treatment
hydropower production
individual or collective irrigation
etc...

27. WATER USES art.2 #39; art.5
Water services together with any other activity identified under Article 5 and Annex II having a significant impact on the status of water.
Example
Several activities may be considered as water uses depending on their scale
Significant impact on the ecology of a river and on the water status
 is a water use
No impact on water status
 is not water use
 is an activity