Implementation of the Water Framework Directive (Art. 9)

Implementation of the Water Framework Directive (Art. 9) Implementing cost recovery: an example on a French river basin Athens, June, 2003 Jean-Pierre RIDEAU

pricing is a « basic » measure (Art. 11- 3b)
Art. 9 requirements To take account of the principle of recovery of the costs of water services To ensure by 2010 Incentive water pricing policies for users to contribute to the environmental objectives established under Art. 4 An adequate contribution of the different water uses to the recovery of the costs of water services, disaggregated into at least industry, households and agriculture and taking account of the Polluter-Pays Principle (PPP) A key objective of the directive is to promote sustainable water use, based on a long term protection of available water resources. Pricing is a measure to achieve the environmental objectives of the directive. In implementing articles 5 and 9, we should report both on pricing design and on cost recovery. pricing is a « basic » measure (Art b)

External or Crossed subsidies
Art. 9 requirements Environmental costs To report on Pricing Financial costs PPP implementation It’s also to report on External or Crossed subsidies Sustainability (renewal costs) If full cost recovery is not a requirement, transparency is a requirement. A key objective of the analysis will be to understand which water services and which economic sector are actually paid for, to which expend, by whom and how. More specifically, this will entail identifying Polluter-pays principle implementation This will also entail identifying whether some external subsidies are provided to the water sector, or whether some cross-subsidies paid between categories of water uses. The assessment of cost recovery is also a key indicator of sustainability in identifying renewal costs and revenues. To identify incentive measures to achieve environmental objectives of the WFD

Art. 9 requirements When to do it ? What to do ? How to do ? Deadlines
Key principles It is necessary to carry out operational methods to assist in the practical implementation of the WFD The European guidance document on economic analysis provides deadlines and key principles for the implementation of article 9 and annex III WATECO

Art. 9 requirements For 2004 What to do ? When to do it ?
How to do ? For 2004 To assess how important water is for the economy and socio-economic development To assess current level of Water Services cost recovery Deadlines Key principles The overall objective of the 2004 deadline is a description of the river basin district as referred to article 5, annex III and article 9. The first step of the economic analysis shall assess the economic significance of activities and water uses in the River Basin District. For 2004, we should also report on the current level of cost recovery. River basin district are compliance checking unit for reporting by member states. But, hydrological considerations or socio-economic considerations may strengthen assessment of economic indicators at a sub-basin scale to pave the way for the definition of the programme of measures. For 2004, we’ll appraise the data availability at a disaggregated scale to compute at a sub-basin scale Art. 5 Ann. III  Art. 9 WATECO

Art. 9 requirements How to do ?
What to do ? When to do it ? How to do ? Iterative and gradual To enhance the information and knowledge base Proportionate To help in identifying significant water management issues in the River Basin Deadlines Key principles The review to be completed by late 2004 shall be prepared on the basis of the available data. It is obvious that the available tools and data do not meet all the requirements of the directive. A business plan for updating and enhancing economic information shall be defined for 2004 to enhance by 2006 technical and economic data in order to define the river basin management plans. WATECO Art. 9  Ann. III & Art. 8

Art. 9 requirements What to do ? How to do ? Participatory Transparent
When to do it ? How to do ? Participatory Transparent Integrating stakeholders can bring expertise and information and provides opportunity to discuss and validate key assumptions Deadlines Key principles The economic analysis is also a source of information of interest to stakeholders and the public in the context of information and consultative activities. WATECO Art. 9  Art. 14

To obtain coherent assessments (districts  national)
Art. 9 requirements What to do ? When to do it ? How to do ? A national coordination To obtain coherent assessments (districts  national) To optimise cost associated with collection of the relevant data Deadlines Key principles Each year, the French Committee for National Environmental Accounts chaired by the minister in charge of the environment approves and publishes the environmental expenditures. These accounts are setting up starting from data of the national statistics and investigations carried out by the companies. The definition of the methods of calculation of the costs of the water services by district was thus carried out on the basis of this work in order to have a coherence of the methods and data. It is obvious that the national statistics will not be able to provide the whole of the relevant data. Two enhancements are necessary. The first is the improvement of the national surveys. This work will be begun within the framework of the Environment Committee of the National Council of the Statistical Data The second is the setting up of specific investigations to the district scale. These investigations should supplement the national data and gather information on the significant water management issues identified in the river basin. WATECO Ann. III

Art. 9 requirements Products Pricing Investments and subsidies
Current costs and expenditures (cost recovery) Cost recovery assessment A case study : Loire-Brittany Basin District At a district scale For water services having a significant impact on the status of water According to these key principles, the French guidance document for the first characterisation of the River Basin District requires three products to assess the implementation of incentive pricing and of cost recovery. The first one shall report on pricing. What are tariff’s structures and prices for collective services? how polluter-pays principle is implemented ? The second one shall report on investments and subsidies. It agrees to specify which are the amounts of work completed, the origins of the subsidies, and which economic sectors pay what. The third one is the financing of the annual costs, including maintenance costs, refunding of loan, renewal costs and environmental costs. At this time, we have completed the provisional definition of the method and the identification of the available data. First exploitations of data were carried out to report on prices and tariff’s structures which are applied by collective services in each district. The Seine Normandy district has reported on the identification of the subsidies and on a provisional assessment of environmental costs. A provisional report on the costs and expenditure of water supply and sewerage services is available for the district Loire-Brittany and calculation will be carried out soon for the other districts. provisional results

Pricing Collective services (public or private)
Water supply and sewerage services Collective irrigation services Implementation of the Polluter-Pays Principle This analysis of pricing is setting up on the district scale. The services which are concerned by pricing of water are on the one hand the water supply and sewerage services and on the other hand the collective services for agricultural lands irrigation. We should supplement this analysis after 2004 if it appears that, locally, other services provided by third parties have a significant impact on the status of water. The description of tariff should be related to the collective services but also to the polluter-pays principle. It will be advisable to present in a synthetic form the implementation and the amounts of the environmental taxes for each economic sector.

Water supply and sewerage services Collective irrigation services National survey on water supply and sewerage services (2000, 2003, …) volumes consumption of households, and likened users (public administrations, business, …) consumption of main industries water losses in distribution networks pricing for households and likened users mean value, max, min fixed part, m3 price vs. consumption In France, municipalities have a pre-eminent role in the organisation of water supply and sewerage services. In 2000, we have carried out the first national statistic survey on water supply and sewerage services municipalities were questioned about organisation of services, prices and volumes. In France, the total number of municipalities is about

Water supply and sewerage services (households and likened users)
Pricing Water supply and sewerage services (households and likened users) €/m3 (1998) Water supply Sewerage Fixed charges (120m3) 0.384 0.145 Vol. charges 0.971 0.848 Environmental taxes 0.039 0.288 Total 1.394 1.281 Assessment at a basin scale (in progress) Data available at a sub-basin scale (50 in France) These data will thus make it possible to present water pricing which are applied to households and likened users in each district. You have here some data for the Loire-Brittany district. These reports on pricing are in progress for each district. They will be also available for about 60 sub-basins for the whole France 765 Mm3/a 710 Mm3/a

Water supply and sewerage services (households and likened users)
Pricing Water supply and sewerage services (households and likened users) 100% fixed charge : 1% (national) free supplying : 13 % (national) For water treatment (filters washing) In some towns, for public administration (schools, sports ground, …) Road washing, fire service, … At the national level, the practice of a total fixed charge pricing concerns only 1% of the population. This method is practised by the smallest municipalities, where water is naturally abundant. The free supplying includes water consumption related on the washing of the filters of the water treatment plants, but also, in some municipalities, water supply to public buildings such as schools, public administrations or sports grounds.

future specific basin survey
Pricing Water supply and sewerage services (main industries) Water supply € / m3 ? (provisional result) Information gap : pricing for industry future specific basin survey Waste water treatment : costs : ANTIPOLL survey (in progress) tariffs (€/DCO, …) : no data I have just presented water pricing for the households and the likened uses. These likened uses includes small traders, hotels, restaurants, offices, and so on. The main industrial consumers can be given special tariffs for supply water and for waste water treatment. In this field, further survey will be necessary. With regard to the sewage treatment, a national statistical survey makes it possible here to provide data on the annual expenditure of the companies in this field.

Water supply and sewerage services Collective irrigation services wide-area networks : Basin survey smallest irrigation networks : National survey (100 irrigation networks) The second item is water pricing for irrigation For the largest irrigation networks, each district will carry out a survey. For the smallest collective networks, we currently have a national survey carrying into 100 networks whose results will be used for the first characterisation of the water basin district. This survey will be to supplement and renew periodically.

Current costs and expenditures (cost recovery) At a district scale For water services having a significant impact on the status of water A second product relates to the subsidies which are allocated to the main economic sectors to enhance investments for water supply and waste water treatment.

Subsidies Identifying subsidies for investments Data Basin survey
From general taxes From environmental taxes on water uses Data Basin survey National accounts The objective is to identify for the various economic uses the investments and their financing.

2000 Régions Départements (taxes) 1000 70 620 100
Millions 2000 Water basin agencies Municipalities Régions Départements From General Budgets (taxes) 1000 70 620 100 Water & Sewerage Services Concretely, this amounts to establish for each district a diagram indicating the financings by the price of water and the financings by general taxes. For public water supply and sewerage services, cost recovery on users is about 90%. Investments : 6100 Users (households, likened users, industry, stock breeders,…) Cost recovery (for investments) 88 %

Current costs and expenditures (cost recovery) At a district scale For water services having a significant impact on the status of water The third product relates to the annual costs and expenditures and their financing.

Assessing Cost recovery
Activities which pose a risk to achieve the good status Full cycle in off-stream water uses Water Services Water Uses WS & any other activity having an impact Abstraction, Impoundment, Discharges D P S A WFD requirement is to identify « water services » and « water uses ». Water services are off-stream water uses, with withdrawal and discharge. Only the services having a significant impact on the status of the water bodies are to be considered. Water uses include the services but also all the activities having a significant impact on the status of water, without it being necessary that this activity withdraws or discharges water. For example, a culture even not water user must be identify as a water use if it has a significant impact on the status of the groundwater body. The identification of water uses is closely related to the identification of the pressures on the water bodies.The economic analysis shall be connected consequently to the analysis of the pressures and the impacts. I R

WS & any other activity having an impact Abstraction, Impoundment,
Assessing Cost recovery Water Uses Water Services (WS) WS & any other activity having an impact Abstraction, Impoundment, Discharges Environmental costs Mitigation costs The directive requires to report on the contribution of the water uses to the recovery of the costs of water services, according to the polluter-pays principle. Practically, this amounts to assess the environmental costs due to the impacts of the water uses on the status of the water bodies and, inside these costs, the mitigation costs which are payable by water services and water users following the degradation of the status of the water bodies by the water uses. An adequate contribution of Water Uses to the recovery of the costs of Water Services taking into account polluter-pays principle

e.g. Denitrification, powered carbon costs for water supply, … Costs of damage that water status impose to the activities e.g. Tourism (bathing, fishing) Environmental costs Mitigation costs For example, these mitigation costs include the cost of the treatment of pesticides or nitrates for water supply. They also include buying mineral water by households in the case of a polluted tap water. The WFD thus requires to examine whether the environmental taxes into force put at the load of water uses the same expenditure going up.

Identification of services off-stream water uses having a significant impact on the status of water Irrespective of the (financial or beneficial) ownership Private or public services Services for third parties Self supply services The WFD doesn’t specify if the services are public or private, if they include or not the self supply services. The key point is the link with the pressures and the impacts. To assess the part of the WS in the water economy

Industry (self supply)
Assessing Cost recovery Identification of services off-stream water uses having a significant impact on the status of water Costs % recovery contribution of water uses (PPP) Public services Industry (self supply) hydropower Abstraction Impoundement, storage It is obvious that we don’t have all the economic data on these various activities. But it is important to publish available data in order to identify the gap and to raise the question of the coherence of the financings of water supply for these activities with the environmental objectives of the water framework directive Like article 1 item 16 specifies it first, the integration of the sector-based policies and of the water policy is a main objective of the WFD. navigation irrigation

water supply and sewerage public services Disaggregation of national accounts (public accounts & national firm surveys) Full Financial Cost Maintenance Cost Renewal 1030 M€/a. Firstly, we have to assess the financial costs. They include the maintenance costs and the renewal costs. The refunding of loans and the financial costs are also included The maintenance costs are calculated by disaggregation of the national data. The provisional result is about one billion euros for the Loire-Brittany district.

water supply and sewerage public services Costs of equipments water networks 27.1 M€ water treatment 5.3 M€ sewage M€ waste water treatment M€ Renewal (15  80 years) Full Financial Cost Maintenance Cost Renewal The renewal costs are evaluated starting from an inventory of works. That is carried out starting from the data obtained by the national statistical survey supplemented by an estimation of unit costs of networks and plant in each district. The theoretical annual cost of the renewal is thus of almost one billion euros per annum for the Loire-Brittany district. 980 M€/a.

A significant water management issue
Assessing Cost recovery water supply and sewerage public services Full Financial Costs Maintenance Costs Renewal costs Total Subsidies 60 M€ % cost recovery # 100% # 65% # 85% 970 M€/a. 980 M€/a. A risk of an inadequate renewal ? An unsustainable policy ? A significant water management issue  to enhance information and knowledge base 1950 M€/a. On the basis of estimate first, the amounts of the subsidies for maintenance of services are approximately 60 million euros per annum. These subsidies are in particular paid by the municipalities to compensate for the loads supported by the service for the rain-off. The test in progress will make it possible to specify these amounts. After deduction of these subsidies to the rain-off, the recurring expenses of operation are 970 million euros. The total financial cost, including the theoretical costs of renewal is thus about 2 billion euros Thus, the rate of covering of the costs is 85%. If it is of almost 100% on the maintenance expenditures and the financial costs, it is only 65% on the renewal costs. This underlines the risk of an insufficiency of the renewal and we will need to improve the data and knowledge on this subject in order to specify the significance of this problem. Income (water sales) 1620 M€/a.

water supply and sewerage public services Costs 1950 M€/a. Income 1620 M€/a. To ensure an adequate contribution of the different water uses Knowing the costs and the incomes, it is then advisable to charge them to each economic sector in order to account for the contribution of each sector to the loads of the services Households water consumption was assessed for each district on the basis of the results of the national statistical surveys on housing and households expenditures. industry agriculture households crossed subsidies ?

No data on agriculture consumption and expenses (stock breeders)
Assessing Cost recovery water supply and sewerage public services invoiced water supply Mm3 total income M€ Households Industry and agriculture Invoiced 450 Mm3 315 Mm3 59 % 41 % Income 930 M€ 690 M€ 58 % 42 % No data on agriculture consumption and expenses (stock breeders) This table presents the volumes of water invoices and the receipts for the households and for industry and agriculture. It highlights balanced contributions of the households and economic activities It is advisable to indicate that we don’t have data both on water consumption and receipts related to breeding. Specific investigations will be to realize to supplement the economic data in this field.

water supply and sewerage public services invoiced water supply Mm3 total income M€ Households Industry and agriculture Invoiced 450 Mm3 315 Mm3 Free supply Mm3 52 % 48 % Income 930 M€ 690 M€ % % From 3% to 6% crossed subsidy owing to free water supply ( Mm3) (public adm., etc.) Another test was carried out by charging the free water supply to the economic activities. This highlights a more important contribution of the households

industry (selfservices) Current expenses Abstraction Survey on cost vs. activities (from 0.24 to 0.84 €/m3) Database on water abstraction vs. activities (water agencies) Waste water treatment National Survey on Industry Expenses (ANTIPOLL) With regard to the self services we have few data on the cost of water supply for industry. Those will have to be supplemented. With regard to the self treatment of waste water, a national statistical survey carried out in 2001 will be used For these activities, the recovery of the maintenance costs is 100% in the absence of subsidies to the maintenance.

irrigation (selfservices) Current expenses Enquiry on cost vs. irrigation system typology (well, storage, …) Database on water abstraction (water agencies) With regard to the irrigation costs, the only data available are the amounts of the environmental taxes. Specific investigations should be set up.

Environmental costs and ressource costs Full Costs Maintenance Costs Renewal Environmental Mitigation costs Environmental damages In this field of environmental and resource costs, the priority is to identify the mitigation costs loading the maintenance and renewal costs of the water services.

Environmental costs and ressource costs Mitigation costs Denitrication costs, … Full Costs Maintenance Costs Renewal Environmental Other mitigation costs Buying mineral water, … For the public water supply and sewerage services, these mitigation costs compensatory are estimated from 30 to 50 M euros per annum. This data is provisional and work is in progress. From 30 to 50 M€ Provisional result

Environmental costs and ressource costs Environmental damages Methods ? Data ?  no assessment for 2004 For 2004 :  synthesis of studies  a database  built capacity for cost-benefit analysis Full Costs Maintenance Costs Renewal Environmental This assessment of the mitigation costs must be supplemented by an assessment of the environmental costs due to the degradation of the status of the water bodies owed by water services and water uses. It thus appears difficult to report on a soundness account for the first characterisation of the district, even if first assessment can be carried out. Within the working group IRBM, a drafting group must gather the data and specify the methods. The following step is to assess the ratio of these mitigation costs and environmental costs according to each economic activity.

Environmental costs and ressource costs nitrates DCO, NH4, P. pesticides Other priority subs households industry P The assessment of the pressures will make it possible here to define the contribution of each activity in the degradation of the status of the water bodies. We have to define indicators of pressures taking account of the various polluting parameters. The Seine Normandy basin thus carried out a first evaluation of the environmental damage and charge relating to the various economic sectors. agriculture

Environmental costs and ressource costs nitrates DCO, NH4, P. pesticides 15 % 50 % 35 % 70 % Other priority subs Agence de l’eau Seine-Normandie households industry P The assessment of the pressures will make it possible here to define the contribution of each activity in the degradation of the status of the water bodies. We have to define indicators of pressures taking account of the various polluting parameters. The Seine Normandy basin thus carried out a first evaluation of the environmental damage and charge relating to the various economic sectors. agriculture

To identify significant water management issues
Implementation of Art. 9 Key points For 2004 : setting up data base organisation a business plan (2005 – 2006) to enhance data base and knowledge To use and to improve national statistic inquiries with supplementary inquiries in each RBD To build capacity to assess environmental damages methods, tools, database To identify significant water management issues detail of information shall take account of the costs associated with collection of the relevant data Proposing means for filling information and knowledge gap aimed at improving decision making Some conclusions I have just presented some provisional results. The data processing are currently in progress and our objective is to complete at the end of the year the analysis of available data. It is obvious that we will not be able to fill all requirements of article 9 in 2004, in particular with regard to the environmental and the resource costs. The objective for 2004 is certainly to set up an economic information net to pave the way for the definition of measures. Each time possible, the information given by the national statistical surveys shall be used exhaustive knowledge is not necessary. The objective of the economic analysis is to help with the identification of the significant water management issues identified in the river basin. The first assessments available in 2004 will be able to make it possible to carry out a provisional identification of these main questions which arise in the district. It will then be advisable to supplement the data available in order to validate the diagnosis. The work completed pursuant to article 9 will feed the elements subjected to consultation of the public to realize at the latest at the end of 2007 and will contribute to the definition of the measures to carry out the environmental objectives of the directive

Thank you Athens, June, 2003 Implementation of the
Water Framework Directive Thank you Athens, June, 2003 Jean-Pierre RIDEAU

Implementation of the Water Framework Directive (Art. 9)

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Implementation of the Water Framework Directive (Art. 9)

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