Directorate-General for Public Works and Water Management
Institute for Integrated Water Management and Wastewater Treatment/RIZA
Environmental and Resource Costs
and the Water Framework Directive
An overview of European practices
WORKSHOP PROCEEDINGS
Editors
Roy Brouwer and Pierre Strosser
RIZA Working Paper 2004.112x
Beurs van Berlage, Amsterdam, 26 March 2004
ACKNOWLEDGEMENTS
The workshop and the publication of the workshop proceedings was funded by the Dutch
Directorate-General for Public Works and Water Management. The workshop was organized
with the help of Gerard Broseliske, Lisa Goedemans and Anita Ide from RIZA. The input and
contribution from the members of the European drafting group ECO2 is greatly appreciated.
More particularly, chapter 2 in these proceedings is based on the work and input of the entire
drafting group (in alphabetical order): Kevin Andrews (UK), David Barton (Norway),
Philippe Bauduin (France), Roy Brouwer (The Netherlands), Thierry Davy (European
Commission), Patrick Deronzier (France), Ian Dickie (UK), Erna Etlinger (Austria), Franck
Fredefon (France), Jeanne Golay (UK), Hilde Kirkjebo (Norway), Oskar Larsson (Sweden),
Josefina Maestu (Spain), Judit Rákosi (Hungary) and Jörg Rechenberg (Germany).
i
TABLE OF CONTENT
1.
Introduction
Roy Brouwer and Thierry Davy
2.
The concept of environmental and resource costs; Lessons learned from ECO2
Roy Brouwer
3.
Practical experiences in France
Franck Fredefon and Yann Laurans
4.
Practical experiences in Sweden
Oskar Larsson
5.
Practical experiences in Spain
Josefina Maestu, Joaquin Andreu Alvarez and Carlos Mario Gomez
6.
Practical experiences in the Netherlands
Roy Brouwer
7.
Practical experiences in Belgium
Ann Beckers
8.
Practical experiences in England and Wales
Jonathan Fisher
9.
Environmental and resource costs and their link to Impress
Fred Wagemaker
10.
Conclusions and recommendations
Roy Brouwer and Pierre Strosser
Annex
- Workshop Programme
- Workshop Participants
- Workshop Presentations
ii
1.
Introduction
Roy Brouwer (RIZA, The Netherlands) & Thierry Davy (European Commission)
The Wateco guidance on the economic analysis for the water Framework Directive (WFD),
officially published in 2002, identifies environmental and resource costs (ERC) as one of the
issues, which require further investigation in order to make them of direct use for developing
river basin management plans. According to Paragraph 1 in Article 9 in the WFD, member
states shall take account of the principle of recovery of the costs of water services, including
environmental and resource costs, having regard to the economic analysis conducted
according to Annex III, and in accordance in particular with the polluter pays principle.
Since September 2003, a European drafting group (DG) has been set up in order to further
clarify the concept of ERC in the WFD. This DG (called “ECO2”), led by the Netherlands
(Roy Brouwer) and the European Commission (Thierry Davy), advises the Working Group on
“Integrated River Basin Management” (WG2B) on ERC. Since 2003 WG2B is one of the four
working groups under the Strategic Co-ordination Group (SCG), which is responsible for the
common implementation of the WFD. WG2B has asked DG-ECO2 to draft a non-binding
advisory note on the definition and calculation of ERC in the context of the implementation of
the WFD.
DG-ECO2 has fourteen EU members, official country representatives and interested
stakeholder representatives, who have met three times since September 2003. The result of
these three meetings is a draft advisory note on ERC. At the last meeting of the DG ECO2 in
January 2004, it was decided that the work of the DG reaches completion and that the results
so far should be shared with a broader audience of economists (and interested noneconomists) working on the implementation of the WFD in order to test the use and
usefulness of the main outcomes. The idea of having an international workshop on ERC and
the work of ECO2 was launched at the fourth edition of the implementation of the economic
elements in the WFD in Lille (France) in February 2004. At this meeting, over 20 people preregistered for the workshop.
These proceedings present the results from the international workshop held in Amsterdam on
the 26th of March 2004. The workshop programme is included in the Annex to these
proceedings. Forty people participated in the workshop (excluding the 10 presenters and
workshop facilitators). The Annex includes a complete list with the names and institutional
affiliations of the workshop participants. Most participants are from the Netherlands (11) and
France (10), followed by Germany (5), Italy (5), Belgium (5) and the United Kingdom (4) and
Norway (2). The other participants are from Sweden, Spain, Luxembourg, Portugal, Hungary,
Scotland, Greece and Latvia. About two thirds of the participants have a background in
economics, while just over one third (37%) indicated on the registration form that they are not
an economist.
The workshop’s main objectives were to present the main outcomes from DG-ECO2 and to
give an overview of case study examples across Europe, illustrating the way ERC are dealt
with in practice in different EU member states (MS) in the context of the WFD. When the
workshop programme was drafted, getting sufficient and detailed country case study
1
examples proved to be a real problem. Only very few EU MS have detailed and practical
examples of how they are dealing with ERC in the context of the WFD, let alone official
guidelines towards their empirical estimation, calculation and application. Most MS seem to
struggle with the concept of ERC. The work presented at the workshop therefore reflects work
in progress in a few different EU countries only. In most cases, the examples represent
preliminary and non-officially approved steps towards the empirical calculation of ERC.
Another important focus of the workshop was to establish a link between ERC and the work
carried out in the various WFD working groups dealing with pressures and impacts (usually
referred to as the working group “Impress”). One of the main messages from DG-ECO2 is
that the link with Impress is of paramount importance and an essential first step in order to be
able to assess and apply ERC. Again, also this proved to be difficult during the organisation
of the workshop as this link is not firmly established anywhere (yet). Different people
involved in the work by the various Impress groups across Europe were contacted. We found
a Dutch Impress working group leader who was willing and able, after consulting various
people across Europe, to provide an overview of the work on pressures and impact across a
number of European countries so far and how this could be linked to the economic concept of
ERC as outlined in the draft advisory note from DG-ECO2.
The country case study examples presented in these proceedings therefore have to be
interpreted with the necessary care. They do not reflect best practices across Europe. They
also do not provide guidelines on how to calculate and apply ERC in river basins or river
basin management plans. They merely aim to show how the issue of ERC is approached and
dealt with in practice in a variety of ways so far in the context of the WFD. This to help
economists (and interested non-economists) working on the implementation of the WFD to
generate ideas and information on the concept of ERC with which they can further elaborate
ERC in their own country or river basin. For this purpose, presenters were asked to explicitly
address in their presentation the definition of ERC in their case study example, the approach
used to estimate and calculate ERC, including data needs, how the calculated ERC are used,
and the main challenges and problems encountered when calculating ERC.
2
2.
The concept of environmental and resource costs;
Lessons learned from ECO21
Roy Brouwer (RIZA, The Netherlands)
2.1. Introduction
The main objective of the Drafting Group (DG) ECO2 is to clarify the concept of
environmental and resource costs and their use in the context of the implementation of the
WFD. The DG set itself the following three tasks. First, to define environmental and resource
costs in a clear way. Secondly, to give a brief overview of the various goals they may serve in
the WFD. Thirdly, to provide an overview of the various methods available to estimate
environmental and resource costs in practice.
2.2. What are environmental and resource costs?
In the Wateco guidance’s glossary of terms, environmental costs are defined as representing
the costs of damage that water uses impose on the environment and ecosystems and those who
use the environment (e.g. a reduction in the ecological quality of aquatic ecosystems or the
salinisation and degradation of productive soils). Resource costs are defined as the costs of
foregone opportunities which other uses suffer due to the depletion of the resource beyond its
natural rate of recharge or recovery (e.g. linked to the over-abstraction of groundwater).
These definitions are also the basis for the definitions proposed by the DG-ECO2. However,
the distinction made in the Wateco guidance between environmental and resource costs is not
clear-cut. Resource costs are defined by the DG-ECO2 as the opportunity costs of using water
(e.g. abstraction or wastewater discharge) in an economically speaking inefficient way. They
equal the difference between the economic value of present or future water use (e.g. allocation
of emission or water abstraction permits) and the economic value of the best alternative water
use (now or in the future). Resource costs are therefore not necessarily confined to water
resource depletion only (in terms of water quantity or water quality), as suggested by the
Wateco guidance. They arise as a result of an economically speaking inefficient allocation of
water and/or pollution over time and across different water users. In practice, this means that
resource costs can be proven to exist if alternative water use generates a higher economic
value than present or foreseen future water use. There may be a variety of reasons why this is
the case, including institutional ones (e.g. historical water abstraction rights or the current or
future distribution of pollution permits).
In all other cases there is no difference between resource and environmental costs as
suggested by the Wateco guidance in view of the fact that there will always be opportunity
costs if there is water scarcity, either in a quantitative or qualitative sense, at a specific point
in time and space. However, there may be resource costs even if there are no environmental
costs such as a degraded aquatic ecosystem.
1
This chapter is based on the work carried out by the DG-ECO2 and reflects the current state of thinking about
environmental and resource costs in the context of the WFD in a number of European Member States. It does not
present the final conclusive definition of environmental and resource costs or their measurement method. This is
an ongoing learning process.
3
Environmental costs consist of the environmental damage costs of aquatic ecosystem
degradation and depletion caused by a specific water use (e.g. water abstraction or the
emission of pollutants). According to the Wateco guidance, a distinction can be made between
damage costs to the water environment and those who use the water environment. Interpreted
in terms of the concept of total economic value, one could argue that the environmental
damage costs refer to non-use values attached to a healthy functioning aquatic ecosystem,
while the costs to those who use the water environment refer to the corresponding use values.
The estimation of these use and non-use values as a result of alternative and competing water
use may provide the basis for the subsequent assessment of resource costs. For instance,
resource costs arise if ecosystem restoration and conservation - measured through the use and
non-use values attached to the water environment by the general public (households) and/or
recreation - generate a higher economic value than for example current or future water
abstraction by agriculture or water pollution by industry. Hence, environmental and resource
costs cannot simply be added since there is a real risk of double counting.
In summary, environmental costs are defined by the DG ECO2 as the environmental damage
costs to the water environment and its users as a result of alternative competing water use,
while resource costs are defined as the costs of an economically inefficient allocation of
water, either in terms of water quantity or water quality, over time and across different water
use(r)s. The calculation of resource costs can be based upon the estimation of environmental
costs, but there may also be resource costs in the absence of environmental damage costs. In
order to keep things simple, the remainder of this chapter will only refer to environmental
costs.
2.3. When can we speak of environmental damage?
An important question when estimating environmental costs is what exactly constitutes
damage, to the water environment and those who use the water environment. This will largely
depend upon the point of reference, measured, for instance, through existing environmental
norms or standards or the right people attach to a clean environment and the provision of
sufficient and clean water. In practice, sometimes also a point in the past, when pollution
levels and corresponding damage costs were relatively lower, is taken to represent the
reference situation.
In theory, damage arises when there is a discrepancy between some reference and target
situation. An example is the discharge of waste water into a water course at a rate (e.g. tons of
N per year), which exceeds some permitted rate (in tons per year) and hence results in a
eutrophic water system with negative consequences for both the biological diversity of the
water system and recreational amenities provided by the water course, including the possible
negative effects on human health if the specific water body is also used for recreational
swimming. It is important to point out that this permitted discharge rate is usually not some
constant and can be determined in a variety of ways, including through expert judgement of
good ecological status, public participation or taking into account the incremental costs of
reducing damage just below or above the rate2.
2
Another important point is that even if a target situation is met, this does not necessarily mean that there are no
more environmental damage costs. There may still be residual environmental damage, for example, because the
target situation is based on a politically or socially acceptable level of water use (e.g. abstraction or pollution),
which does not necessarily correspond with a healthy functioning ecosystem. Another reason may be that part of
the environmental damage is currently unknown or invisible and only manifests itself years later, because of
fundamental uncertainties surrounding environmental cause-effect relationships. Furthermore, theoretically
4
In the context of the WFD, it seems logic to use the expected water status in 2015 as the
reference situation, but other reference situations may also be appropriate. The same applies
to the target situation. It seems logic to relate the target situation to the environmental
objectives of the WFD, i.e. good ecological water status in 2015. However, again other target
situations may also apply.
Hence, there is a strong dependence of environmental costs on the physical status of the water
system and knowledge and information about this physical status. This includes the damage
caused to the water system as a result of pressures exerted on the water system, such as the
extent to which the system’s natural rate of recharge or recovery has been impaired by a
specific water use. Other damage categories include, in general, eutrophication, salinisation,
dessication, loss of biological diversity and morphological changes to a water system. This
type of information is crucial to the subsequent estimation of environmental costs. The
physical status of a water body or water system provides the basis for the estimation of the
environmental costs in economic terms. If this information is not available, environmental
costs cannot be assessed.
2.4. What are internal and external environmental costs?
Another important point is the distinction between internal and external environmental costs.
Internal costs refer in this context to costs, which are part of the economic system related to
specific water use, whereas external costs remain outside the economic system.
According to Pearce and Turner (1990):
‘An external cost exists when the following two conditions prevail:
1) An activity by one agent causes a loss of welfare to another agent.
2) The loss of welfare is uncompensated.’
(see also the Wateco Glossary of Terms).
Hence, if economic (damage) costs as a result of specific water use are compensated,
financially or otherwise, we speak of internal(ised) environmental costs. If, on the other hand,
these economic (damage) costs remain uncompensated, we speak of external environmental
costs.
For example, a company located upstream along a river produces marketable output (e.g. food
products or chemical products) and at the same time wastewater, which is treated before it is
discharged into the river. Although the wastewater is treated before it is discharged in
accordance with existing legislation, the discharge still pollutes the water. The polluted water
results, for example, in higher purification costs for drinking water companies located
downstream and loss of recreational fish stock. The higher (monetary) purification costs of
the drinking water companies and the (non-monetary) damage caused to the recreational
anglers downstream, who experience a real loss of recreational fishing opportunities, are not
compensated by the polluter or through some other mechanism, and are therefore external
costs.
speaking any residual damage beyond the target situation may still have an economic value as long as there is a
positive public willingness to pay to reduce pollution levels even further.
5
On the other hand, part of the potential damage is mitigated by the wastewater treatment
measures taken by the polluting company. The associated costs can be regarded as
internalised potential environmental damage costs in view of the fact that they prevent
potential damage and the need to compensate the drinking water companies and recreational
anglers. In other words, part of the potential economic damage costs are taken into account
(internalised) in the company’s own operations and calculated through to their customers and
are therefore part of the economic system.
In summary, it is important to know the extent of the damage caused and by whom, but also
to what extent the damage is compensated (or not) by the polluter or beneficiary of a specific
water use or water service. The fact that the polluter or beneficiary pays for the damage
caused is a necessary, but insufficient condition to assess the extent to which environmental
costs are internal or external costs. Information is also needed about the extent to which the
stakeholders negatively affected by water pollution or abstraction are compensated,
financially or otherwise, directly by the polluter or through some other compensating
mechanism. In the context of cost recovery, the DG-ECO2 also considers the costs of
preventing and mitigating potential damage and correspondingly the reduced need for
compensation as an internal cost, i.e. an internalised potential damage cost.
2.5. Which role do environmental costs play in the WFD?
There are four different places in the WFD where environmental costs come into play:
•
•
•
•
Article 9: take account of the cost recovery of water services, including environmental
costs.
Article 9: Member States shall ensure by 2010 that water pricing policies provide
adequate incentives for water users to use water resources efficiently, and thereby
contribute to the environmental objectives of this Directive.
Annex III and Article 11: make judgements about the most cost-effective combination
of measures in respect of water uses to be included in the programme of measures.
Article 4: possible economic justification for derogation (including designation of
water body status):
- Objectives derogation if the achievement of these objectives would be
disproportionately expensive.
- Derogation for new modification or sustainable economic activity, if benefits of this
activity outweigh benefits from good water status.
Article 9 says that environmental costs should be taken into account in the costs of providing
water services such as for example wastewater collection and treatment. In order to be able to
assess the level of cost recovery, one therefore has to know the total costs, including
environmental costs, and the way these costs are paid for by the different users of the water
service through existing pricing and financing mechanisms. This allows us to assess the extent
to which the Polluter Pays Principle applies. Including in this assessment an analysis of the
level of compensation received by different water users for any damage caused by a specific
water use gives us an idea to what extent environmental costs are internalised. Hence, the role
of environmental costs in the context of water pricing policies is to signal to what extent they
are internalised through existing pricing mechanisms in society.
Although article 9 is the only article in the WFD, where environmental costs are mentioned
explicitly, environmental costs are closely related to the issues raised in articles 4 and 11. The
role of environmental costs in the context of selecting a cost-effective programme of measures
6
(Article 11 and Annex III) is to signal to what extent existing or new environmental standards
are met or not and what the associated costs are, including (residual) environmental damage
costs.
In addition to the cost-effectiveness analysis (i.e. estimating the least cost way to achieve the
environmental objectives), also the benefits of reaching these environmental objectives can be
estimated in a cost-benefit analysis (CBA) in order to support the process of establishing
environmental objectives. CBA allows policy makers to include economic efficiency criteria
besides ecological criteria in their decision-making process. In the domain of water pollution,
this basically means comparing the costs of pollution control measures (including water
services such as wastewater collection and wastewater treatment) and the damage costs
avoided. These damage costs include the damage to the water environment and other water
users. Hence, the role of environmental costs in the context of Article 4 can be to show
whether the costs outweigh the benefits, including the environmental costs avoided by, for
example, pollution control measures.
It is important to point out that the target situation may be very different when looking for an
economic efficient solution instead of imposing environmental standards based on chemical
and/or ecological criteria for good water status. When looking for economic efficiency, the
target situation is found, theoretically speaking, at the point where marginal costs equal
marginal benefits (or where marginal benefits are equal across the market and non-market
goods and services provided by a water system). Environmental objectives should be fixed at
this point if and only if economic efficiency is the overriding decision criterion. When using
chemical and/or ecological criteria to determine environmental objectives for water bodies,
one can still try to assess whether or not the total benefits outweigh the total costs at the
predetermined level of pollution or water abstraction and aim for an efficient allocation of
clean water across different water users. However, in this latter case only within the
constraints imposed by the environmental objectives.
In summary, the assessment of environmental costs serves different objectives depending on
where in the WFD they are addressed. This has consequences for the way they are estimated
and calculated in practice.
2.6. How can environmental costs be measured in practice?
A number of steps can be distinguished when trying to estimate the environmental costs
associated with water use and services. These steps are presented in the proposed flow
diagram below. This flow diagram is a first attempt to provide some guidelines for the
assessment of environmental costs. The diagram basically consists of three main parts, which
are clearly interlinked:
1) Environmental (impact) assessment to qualify and quantify the environmental
damage involved.
2) Economic valuation of the physical environmental damage.
3) Institutional and financial assessment of the extent to which the estimated
environmental costs are internalised or not through existing price and/or finance
mechanisms and the application of the polluter and/or beneficiary pays principle.
7
Environmental assessment
Proposed “flow diagram” to assess
environmental costs in the WFD
yes
no
No environmental
damage costs
Assessment of the impact on the (a)biotic water environment
Are currently measures taken to
prevent/mitigate/compensate
damage?
no
yes
Economic assessment
Is there a significant pressure on the water system?
Estimation of current
costs of measures
Assessment
of residual
damage
Who pays for these costs?
Polluter/
beneficiary
Other water user(s)
including environment
Internalised (potential)
damage costs
External damage
costs
Assessment of the damage
to the water environment
Assessment of the damage
to other water users
Economic valuation of the (residual) damage via:
Additional measures to
reach a target situation
and/or prevent/mitigate/
compensate damage
(costs)
Are currently measures
taken to prevent/avoid/
mitigate/compensate damage?
no
yes
Assessment
of residual
damage
Estimation of current
costs of measures
Who pays for these costs?
Estimation of costs
and effectiveness of
additional measures
Estimation of benefits
of reaching a target
situation via (in)direct
valuation methods
Proxy for external
damage costs
External damage
costs
Polluter/
beneficiary
Other water user(s)
including environment
Internalised (potential)
damage costs
External damage
costs
The diagram furthermore tries to illustrate explicitly that:
•
•
•
•
•
•
•
•
Any assessment of environmental costs starts off with or is based upon an
environmental (impact) assessment, hence requiring the input (knowledge, expertise
and information) from both economists and environmental experts.
There are two main approaches to the numerical estimation of environmental costs, a
cost based approach and a benefit based approach (a few selection criteria for either
one will be given below).
The cost approach is based on the calculation of the costs of measures needed to
protect the water environment against environmental damage.
The benefit approach is based on the estimation of the environmental damage if no
measures are taken to protect the water environment (and those who use this
environment) or the environmental damage avoided (=benefits) if measures are taken.
A distinction is made between measures already in place to protect the water
environment (and those who use the water environment) and additional measures
needed to protect the water environment.
The costs of measures already in place to prevent, avoid or mitigate potential
environmental damage paid for by a water (service) user (polluter or beneficiary) are
referred to as ‘internalised potential damage costs’.
The costs of measures already in place to compensate for real environmental damage
paid for by a water (service) user (polluter or beneficiary), including economic
instruments like taxes or financial compensation, are called ‘internal damage costs’.
The costs of additional measures needed to protect the water environment (and to
reach some target situation) can be used as a proxy for the external environmental
costs.
The first steps are clearly related to the work by other experts than economists working on the
identification of pressures and impacts on water bodies. As mentioned, the physical
characterisation of the environmental damage caused provides the basis for the subsequent
economic assessment and valuation of this damage. This damage can basically be valued from
an economic point of view in two different and mutually non-exclusive ways, i.e. either
through the estimation of the costs of measures to reach a (predefined) target situation or the
estimation of the benefits of reaching the target situation. The target situation in the flow
diagram refers for example to a situation with an acceptable level of damage, from a societal
point of view, to the water environment and other water users, or to a situation with no
damage at all.
A first step is to identify the significant pressure, which causes a water body to change. In
principle, if there is no significant pressure, there will also be no environmental costs. A
second step is to assess the impact of this pressure on the water environment, in chemical or
ecological terms. A third step is to identify and, if possible, quantify the nature and extent of
the damage involved, both on the water environment and other water users. Damage is
defined here as the difference between some reference and target situation. This target
situation can for example be an environmental objective or environmental standard.
The assessment of the extent to which some (predefined) target situation (e.g. environmental
objective or standard) is met (and hence the environmental damage involved) shows strong
resemblance with the risk or gap analysis carried out by other working groups such as
IMPRESS in the WFD. On the basis of this step, it is decided to what extent there is a need
9
for additional measures to reach some target situation, for example good ecological water
status in 2015.
In the next steps, the extent of the environmental damage and the damage to other water
use(r)s is measured in economic terms. This can be done in various ways, based on the
identification of the goods and services (functions) impaired by the pressure involved (e.g.
water used for drinking water production, irrigation, food processing, recreation, wildlife
habitat etc.). For the purpose of assessing the current level of cost recovery, it is important in
these subsequent steps to also assess the extent to which environmental costs are already
internalised through existing pricing and financing mechanisms. Therefore, in a separate step,
measures already taken to reduce, eliminate or mitigate (potential) damage caused by a
specific pressure are identified. These measures may include economic instruments as well as
technical measures. In the latter case, input is usually also required from technical engineers
and other experts in the field of pollution abatement and mitigation technologies.
If existing measures suffice to meet the target situation, only the costs of existing measures
are calculated, in accordance with the economic analysis advocated in the Wateco guidance
document, and an assessment is made of the extent to which the polluter pays principle
applies. If the polluter or beneficiary pays, either directly or indirectly through existing
pricing or financing mechanisms to prevent or mitigate potential damage to the water
environment and other water users, the current financial costs are referred to by the DG-ECO2
as ‘internalised potential environmental costs’.
If no measures are taken to prevent, mitigate or compensate environmental damage or damage
to other water users, or current measures are insufficient to reach a target situation (e.g. good
ecological status in 2015), additional measures can be taken. The costs and effectiveness of
these additional measures can be estimated with the help of other experts: technical engineers
who have knowledge and information about best available techniques (BAT) and scientists
who are able to assess the environmental impact(s) of these additional measures. For the
purpose of cost recovery, the costs of these additional measures can be used as a proxy for the
external environmental costs, i.e. costs, which remain uncompensated without additional
measures and which have to be internalised somehow in order to reach the desired target
situation.
Besides informing policy and decision-makers about the costs of bridging the gap between the
current (or expected future) situation and the target situation, assessing the least cost way to
reach some predefined environmental objective in a cost-effectiveness analysis (as requested
by the WFD in Annex III and Article 11) may also provide the basis for future water pricing
policies (see, for example, Baumol and Oates, 1971). Fixing environmental taxes or charges at
individual company or sector level at a level sufficiently above the least costs of
implementing BAT should induce companies or a sector to implement the BAT instead of
paying the imposed environmental tax or charge. Hence, carrying out a cost-effectiveness
analysis may support both the assessment of cost recovery and water pricing policies.
As demonstrated by Baumol and Oates (1971), fixing price levels on the basis of a costeffectiveness analysis is a second best solution, but nevertheless possibly a very effective one
in achieving some predetermined target situation (e.g. emission of tons of nutrients or
kilograms of trace metals annually) in view of the sometimes fundamental uncertainties
surrounding environmental change and the corresponding damage costs.
10
Alternatively, the economic value of the environmental damage (avoided with the help of
existing pollution abatement and mitigation measures) can be estimated with the help of direct
and indirect economic valuation methods (e.g. Johansson, 1987; Mitchell and Carson, 1989;
Freeman, 1993). Direct methods (also called stated preference methods) refer to contingent
valuation (CV) and contingent ranking (CR) techniques, with which individuals are asked
directly, in a social survey format, for their willingness to pay (WTP) for a pre-specified
environmental change3. WTP can also be measured indirectly by assuming that this value is
reflected in the costs incurred to travel to specific sites (travel cost studies) or prices paid to
live in specific neighbourhoods (hedonic pricing studies). The latter two approaches measure
environmental use values through revealed preferences, while CV is believed to be able also
to measure non-use or passive use values through stated preferences4.
Based on the estimation of the environmental damage costs (avoided), through direct or
indirect valuation methods, existing pricing and financing mechanisms can be reviewed to
assess to what extent the estimated damage costs are internalised. Estimation of the total
economic benefits of reaching the target situation (i.e. damage costs avoided) also allows
assessment of the economic efficiency of existing pollution abatement measures through CBA
or assessment of the most efficient level (and corresponding prices) of pollution control and
water abstraction and the economic justification for derogation.
2.7. Conclusions
Environmental costs are defined by the DG ECO2 as the economic damage costs to the water
environment and other water use(r)s caused by alternative competing water use (e.g. water
abstraction or wastewater discharge). Resource costs are defined as the costs of an
economically inefficient allocation of water, either in a quantitative or qualitative sense, over
time and across different water use(r)s. The calculation of resource costs can be based upon
the estimation of environmental costs, but there may also be resource costs in the absence of
environmental damage costs. They cannot simply be added because there is a real risk of
double counting.
Environmental and resource costs can only be estimated if the underlying reference and target
situations are known. The physical characterisation of these two situations, for instance in
terms of current annual emission levels of polluting substances (e.g. nutrients or trace metals)
and their maximum acceptable levels (e.g. based on existing environmental standards or the
water resource’s natural absorption rate), provides the basis for the subsequent economic
valuation of the discrepancy between the appropriate reference and target situation. In other
words, the economic valuation procedure is based on the gap analysis carried out by Impress.
In the context of the WFD, it seems logic to use the expected water status in 2015 as the
reference situation and to relate the target situation to the environmental objectives of the
WFD, i.e. good ecological water status in 2015. However, other reference and target
situations may also apply.
3
In environmental economics, various models and techniques have been developed to measure the value people
attach to natural resources and the goods and services these resources provide. Environmental values are
measured in money terms through the concept of individual willingness to pay (WTP) or willingness to accept
compensation (WTAC) in order to make them commensurable with other market values. Of these two, the WTP
approach has become the most frequently applied and has been given peer review endorsement through a variety
of studies (e.g. Arrow et al., 1993).
4
In environmental economics, the concept of total economic value, measured through WTP, has been broken
down into various use and non-use related reasons and motives for people to value a specific environmental
change (e.g. Pearce and Turner, 1990).
11
Economic costs can be estimated with the help of (1) available information about the costs of
measures needed to prevent, avoid, repair or mitigate the damage or (2) available economic
valuation methods assessing public willingness to pay (the costs of measures) to prevent,
avoid, repair or mitigate the damage. The choice of a specific economic valuation method
depends, first of all, upon the main objective when assessing environmental and resource
costs. Different methods simply measure different things and may therefore be more or less
appropriate in view of the purpose for which the results are to be used. Second, the available
information will also play an important role. In general, cost data are usually more readily
available than benefit data. Third, the degree of uncertainty surrounding the outcomes of
different methods also differs significantly and may be decisive when choosing a specific
method for a specific purpose. For instance, the acceptable level of uncertainty is much higher
in a pre-feasibility cost-benefit study than when establishing ‘correct’ or ‘right’ water price
levels based on current levels of cost recovery.
Finally, there exists an important relationship between environmental and resource costs and
the assessment of what has been labelled ‘financial costs’ in the Wateco guidance for the
purpose of cost recovery. In some cases, these financial costs are equal to (part of) the
environmental and resource costs, namely when they have actually been internalised through
existing pricing or financing mechanisms. For the purpose of cost recovery, the challenge is to
identify and quantify the extent to which environmental and resource costs are internal or
external costs, i.e. actually being paid and compensated for or not by those who have caused
the environmental and resource costs involved.
References
Arrow, K., Solow, R., Portney, P.R., Leamer, E.E., Radner, R. and Schuman, H. (1993). Report of the
NOAA Panel on contingent valuation. Federal Register, January 15, 58(10): 4601-4614.
Baumol, W.J. and Oates, W.E. (1971). The use of standards and prices for protection of the
environment. Swedish Journal of Economics, 73: 42-54.
Freeman III, A.M. (1993). The measurement of environmental and resource values, Theory and
methods. Resources for the Future, Washington, D.C.
Johansson, P.O. (1987). The economic theory and measurement of environmental benefits. Cambridge
University Press, Cambridge.
Mitchell, R.C. and R.T. Carson (1989). Using surveys to value public goods: the Contingent Valuation
Method. The John Hopkins University Press for Resources for the Future, Washington, D.C.
Pearce, D.W. and Turner, R.K. (1990). Economics of natural resources and the environment. Harvester
Wheatsheaf, UK.
12
3.
Practical experiences in France
Franck Fredefon (Environment Ministry, France) & Yann Laurans (Agence de
l’Eau Seine-Normandie, France)
3.1. Presentation of the reference work
The progressive implementation of the Water Framework Directive (WFD) will be a major
step forward in the area of economic expertise. A research commissioned by the Water
Department of the French Environment Ministry and carried out by the French Institute for
Agronomic Research in May 2003 aimed to aid and support the economic analysis by
supplying economic valuation results related to water damages. The research marks an
operational step in the work on water economics and the integration of market or non-market
damages in public decision-making. The work has three main aims:
1) It illustrates the state-of-the-art of water-related damage valuation in France (listing of
40 studies and synthesis of results obtained);
2) It assesses the reliability and transferability of these values with the aim of
establishing indicator values for water-related services in the sense defined by the
European Directive;
3) It assesses the strong and weak points of French expertise in this field and formulates
recommendations (insufficiently investigated fields, need for additional studies,
inadequately solved methodological difficulties, standardisation of procedures and
protocols for comparison purposes).
In the report based on this research, water uses as they are defined in the European Directive
are grouped into more or less homogeneous categories linked to a conventional typology of
hydrosystem functions, which distinguishes between water supply, trophic productivity,
purification, transport, recreational and patrimonial functions (Table 1).
Table 2 shows the number of available French studies according to the categories of uses
(which are the key of classification of studies) and the measurement methods used. The table
shows that the contingent valuation method is the most widely used method at the moment.
The table also shows that recreational uses, in particular those related to sports and leisure
fishing, are most often studied and valued. If we group uses roughly into market uses (supply,
production and purification) and non-market uses (recreational, ecological and patrimonial), it
becomes clear that two thirds of the studies relate to non-market uses. So, there is a lack of
knowledge concerning market uses such as drinking water supply, productive uses, treatment,
storage and transport of material, and network services. We therefore recommend to wait and
carry out more primary studies linked to these uses before transferring these values. On the
other hand, it seems conceivable to develop transfer values for recreational and ecosystem
uses. Valuations related to this non-market aspect offer a coherent and comprehensive set of
information. Besides, their integration in an indicative and informative approach is expected
not to produce insurmountable difficulties.
13
Categories of uses
Water supply, withdrawal, storage
Uses
Drinking water supply (purification, distribution, storage)
Health (mineral water, hydrotherapy)
Production uses
Commercial fishing, aquaculture and shellfish farming
Industrial water: industries supply
Hydroelectricity
Agriculture: water supply, irrigation
Fluvial and seaside materials extraction
Waste treatment, transport and storage Industrial and household waste treatment
Diffusion of farming pollution
Sludge disposal
Network, infrastructures
Navigation: rivers, inland waterways
Harbor activities (trade and leisure cruising)
Recreational uses: leisure,
Recreational fishing, hunting
contemplation
Bathing and other water sports, walks
Contemplation of beauty spots and landscapes
Ecological uses: biodiversity,
Fauna and flora protection
preservation, protection
Reproduction (damp zones, spawning beds)
Uses deferred for oneself and future generations (lasting
development)
Observation and study environment (training, research)
Passive use (existence value of biodiversity)
Flooding protection (wetlands)
Fire protection
Table 1: Correspondence between categories of uses and uses
Categories of uses
Drinking water supply
Productive uses
Treatment, storage and
transport of material
Recreational uses
River sailing
Ecological uses and
biodiversity
Deferred ecological
uses and protection
Total
Number of studies
2
2
Methods
Contingent valuation
Transport costs
Number of studies
19
7
3
Hedonic prices
3
17
1
Replacement costs
Damage (expert statements)
3
5
4
Treatment cost
2
11
Substitution scenarios
1
40
Total
40
Table 2: Classification according to uses and methods
14
3.2. Medium-term goals
Considering these French experiences and the lack of knowledge that still exists, the French
Environment Ministry is working on medium-term goals, which include:
•
•
•
•
carrying out routine studies, specifically regarding market uses;
further specification of valuation studies covering all valuation methods in order to
simplify the work of water actors and future value transfers;
specification of uses and variations of water quality linked to uses (for future costbenefits analysis);
improvement of knowledge about value transfers for non-market uses (focusing on
data reliability and counting “users”).
3.3. Work in progress
In addition to these medium-term goals, the French Environment Ministry is already working
on some specific issues:
•
•
•
highlight the work carried out: creation of a database, bringing together all the
available information, in a way compatible with the EVRI database;
elaboration of a table of reference values ranked according to uses, for costs and
benefits valuations, at water body scale, linked to the purpose of assessing
disproportionate costs of environmental measures;
elaboration of a valuation method for environmental costs of water services at the
French districts scale for the districts characterisation (end of 2004). This approach
leads to assessing avoidance costs, i.e. investment and operational costs which
communities have to pay over and above what they are already paying in order to
minimize pressures and impacts on the water environment by water services. This is
based on the French guidance document “Pressures and Impacts”5, from which
pressures and impacts can be linked to water services. In this way three categories of
costs have been identified:
- “quality” costs: costs of treatment of the residual pollution in order to reduce this
pressure;
- “quantity” costs: costs of pressure mitigation in order to reduce water withdrawals;
- “morphological” costs: costs of impact mitigation such as cost of bypasses for fish
migration, river bed restoration costs etc.
The main objective of this method (which does not provide the “right” environmental costs as
understood by the WFD as the costs of the means to mitigate damages are probably not equal
to the costs of these damages) is to provide the same points of reference for each district.
3.4. Example of cost recovery assessment in Seine-Normandie
In this final section, the issue of calculating and then using environmental costs for the
purpose of practical decision-making is addressed at river basin scale. First, an analysis is
presented of what is the demand for economic valuation of the environment coming from the
Water Agency board and its partners (Local Environment Ministry representatives, “DIREN
Ile de France”). The outcome of this analysis was used for the overall orientation of the costrecovery methodology in the Seine-Normandy basin, the main recommendations of which are
summarised below. Secondly, the calculation method is summarised through questions
5
Identification des pressions et impacts – Guide méthodologique, MEDD, Direction de l’Eau, mars 2003.
15
addressed and types of answers proposed, giving meaning to the concept of environmental
costs. Thirdly, reactions from stakeholders are summarised, after presentation of the above
results in six regional meetings with representatives from towns, industries, farmers,
environmental and consumer associations.
3.4.1. Orientations for environmental valuation from the Water Agency’s experience
The Water Agency benefits from a 40 years-old experience in stakeholder participation (not
public participation) in regional water policy-making. For example, water management is
organised through the adoption of general “masterplans” (SDAGE) for each river basin. These
masterplans were elaborated between 1995 and 1997 in co-operation with representatives
from the most influent stakeholders in the basins, i.e. representatives from towns, industries,
farmers and the State, and also with the participation of consumers associations. Economic
analysis was used to support the six French river basin masterplans, for various purposes and
with diverse effective utilisation6.
Based on this experience, the adopted economic assessment of cost-recovery followed two
basic recommendations:
1) Start with a screening of cost-recovery assessment, trying to give concrete meaning to
the WFD concepts. Then, where possible, provide figures, how ever rough, and pay
attention to the messages derived from them if they prove sensitive to the assumptions
made. The main concern is to clarify the general meaning of cost recovery in all its
aspects rather than providing a very specific and specialised evaluation, which will not
be easily understood by stakeholders.
2) Seek different economic values for environmental costs (environmental damage
costs). No single and unambiguous scientific methodology exists for objectively
measuring environmental costs. Therefore, different calculation methods and results
were presented side by side in order to allow decision-makers to discuss these based
upon various references. The idea is not only that different values are produced for
different purposes, but also that one value alone cannot be put forward for addressing
environmental costs.
3.4.2. Definitions and methodological choices
Water services: up to mid-2004 in Seine-Normandie water services considered include water
distribution and sanitation, including industrial and other “self-service”, irrigation and direct
discharges from farms. Hydropower and navigation will be included later based on
forthcoming data.
Environmental costs are considered according to the WFD text itself: “… The principle of
recovery of the costs of water services, including environmental and resource costs associated
with damage or negative impact on the aquatic environment should be taken into account in
accordance with, in particular, the polluter-pays principle.” (Preamble N°38; see also
“Economics and the Environment, the Implementation challenge of the Water Framework
Directive, a guidance document”, EEC, “Wateco” Guidelines, page 19).
This definition is also in accordance with other Wateco draftings: “Environmental costs
represent the costs of damage that water uses impose on the environment and ecosystems and
those who use the environment (e.g. a reduction in the ecological quality of aquatic
ecosystems or the salinisation and degradation of productive soils)”. (Annex II.II.2. See also
Annex IV.1.14. )
6
See Laurans (2000) and Laurans et al. (2001).
16
“Society derives benefits (or costs, which are foregone benefits) from improved environmental
quality in water bodies, which would arise from achieving the environmental objectives
contained in the Directive. This value is made up of both “use” and “non-use” values (see
box 5…).”. (Annex IV.I.20.)
“Cost-based valuation methods: … “The costs of measures already adopted, which are
theoretically already included in financial costs. These costs should be reported as a distinct
financial cost category. Counting them as environmental costs would be double counting”…
(Annex IV.1.21.)
From this perspective, environmental costs imply taking into consideration costs which follow
from the operation of water services and damages to the aquatic environment: rivers, aquifers
and transitional waters. Some of these damages result in technical monetary costs for water
services that use the environment as a resource (e.g. when having to treat polluted water prior
to distribution) or for water uses (e.g. bathing prevented by pollution). For evaluation
purposes, this means two separate kinds of evaluations:
1) environmental damages per se (i.e. non-use values);
2) external costs born by water services or water uses and due to water services through
the deterioration of the aquatic environment when used as a resource by these
activities (i.e. use values).
3.4.3. Main issues addressed in the Seine-Normandie cost recovery assessment
The cost-recovery assessment results were presented through stakeholder consultation in a
questions-and-answer process.
Question 1: To what extent does “water pay for water” and only for water?
This means assessing the financial exchanges between water services on the one hand and
other financial sources, mostly State sources, on the other hand. For this purpose the
evaluation relied on a statistical survey that gave good estimates of water services invoices in
the district, plus a specific study carried out on industrial expenses. National data were used
for assessing the amount of State subsidies (average amount over 5 years). Based on these
data, the subsidy ratio of water services is estimated at 4 percent for households and other
domestic users (small industries), 2 percent for industry and 55 Percent for agriculture
(through irrigation and manure management).
Question 2: Which exchanges exist between the various categories of water service users?
In France, this can result from differences between contributions paid to the Water Agency
and the benefits obtained from a specific category. It can also result from the real sharing of
costs compared to invoices in municipal water services operating (especially with respect to
households and industries). Present evaluations conclude that 3 percent of the invoice paid by
households and small industries is transferred to industry and agriculture, accounting for 6
and 35 percent of their invoice respectively.
Question 3: How important are mitigation costs?
Mitigation costs are paid through the water invoice and are due to pollution and resulting
treatment. For estimating mitigation costs, two complementary assessments were carried out:
1) A small survey on observed mitigation costs in various types of treatment plants,
according to their size, type of pollutants, etc.
2) Estimates of treated and distributed volumes, which were multiplied by the unit
mitigation costs and compared to the average invoice amount.
17
Five percent of the invoice paid by households and small industry for water services
(including sanitation) consists of mitigation costs, For industry this is 3 percent and there are
no mitigation costs for agriculture.
Question 4: What is the value of the environmental costs?
For providing references on this issue, we chose to evaluate:
1) The amount of the present actual environmental restoration expense (“costs of
measures already adopted”. However, here pollution abatement costs are not included,
they are part of water service prices. Only environmental restoration costs are dealt
with as “present environmental restoration expense” (Wateco guidelines Annex
IV.1.21 op.cit).
2) A gross potential contingent valuation of improving the quality of rivers, based upon
existing British studies and applying these to the basin population and length of rivers
according to their quality status.
3) Calculation of the potential restoration costs of the environment, “measures that would
need to be taken to prevent environmental damages up to a certain point, such as the
Directive’s objectives. These costs can be a good estimate of what society is willing to
forego”. (Wateco Guidelines Annex IV.1.21.)
The methodology is detailed in the box below.
Evaluation base
(source: Impress)
Types/surfaces/lengths of damaged wetlands
Number and height of dams disabling fish
migration
Types/volumes/breakdown of pollutions
Unit costs applied
Ecological engineering costs/ha/km
Lowering/suppressing dam costs/metre
Fixed sum per equipment/proportional
value/kg/day of pollution abatement
Not exactly “restoration:
no possible restoration
for chemical pollution
Box 1: Restoration cost methodology used in the Seine-Normandy cost recovery assessment
Present protection expenditures are estimated at €56 million per year for the whole district,
which represents 2 percent of the invoice paid by households and small industries. A rough
calculation of willingness to pay (WTP) for improving water quality of rivers suggests an
amount of around €100-200 million per year, or €6-12 per inhabitant per year. Finally, an
assessment of the potential costs of tackling the major sources of pollution in the district and
abating their pollution resulted in a cost estimate of €450 million per year, which is equivalent
to €26 per inhabitant per year.
These three types of cost references cannot be aggregated. In welfare economics, current
expenditures and contingent valuation data deal with preferences, in other words with the
18
social “demand”, whereas achieving a “zero pollution” state is a statement of “environmental
full quality supply cost”. The chosen level is achieving the good status objective. The latter
give also insight in social preferences (through the policy decision).
3.4.4. Stakeholders reactions to environmental costs assessments
During six regional stakeholders meetings (each with around 100 attendees), the above results
were presented. Reactions to presented evaluations (oral plus written document) were as
follows:
Reactions from Environmental NGOs
Environmental NGOs were sceptical about contingent valuation and demanded a variety of
methods. They expressed demand for addressing existence values and asked for methods
which would provide clues about the social importance of the environment (e.g. bird watchers
etc.). They asked for local examples and illustrations and criticised the necessity of presenting
a basin-scale assessment.
Consumers associations
Consumer associations reacted about subsidies, and did not react on environmental costs
assessments.
Reactions from mayors and technicians in charge of municipal services operation
This category showed scepticism about the mitigation cost results, especially about the
calculated ratio of mitigation costs compared to invoices. This can be explained easily in view
of the fact that the ratio is calculated at basin scale and for water and sanitation together. This
lowers the average to 5-7 percent, while locally the ratio of mitigation costs compared to
water prices can be as high as 20 %. Nevertheless this raised misunderstanding.
State and local public bodies
These were worried about having a short series of figures expressing environmental costs.
They feared that the public would focus on one or two figures and “sit on them”. They also
pleaded for a comparison of the costs of non-quality compared to the costs of improving the
environment, i.e. a cost-benefit demonstration. Eventually, this category appeared fairly active
in the whole process by providing us data in response to our call for local precision (e.g.
regarding the importance of “small industry” in the domestic data).
All these reactions and suggestions are currently being studied carefully in order to include
them in the following versions of cost recovery calculations.
References
Laurans, Y. (2000). Economic valuation of the environment in the context of justification conflicts:
development of concepts and methods through examples of water management in France.
International Journal Environment and Pollution, Vol. 15 N°1, 94-115.
Laurans, Y., Bouni, C., Courtecuisse, A., Dubien, I., Johannes, B. (2001). L’évaluation économique de
la théorie à la pratique : l’exemple des SDAGE en France. Natures, Sciences, Sociétés, vol. 9,
N°2, 17-28.
19
4.
Practical experiences in Sweden
Oskar Larsson (Environmental Protection Agency, Sweden)
4.1. Definition and measurement of environmental costs
We define environmental costs as the costs of damage to the environment as a result of human
activities (direct and indirect). This can include damage to ecosystems as well as health
impacts.
Preferably, environmental costs should be measured on the basis of economic welfare theory,
and new studies be carried out to value environmental change in every specific context.
However, given the vast amount of water bodies that require valuation and the financial and
time constraints, it is difficult to do so. Benefit transfer is an alternative to undertaking new
studies. Indeed, a large number of valuation studies have been carried out over the years in
Sweden and we have recently compiled these studies in a database (see
http://www.beijer.kva.se/valuebase.htm). The provision of the database will greatly facilitate
the use of monetary values as a measure of welfare changes that result from changes in the
environment.
The inclusion of environmental costs is required in three parts of the Directive; to recover the
cost of water services, to assess the cost effectiveness of measures and, finally, the possible
need for derogation. The level of ambition can be adjusted depending on the type of analysis.
It is difficult to obtain robust and relevant valuations of environmental costs through welfare
based methods, not least within the time frame given by the Directive’s 2004 reporting
requirements. As a temporary approach therefore, and for assessing the cost effectiveness of
programmes of measures as well as today’s level cost recovery, one option is to look at cost
based methods, e.g. environmental expenditure. Actual and planned environmental
expenditures equal the cost of meeting today’s standards (given, to some extent, by society’s
preferences) and, hence, they do not measure the full environmental cost (unless standards
equal zero damage), but rather some internalised part of the total environmental costs. These
estimates can be revised and replaced by more rigorous estimates over time. For assessing
costs and benefits in the context of derogation, however, the cost approach is insufficient also
in the short run (expenditure alone can obviously not be used as a measure of costs and
benefits). Values derived through measures based on welfare theory will be used in this
context.
4.2. Definition and measurement of resource cost
We simply define resource costs as the costs of foregone opportunities, i.e. the cost of
something in terms of an opportunity foregone. The opportunity cost is not the sum of the
available alternatives (opportunities), but rather the value of any particular one of them
(unless several alternatives can be combined). The opportunity cost is thus a product of the
costs and benefits generated by different alternatives and signals inefficient resource use (both
with respect to water quality and quantity) if a use (i) of the highest value is excluded at the
expense of another use (j) which has a lower value. This can be expressed as:
Bi – Ci > Bj – Cj
Æ inefficient use of resources if use j has been given the rights to use
the resource, and if this excludes use i
20
where B denotes the total benefit (use and non-use) of a use and C is the total cost
(internalised and external). Resource costs are important in the context of conflicts and
inefficient allocation of rights to water use.
The ability to correctly measure resource costs is heavily dependent on the correct
measurement of environmental costs and other specific cost types and requires the use of
welfare based methods. We are likely to focus on identifying possible inefficient allocations
of water rights where such inefficiencies jeopardize the possibility of achieving the
environmental objectives of the Directive. In Sweden, economic considerations have not
traditionally been taken into account in, for instance, the granting of abstraction permits.
4.3. Recent experiences
A large number of valuation studies have been carried out in Sweden. However, we have
limited experience from the use of cost-benefit analyses in the environmental policy arena.
The study presented at the workshop in Amsterdam (Löwgren, 2000) looked at the use of
water in the Emå River Basin in order to test and develop market based methods to assess
monetary values for water related goods and services within a catchment area. The associated
values originate both from use values (direct and indirect) and non-use values (e.g. existence
and option values). For uses of direct economic importance it was possible to calculate
monetary values from market prices, as in the case of hydropower generation and fish
production. Non-use (hence non-market) values were not treated in the study. The values of
water for household consumption and agricultural irrigation were estimated through the
related extraction cost. In principle, the same method should be applicable to industrial uses,
but data were not available. The resource’s recipient capacity with respect to wastewater from
households and industry was accounted for by avoidance costs, i.e. through costs for
wastewater treatment. Shadow prices, including the costs for the restoration of abandoned but
heavily polluted old industrial sites, the liming of acid lakes, and nature conservation costs
were calculated to mirror recreation values and the maintenance of biodiversity. For the next
two decades there are plans to restore fish habitats and to remediate more industrially
contaminated areas which would give rise to further expenditures. The study was carried out
within the Swedish Water Management Research Programme (VASTRA), which is funded by
the Swedish Foundation for Strategic Environmental Research (MISTRA). Financial support
was also given by the Swedish Environmental Protection Agency (SEPA).
4.4. Main outcomes and challenges
The main outcomes and challenges can be summarised as follows:
•
•
•
•
•
Different methods can be used in different contexts of the implementation of the
Directive and, for practical reasons, the level of ambition has to be tailored according
to these contexts,
The use of several parallel valuation methods requires that specific attention is paid to
the possibility of double counting when separate cost items are added up.
Non-use values are likely to be important.
Important but difficult to exactly specify gaps between current and target water status.
The vast number of water bodies in Sweden requires streamlined economic analysis.
21
4.5. Future work
Our next steps in terms of addressing the issues of environmental and resource costs will
include:
•
•
•
A validation/peer review of the studies in above mentioned database.
A strategy for further valuation studies in order that they are applicable to different
circumstances.
The streamlining of economic assessments for reasons of transparency, comparability
and efficiency.
22
5.
Practical experiences in Spain
Josefina Maestu (Environment Ministry, Spain), Joaquin Andreu Alvarez
(Universidad Politecnica de Valencia, Spain) & Carlos Mario Gomez
(Universidad de Alacala de Henares, Spain)
5.1. Interpretation of environmental costs
Environmental costs are the environmental damage costs (external) from abstraction and
discharges. As in the WATECO guidance, these are the costs of damage that water uses
impose on the environment and ecosystems and those who use the environment. It includes
then foregone environmental benefits that could arise if water quality and flows were
improved.
Economic valuation (of both benefits and costs) is a means to an end. For this reason, the
precise cost concept that is relevant in a certain case will depend on the context and the
valuation purpose. One important aspect in this respect is the specific analysis we are trying to
perform (cost-effectiveness, cost-benefit, cost recovery, and so forth); and the available
information. Sometimes the environmental impact of abstracting another cubic meter of water
from a certain water body to meet demand – or the environmental cost – is not easy to
measure, but we can probably obtain the cost of the compensatory measures needed to save
one cubic meter from another existent use.
The water quality standards of a particular river basin have always been prescribed by the
legal standards. Water management authorities have been implementing measures to reach a
quality standard, which was decided upon by the relevant public authority. This imposed
administrative decision in the past is considered to represent social demand and desires (or the
accepted environmental quality according to the believes, incomes and desires of people). If
this is the case, we could accept that the environmental cost equals the cost of taking the
measures needed to obtain the relevant ecological quality targets. This is an approximation of
the environmental cost measured by the historical willingness to pay to guarantee a certain
desired environmental quality in the presence of an increasing demand for water services or,
alternatively, by the cost of avoiding undesired environmental damages. Part of the damage is
being paid for through existing pricing or financing mechanisms (e.g. the costs paid by the
polluter for measures taken by the polluter himself to treat pollution or the price, fee, levy or
charge paid by the polluter to others who treat the pollution caused by the polluter).
However, there are some important issues, which have to be considered:
a) if standards are met, residual damage will still have an economic value;
b) when analysing benefits of water quality improvement against costs of mitigation
measures in a disproportionate cost analysis, the forgone benefits should be valued on
the basis of the welfare preferences of the affected beneficiaries.
23
5.2. Interpretation of resource costs
Resource costs are defined as the opportunity cost or the value of water in the best foregone
alternative. In economic theory, we define costs and benefits in a flexible institutional setting
(where water property rights can be easily reallocated from one use to another in order to
obtain an efficient water allocation) and with respect to a reference point where water is
efficiently distributed among water uses. From biology or natural sciences, we take as a
reference point the physical or biological restrictions that must be respected (such as the
assimilation capacity, the recharge ratio, and so forth) and from these we deduce the quantity
of water that can be diverted or the quantity of pollution allowable in a stream.
However, even if environmental restrictions are respected, the satisfaction of urban water
demand for example for domestic uses can only be met at the expense of reducing the
satisfaction of another water use (being it extractive or in situ, valued by the market or
intangible, related to use or non-use values). In the context of the WFD, the reference point
may be the baseline ecological status of the water system (with the actual allocation of water
rights between water uses) or alternatively the good ecological status.
In a water system with a certain quantity of water, a decision is taken about how much water
can be extracted from the water system and how much pollution can be discharged. This
decision is equivalent to a decision regarding how to distribute the resource between in situ
services (biodiversity support, security, option values, recreation) and extractive services
(crop irrigation, drinkable water production, and so forth). Once a decision has been taken
regarding how much water can be extracted and how much emissions are allowed, a new
decision must be taken about how to distribute abstractions and emissions between the
different uses (e.g. how much for crop irrigation and how much for drinking water
production). The first kind of decision is associated with an environmental cost (extracting
water and pollutant emissions will reduce the biological productivity, the quantity of
recreational services, landscape quality, and many other services of the water system) and also
with a resource cost as the best alternative foregone by extracting water is leaving it in the
environment to provide in situ services. The second kind of decision does not have
environmental cost (as the quantity of water extracted has already been decided upon), but
only resource cost (as giving the water to the urban families has the opportunity cost of not
giving it to farmers and so forth).
Other important considerations regarding the definition of both environmental and resource
costs are:
• Environmental and resource costs may be defined at different levels and for different
time scales.
• There is a clear difference between total, average and marginal costs, and these
differences are of relevance to the economic analysis.
• Both environmental and resource costs do not refer to mutually exclusive cost
concepts (or to different cost items that must be added to obtain the total water cost).
Calculations of the resource cost can include environmental cost (the foregone
opportunities which other uses suffer due to the depletion of the resource; e.g.
biodiversity loss, amenity losses and other environmental impacts).
• It may also be helpful to precise the exact meaning of some terms, such as pressure,
impact and damage, as these are often used synonymously when in fact they are not.
24
5.3. Approach for assessing environmental costs
Most problems regarding environmental and resource costs come from the need to define this
concepts in a particular institutional framework and with respect to a certain reference point.
For the purpose of cost recovery analysis, the costs of measures can be used as a proxy or
indicator of the external environmental costs i.e. the costs of measures aimed at reducing,
eliminating or mitigating environmental pressures (through water use or services) on a water
body, which have to be internalised somehow in order to reach the desired (target) situation
(e.g. existing or new environmental standard).
For the purpose of cost recovery, the steps are:
a) The identification of measures already taken or in place to reduce, eliminate or
mitigate the environmental damage caused by a specific pressure.
b) Analyse the cost of the measures in place to meet the existing environmental standards
and analyse the costs expected to be incurred to meet standards in the cases where
these have not been met.
c) Identify how measures are paid for and consider if the costs are passed on to others:
consumers paying (part of) the additional costs of pollution abatement; companies
who have adopted pollution abatement technologies.
There are problems in the application of this approach in cases where there is mainly financial
accounting data about mitigation measures and this needs to be made explicit in the analysis.
There are also problems in gathering the data related to measures and their level of
implementation. However, this approach links well with the cost-effectiveness analysis of the
programs of measure required to achieve GEQ with the WFD (the new target situation). This
would be the context for measuring costs after 2004.
Measuring environmental costs can also build on information provided by the work of
Impacts and Pressures to help evaluate the marginal benefits associated with the
improvements in the pressures and their impacts on water services. This approach requires (as
in the RBMP):
a) to identify and quantify pressures and their impacts;
b) identify the gap between the existing situation and the GEQ situation;
c) apply the available monetary valuations for specific environmental benefit types.
The economic value of avoided damages (with future measures) can be estimated with the
help of direct and indirect economic valuation methods. There are, however, many difficulties
associated with implementing this approach in Spain in view of the fact that there are very
few partial and context dependent valuation studies.
5.3. Approach for assessing resource costs: the Jucar pilot river basin
A pilot methodology and tools for the assessment of resource cost has been developed in the
Jucar pilot river basin (Jucar PRB) and has produced some preliminary results7. Resource
costs are defined as the opportunity cost of water use in a certain location and at a specific
point in time. Therefore the present allocation system, existing allocation rules and how the
system operates in practice under scarcity conditions have to be described first. The marginal
7
Methodology developed for the Jucar PRB and the Environment Ministry by Joaquin Andreu, Manuel Pulido,
Guillermo Collazos, and Miguel A. Perez from the Institute for Water and Environmental Engineering (IIAMA),
Universidad Politecnica de Valencia, Spain.
25
resource opportunity costs can be defined as the cost for the system of having one unit of the
resource less available. This value is an indicator of the aggregated “economic impact” of
water scarcity and helps us to understand how much users would be willing to pay to mitigate
scarcity. It also helps us to look into the possible benefits associated with the implementation
of the legislation of water transactions and water banks.
Water supply systems and water demand units are integrated at the basin scale. There are
many components (see slide no. 3), such as water bodies (i.e. surface waters, ground waters,
coastal waters), water uses and services, infrastructures, and complex relationships between
these components which affect water flows and availability, both in space and time. The
relationships and their implications for the assessment of resource costs need to be captured
by means of adequate hydrological modelling at river basin scale.
The use of hydro-economic models allows us to analyse the basin in an integrated way, to
preserve the interconnection between its different elements and to discriminate between
results across different locations. Isolated consideration of the elements in the basin is an
incorrect approach. Tools for a more rigorous analysis are available. The use of these models
captures and highlights the spatial and temporal variability of supply and allows the
calculation of opportunity costs. The models properly reproduce surface and groundwater
interactions at the basin level and incorporate the value of water across different uses
considering the system’s supply costs. This allows us to dynamically represent the marginal
economic value at different locations in the basin, taking into account resource availability,
storage capacity, losses, return flows, and willingness-to-pay (or marginal economic value) of
the various demand units.
The approach has been applied in the Jucar PRB where hydrological models for water
management have been previously developed and successfully applied for the Jucar
Hydrological Plan (see slide no. 6) and the computation modules for incorporating
information on water demand functions for the different water demand units have been
recently developed and tested and are integrated in a Decision Support System (DSS). Most
other basins in Spain have also prepared hydrological models for the same purpose and hence
it is possible to apply the same approach to other Spanish basins.
The developed hydro-economic models are tools which can be used systematically for the
economic analysis required by the WFD, either for assessing the economic impact of
environmental measures, such as minimum flows in rivers or minimum volumes in reservoirs,
or for the cost effectiveness of measures, including disproportionate cost arguments for
heavily modified water bodies, extensions of deadlines or less stringent objectives.
5.4. Methodology used in the Jucar PRB
The following two aspects were considered for inclusion in the analysis:
•
Conjunctive modelling of surface and groundwater. In systems in which the
groundwater component is important, the model should be able to simulate both
surface and groundwater systems (see slide no. 7) and their interaction. Otherwise,
externalities due to separate actions would be ignored. For example, the isolated
analysis of an aquifer does not allow the assessment of how pumping influences the
ecological status of downstream locations.
26
•
Incorporation of water productivity functions in the water uses and marginal unit
costs of the water supply system. The demand of the different types of users are
represented by “economic value functions”, which express the relation between water
supply and its marginal value for the different types of users in a specific year (see
slide no. 12). The integration of the economic demand function for a certain level of
supply (area under the demand curve, as seen in slide no. 13) (considering the supply
costs of the level of provision) provides the economic benefit at this supply level (see
slides no. 14 and 15). The accuracy in the definition of these demand curves, assumed
as exogenous information in these models, is fundamental for the reliability of the
results. The supply costs considered include annual infrastructure costs and variable
cost of intake, distribution and treatment of the resource for both surface and
groundwater supply.
The calculation of resource costs is based on simulation and optimisation models. The use of
an optimisation approach allows us to calculate an upper bound of the economic value of
water at a certain location with the system being operated in an economically optimal way.
The simulation approach allows us to determine the economic value resulting from a set of a
priori established operating and allocating rules. These rules can correspond to the priorities
and historical rights, reproducing the current modus operandi of the system.
Comparison of the optimisation and simulation results provides insight in the resource cost.
The gap between the economic value of an economically optimal water use and the current
water allocation system allows us to assess the “distance” between the optimum and any
management regime analysed. The results of the optimisation model provides insight in
possible operating rules or strategies with which to improve the economic results in the
system, whereas the benefits of any modification in the management criteria, such as
modifications to achieve the quality standards required by the WFD, can be assessed by the
simulation model.
5.5. Optimisation approach
The development of a hydrologic-economic optimisation model at the basin scale (see slide
no. 17) allows us to assess, using shadow prices or dual values, the marginal opportunity cost
(value) of the resource at various locations in the system (and by different demand units and
types of users), the willingness-to-pay of the different types of users, and the economic losses
caused by reduction of supply.
The objective function that has to be maximized is the discounted net economic value of the
benefits resulting from the services provided by the system to the water uses. This net
economic value is obtained by aggregating the benefits corresponding to the supply level and
deducting the supply costs. The constraints in the model serve to guarantee the feasibility and
sustainability of the final decisions. The solution of the model provides shadow prices, one for
each of the balance constraints, which can be interpreted as the marginal benefit of relaxing
the corresponding institutional or capacity constraint. The resource value at different locations
and the hydrologic inflows into the system provide information about the marginal
willingness-to-pay for an additional unit of supply from each source.
The optimisation model allows detecting in which cases the physical limitations of the
infrastructure or the management rules of the system act as constraint of a more efficient
resource allocation, as in these cases the shadow price of the capacity constraints is positive.
In this way, the shadow price time series provides information about the marginal value of the
27
system by increasing water use by one unit or, by the same token, the benefits forgone
(opportunity cost) to maintain one more unit of minimum stream flow. The shadow price time
series shows the marginal economic value of relaxing the constraints during certain periods.
The model’s results for various levels of constraints allow the quantification of the expected
value of their economic impact on the system as a function of the applied constraint level.
5.6. Simulation approach
The proposed simulation approach is conceptually simple. It consists of three steps:
1. Setting-up a simulation model for water management in the basin in which all the
relevant components (surface and groundwater resources, infrastructure, demands,
etc.) are included, allowing the representation of different management policies in a
way that properly reproduces the current water allocation, integrating legal aspects,
institutional issues, etc.
2. Setting-up an economic assessment of the resource allocation undertaken by the
previous model. This assessment requires data on the water demand functions, which
correspond to each demand unit of the system, as mentioned previously.
3. Use of specific routines, which allow the sequential and iterative use of the previous
models to obtain the resource costs based on previous definitions.
Step 1: Preparation of a hydrological simulation model
This is already accomplished in many of the River Basin Agencies in Spain as a result of the
planning tasks undertaken for the elaboration of the Basin Hydrological Plans. For example,
in the Jucar Basin Agency a model is available (see slides no. 6, 7, and 8), which has been
implemented and successfully applied using the SIMGES module of the Decision Support
System (DSS) AQUATOOL (Andreu et al., 1996). SIMGES is a generic model (it can be
used to represent any basin), which allocates water period by period, based on the priorities
assigned by the modeller to the elements of the systems, respecting physical and operative
constraints.
Step 2: Associating economic functions to the demand units in the basin and calculation of the
economic value of water use in the base case
This requires associating to each element annual and/or monthly economic functions (see
slide no. 10), which represent the unit cost/benefit for the system from the different flow or
supply levels for each element (e.g. for a use the economic function will be the demand curve;
for pumping elements it will have negative values to represent the cost of this action, etc.).
Once determined, the functions are introduced as data to the evaluator, which, based on the
water allocation given by the simulation, estimates the economic benefits for each location
and time, as previously explained (see slide no. 13). The module EVALGES, included in
AQUATOOL, performs this computations. The simulation and assessment of the system for a
given hydrologic scenario is named the base case.
Step 3: Comparing the economic value resulting from the base case with that resulting from
variations in water availability (scarcity)
A modified case corresponds to the simulation with a perturbation consisting in adding (or
removing) a differential water volume (∆Volume) at the location and time of interest (see
slide no. 21). Thereafter, the model carries out a new resource allocation, using the allocation
rules, and after that, the total economic benefit of this modified case is evaluated. The
difference in total benefits from the base to the modified case (∆Benefit) is computed. The
ratio ∆Benefit/∆Volume is an approximation of the aggregated marginal resource cost for the
28
system. This reflects the aggregated economic cost of water scarcity according to the existing
allocation criteria.
5.7. Results and final remarks
Routines in EVALGES have been implemented to carry out simulation tasks for each of the
points or elements of the basin selected and for all the months in the hydrologic scenario. The
results can be depicted in graphs (see slide no. 23). Results obtained so far are showing
consistency with expected economic behaviour. For instance, opportunity cost of the resource
in a point is higher in scarcity situations and lower in abundance situations (see slide no. 24),
and opportunity costs are modified in time if there is the possibility of storing water in a
reservoir (see slide no. 25).
Further extensions of this method where water quality aspects are also integrated is being
carried out, mainly in order to be able to simulate the effects of measures in the RBMP. The
parameters of the return flows of the different uses have to be properly incorporated. Water
quality and water quantity interactions between surface and groundwater subsystems call for
integrated basin modelling. The developed model for water quality assessment can be used to
simulate simultaneously several indicators. This allows us to compute the opportunity costs
resulting from the need to meet ecological water quality objectives. Comparing opportunity
costs using the optimisation (maximisation of economic value given restrictions on pollution
content in rivers) and the simulation approach (according to existing emission authorisations)
could also be possible. The three models (i.e. simulation, optimisation and quality assessment
models), included in the same decision support system (i.e. AQUATOOL), can be used in an
integral, iterative and interactive way.
References
Andreu, J., J. Capilla and E. Sanchis (1996). AQUATOOL, a generalized decision support system for
water-resources planning and management, Journal of Hydrology, 177, 269-291.
European Commission (2000). Pricing and sustainable management of water resources.
Communication from the Commission to the Council, European parliament and Economic and
Social Committee, COM(2000) 477, Brussels, Belgium.
29
6.
Practical experiences in the Netherlands
Roy Brouwer (RIZA, The Netherlands)
6.1. Introduction
The practical estimation and application of environmental and resource costs (ERC) in the
context of the implementation of the WFD in the Netherlands is based on the principle
“different costs for different purposes”, and guided by existing official guidelines for
environmental cost calculation from the Environment Ministry. Two other important
considerations are (1) data availability and (2) the reliability and accuracy of the available
data. In the latter case, decision-maker demand for reliable and accurate estimates plays an
important role. This is closely related to the purpose the data are used for (what exactly is at
stake and what do policy makers or river basin authorities wish to achieve?) and the phase in
the decision-making cycle ultimately leading up to the actual implementation of a decision. In
general, the reliability and accuracy of data used in an explorative policy phase (e.g. assessing
the costs and benefits of different policy instruments to stimulate efficient and sustainable
water use) is usually much lower than the data used to support the actual implementation of a
decision (e.g. the implementation of a specific water price, tax or levy related to a specific
water use and/or water service).
6.2. Different costs for different purposes
In the Netherlands, an important distinction is made between ERC estimated and calculated
for the purpose of:
1) the WFD’s 2004 reporting requirements in the context of cost recovery (Article 5);
2) possible future pricing policies (Article 9);
3) possible derogation as a result of disproportionate costs (Article 4).
For the purpose of the 2004 reporting requirements (Article 5), the total financial costs are
calculated, where possible by river basin, of measures already taken with a primary aim to
prevent, avoid, mitigate or restore environmental damage related to water, based on existing
legal (environmental) standards. Available information about the total revenues from existing
pricing and financing mechanisms is used to assess the extent to which the current financial
costs of these measures to prevent, avoid, mitigate or restore environmental damage related to
water are actually recovered within the existing institutional setting in river basins.
For the purpose of possible (future) pricing policies (Article 9), economic efficiency is
expected to be an important criterion when choosing among different economic policy
instruments to stimulate sustainable water use (if current water use and damages to the water
environment are considered unacceptable from a societal point of view and/or economically
speaking inefficient). This means that instead of calculating total costs related to
environmental damage for the purpose of cost recovery, marginal values are needed in order
to be able to determine economic efficient price or tax levels and corresponding levels of
pollution (and damages related to water). Estimating these marginal values requires other
knowledge and information about the economic shadow prices of water uses and water
services (including the allocation of water or pollution rights to the environment). Integrated
30
hydro-economic modelling is foreseen as one way of providing the necessary data and
information input for this specific purpose.
For the purpose of possible derogation as a result of disproportionate costs (Article 4), both
cost and benefit data are needed in order to be able to underpin derogation from an economic
point of view. In the context of pollution control and damage repair, this means that the
additional pollution control costs (of additional measures to reach good water status in 2015)
have to be compared with the additional damage costs avoided. These additional costs (where
avoided damage costs are benefits) can only be calculated if and only if the gap between the
expected situation in 2015 (reference situation) and the desired situation in 2015 (target
situation) is known. This depends on the work of the working group Impress (who deals with
the gap analysis in the Netherlands), but also political decision-making regarding the
environmental objectives to be set in the context of the WFD. The economic analysis will in
this case be broader than just looking at the financial costs of pollution control and damage
repair measures. The total (direct and indirect) economic costs of pollution control will be
estimated in the cost-effectiveness analysis and the economic value of the damage costs
avoided will have to be assessed. Indirect economic costs may be especially relevant in those
cases where large-scale changes are foreseen in economic sectors to meet the environmental
objectives in the WFD. Again, integrated hydro-economic modelling is foreseen as one way
of providing the necessary data and information input for this specific purpose.
The calculation of the additional costs and benefits in the context of Article 4 can be seen as
an iterative process, supporting the establishment of environmental objectives for water
bodies. In a first stage (after 2004), pre-feasibility studies will be carried out to assess the
costs and benefits of additional pollution control and damage repair measures. As more
knowledge, data and information becomes available in time, the accurateness and reliability
of the estimates will increase, resulting in a fine tuning of the analysis to support actual
decision-making regarding the selection of a cost-effective programme of measures in the
river basin management plan by 2009.
6.3. Definition and actual measurement of environmental and resource costs
An important distinction is made between the theoretical definition of environmental costs
and their empirical measurement for different purposes. In theory, environmental costs are
defined in line with the DG-ECO2 definition as the economic damage costs to the water
environment and other water users. In the Netherlands, resource costs, as defined by the DGECO2, are currently not distinguished separately in view of the fact that they are expected to
be (partly) based on the estimation of environmental costs8.
The empirical estimation of environmental damage costs through economic valuation
methods remains difficult to say the least in some cases, even after decades of good scientific
research. Some of these valuation methods (especially the stated preference methods) are
furthermore not uncontroversial in the context of public decision-making9. This does not
imply that no further attempt should be made to measure the theoretically correct concept.
8
Initially, resource costs were interpreted as the costs of the depletion of non-renewable and/or renewable water
resources. That is, water as a stock concept subject to value depreciation and possible irreversible change. The
value of this stock concept is reflected in the so-called Hotelling rent (Hotelling, 1931), measured at macro level
in the green accounting literature through for instance the net price of natural resources (Repetto et al., 1989) or
El Serafi’s (1989) user costs, taking also into account intergenerational concerns in the estimation of the
resource’s economic value.
9
See, for example, Sen (1977), Sagoff (1988), Jacobs (1994) or Foster (1997).
31
The difficulties encountered in practice so far to value environmental damage costs do have
important consequences though regarding the validity and reliability of using these estimates
in real decision-making contexts. In certain specific contexts their use is questionable. They
have, for example, never been included in official (inter)national economic accounting
procedures, because the value estimates are considered unreliable at this level. Also in the
context of current and possible future water pricing policies in the WFD the use and
usefulness of the results from certain economic (revealed and stated preference) valuation
methods are considered questionable. Mainly because of the remaining uncertainties
surrounding their estimation and hence their reliability. Again, this does not imply that the
estimation of environmental costs should not be attempted. However, it does mean that based
on the available empirical evidence one has to look very carefully at the right interpretation of
the estimates in view of the purpose they aim to serve.
For the purpose of cost recovery, environmental costs are approximated in practice by looking
at the costs of measures whose primary aim is to protect the water environment. In the
Netherlands this is currently investigated for the water services wastewater collection and
wastewater treatment. The current costs of wastewater collection and treatment are considered
internalised potential environmental damage costs, which are recovered from the sources of
pollution (households, agriculture and industry) through existing price mechanisms.
The cost based approach corresponds with the guidelines for calculating environmental costs
provided in the 1998 manual issued by the Dutch Environment Ministry for the calculation of
environmental costs and benefits10. This manual was written by the Environment Ministry in
collaboration with representatives from the Ministry of Economic Affairs and the Ministry of
Transport, Public Works and Water Management. In this manual, environmental costs are
defined as the costs of measures whose primary aim is to protect the environment by reducing
environmental pressures11. This approach is considered to be in line with the economic
analysis in the WFD in which current and potential future measures have to be identified to
protect the water environment and an assessment has to be made of the way their costs are or
will be paid for by the users of the water services provided.
The manual makes an explicit distinction between costs and expenditures. The gross
environmental costs are annual costs, consisting of the capital and operation costs of
environmental measures. Capital costs are calculated based on the linear depreciation of
capital over its economic lifetime and the real average interest costs as observed in the capital
market (distinguishing between different economic actors such as industry, agriculture and
households). Savings on energy use or material input are also distinguished and subtracted
from the gross environmental costs. This results in the annual net environmental costs.
Finally, financial transfers, such as subsidies and taxes, are also shown explicitly. Adding or
subtracting the financial transfers from the net environmental costs results in the
‘environmental expense’.
10
VROM (1998).
In the manual, environmental measures include technical measures (end-of-pipe, process integrated and
product measures), volume measures (reduction of output and/or inputs which put a pressure on the
environment) and organisational measures (e.g. legislation). In view of the fact that environmental measures may
have multiple environmental impacts, e.g. influence different pollutants at the same time, the manual also
provides some preliminary guidelines on how to deal with this.
11
32
The calculation of environmental costs for the 2004 reporting requirements is based on the
available data about environmental costs related to water from Statistics Netherlands.
Statistics Netherlands calculates these costs annually based on the existing guidelines from
the Environment Ministry. These national guidelines correspond with the international
environmental cost accounting guidelines provided by the OECD and Eurostat for
environmental protection measures. The environmental costs related to water mainly include
wastewater treatment costs. The costs are calculated separately for industry, agriculture and
the water boards12.
For the purpose of possible future pricing policies and the economic analysis underpinning
possible derogation in the period 2005-2008, a 2-3 year research proposal has been written to
develop an integrated hydro-economic model for river basins. At the same time, large scale
original economic valuation work is being undertaken to estimate the economic value of
improving the water environment through contingent valuation and travel cost methods,
similar to the economic pre-feasibility studies undertaken to support the decision-making
regarding the revision of the water quality standards in the European Bathing Water Quality
Directive13. In these studies, special attention is paid to the reliability and temporal stability of
the estimation results, based on similar work undertaken in the UK where the validity and
reliability of using contingent values in actual decision-making were investigated through
public discussion and consultation14. In view of the experiences with these valuation methods
in the Netherlands so far in the domain of water, the results of these studies are currently
considered only suitable for pre-feasibility cost-benefit studies in the explorative phase of the
decision-making cycle, for example to support the setting of environmental standards, but not
to fix price levels for water uses and services in possible future pricing policies as foreseen in
Article 9 of the WFD.
6.4. Remaining issues and future work
Some of the most important unresolved methodological issues at the moment include:
(1) Physical quantification of the environmental damages or damage categories related to
water based on causal relationships between pressures and impacts at water body and
river basin level. This provides the basis for any subsequent economic analysis of
environmental costs.
(2) Translation of these physically quantified environmental damages to valid and reliable
economic values with the help of economic valuation methods, resulting in an
economic value per unit damage (avoided) or a total economic value per damage
category, which can be transferred unconditionally across water bodies15.
Based on (i) the causal relationships between pressures exerted by different economic actors
and their impact on the water system’s chemical and ecological status, (ii) the economic value
of the corresponding total environmental damage costs and (iii) current prices paid for water
use and the water services provided (i.e. the existing institutional-economic context), the level
12
Regional water boards are in charge of public wastewater treatment in the Netherlands.
Brouwer (2003), Brouwer and Bronda (forthcoming) and Brouwer (2004).
14
Brouwer et al. (1999).
15
Value functions may be an alternative way to transfer values across water bodies, taking into account the main
factors of influence on the economic values. However, also the accuracy and reliability of this approach is
limited (e.g. Brouwer, 2000; Navrud and Bergland, 2001).
13
33
of cost recovery can be assessed, including environmental and resource costs, and the extent
to which the polluter and/or beneficiary pays principle applies.
As long as (1) and (2) remain surrounded by many uncertainties, the theoretically second best,
but practically more reliable cost based approach will be employed to assess the level of cost
recovery and design possible future pricing policies to tackle water pollution problems at
water body level in river basins as foreseen in Article 9 and following the cost-effectivenesss
analysis in Annex III. The economic basis for Article 4 (potential derogation) will be based on
an on-going interactive process of fine-tuning the economic valuation of good ecological
status of water bodies.
References
Brouwer, R., Powe, N., Turner, R.K., Bateman, I.J. and Langford, I.H. (1999). Public attitudes to
contingent valuation and public consultation. Environmental Values 8: 325-347.
Brouwer, R. (2000). The validity and reliability of environmental value transfer. State of the art and
future prospects. Ecological Economics, 32: 137-152.
Brouwer R. (2003). The benefits of cleaner bathing water in the Netherlands (in Dutch). RIZA report
2003.008. Lelystad, the Netherlands.
Brouwer, R. (2004). What is the value of clean water? Public perception and willingness to pay for
cleaner water in the Netherlands (in Dutch). RIZA report 2004.013. Lelystad, the
Netherlands.
Brouwer, R. and Bronda, R. (forthcoming). The costs and benefits of a revised European Bathing
Water Directive in the Netherlands. In: Brouwer, R. and Pearce, D.W. (eds). Cost-Benefit
Analysis and Water Resources Management. Edward Elgar, Cheltenham.
El Serafi, S. (1989). The proper calculation of income from depletable natural resources. In: Ahmad,
Y.J., El Serafi, S. and Lutz, E. (eds.). Environmental Accounting for Sustainable
Development. World Bank, Washington D.C.
Foster, J. (editor) (1997). Valuing nature? Ethics, economics and the environment. Routledge, London.
Hotelling, H. (1931). The economics of exhaustible resources. Journal of Political Economy, 38: 137175.
Jacobs, M. (1994). The limits of neoclassicism: towards an institutional environmental economics. In:
Redclift, M. and Benton, T. (eds.) Social theory and the global environment. Routledge,
London.
Navrud, S. and Bergland, O. (2001). Environmental Valuation in Europe (EVE), Policy Research
Brief Value Transfer and Environmental Policy, Concerted Action funded by the EC DG-XII,
2001.
Repetto, R., Magrath, W., Wells, M., Beer, C. and Rossini, F. (1989). Wasting assets. Natural
resources in the national income accounts. World Resources Institute, Washington D.C.
Sagoff, M. (1988). Some problems with environmental economics. Environmental Ethics 10, 1.
Sen, A. (1977). Rational fools: a critique of the behavioural foundations of economic theory.
Philosophy and Public Affairs, 6: 317-344.
VROM (1998). Kosten en baten in het milieubeleid: Definities en berekeningsmethoden. Publicatiereeks
milieustrategie nr. 1998/6.
34
7.
Practical experiences in Belgium
Ann Beckers (Vlaamse Milieumaatschappij, Belgium)
This summary refers to the on-going work in the Flemish region of Belgium only. The view
expressed in the summary and presentation are furthermore entirely those of the author and do
not necessarily represent the official view of the Vlaamse Milieu Maatschappij or the Flemish
region. Discussions about the content and operationalisation of the concept of environmental
and resource costs are on-going.
7.1. Interpretation of environmental and resource costs
The terms “environmental and resource costs” and their content are relevant in the following
articles of the Water Framework Directive (WFD):
Article 4:
Environmental objectives: economic arguments (such as disproportionate costs) can be an
argument for the extension of the deadlines or the settlement of less stringent environmental
objectives.
Article 9:
Recovery of costs of water services: the member states have to take into account the principle
of cost recovery of water service, including environmental and resource costs.
Article 11:
Economic contribution to the elaboration of a cost-effective programme of measures.
In general, it can be said that in first instance only for article 4 the term ‘environmental’ costs
includes environmental damage costs. For the other articles 9 and 11 the environmental costs
focus on costs of environmental measurements (already taken or planned in the future).
7.2. Measurement approach
Environmental and resources costs are interpreted differently depending on their function in
the article considered. In general, it can be said that the difference between the terms
‘environmental’ and ‘resource’ costs is linked to the point of reference that is taken into
account. Resource costs are limited to costs linked to the depletion (over-consumption) of
resources, as well in a qualitative as in a quantitative way. Environmental costs are all the
other costs taken in order to minimize, limit or prevent deterioration of or damages to the
environment.
According to the articles in question, the definition of the terms ‘environmental costs’ and
‘resources costs’ will be different. This perception is also based on the actual state of
knowledge and scientific understanding of these terms and concepts.
In the context of Article 9 (cost recovery of water services including environmental and
resource costs), we will limit the calculation of cost recovery initially to the costs related to
environmental measures, which have already been taken and/or which are planned to be taken
35
in the future. Nevertheless, the resource costs will be, as far as known, taken into account in
the calculation of the level of cost recovery.
In the context of Article 11 (elaboration of cost effective programmes of measures), the term
‘environmental costs’ will have the same content as the interpretation in Article 9 (i.e. costs of
measurements). The input for the elaboration of a cost effective programme of measures will
be based on the results of the cost-effectiveness analyses carried out by the Flemish
Environmental Costing Model, a model which we are in the progress of operationalising.
In the context of Article 4 (extension of deadlines or the achievement of less stringent
environmental objectives and the proof of the disproportionality of the costs), environmental
and resource costs will be taken into account in a broader way, depending on knowledge and
expertise. Environmental costs will here also include environmental damage costs (and
benefits).
Cost-benefit analyses cannot be carried out by the Flemish Environmental Costing Model
itself, but the model is expected to provide important input for future cost-benefit analyses.
Negative and positive environmental effects of measures are, as much as possible, included in
the model.
7.3. Future work
With regard to the Flemish Environmental Costing Model-partim water- the following can be
said. Until now we have worked on the methodology and the techno-economic databases of
the existing measures in place. In the near future the necessary steps will be taken in order to
be able to make the model operational. The cost-effectiveness analysis will be carried out by
the model. On this basis, the model will where possible provide the information necessary to
realise a cost-benefit analysis.
36
8.
Practical experiences in England and Wales
Jonathan Fisher (Environment Agency, United Kingdom)
8.1. Introduction
This paper outlines the Environment Agency’s current and recent work on environmental and
resource costs for the WFD for the 2004 report and beyond in relation to the River Basin
Management plans (RBMPs). For environmental costs and resource costs, we outline the
Environment Agency’s initial work on the definition of these terms and our measurement
approach. We highlight the uses of some of this analysis. We then report on our recent
experience and practice with our proposed measurement approach and highlight the main
outcomes and challenges and what further work we propose to do to address them.
8.2. Resource costs
We focus on the following specific aspect of resource costs: conflicts and potential
inefficiencies in the current allocation of water resource abstraction licences. We do not
examine fully the definition of resource costs.
We will highlight qualitatively the available information on:
a) The current system for allocating water resource abstraction licenses in England and
Wales and in particular the extent to which these have been granted historically in
perpetuity and on a “first come first served” basis. We will also report on progress
with implementing our newly acquired powers to convert these historical licences in
perpetuity into time limited licences (under the recent provisions in the 2003 Water
Act).
b) The potential benefits of trading abstraction licences to address any potential
inefficiencies arising historically from (a). These are highlighted in the Environment
Agency’s consultation paper on this16.
We will use this analysis to highlight options to appraise and pursue within the context of
RBMPs for overabstracted or overlicensced water bodies at risk of failing to achieve good
status.
8.3. Environmental costs
Environmental costs are the (residual) environmental damage costs from current abstraction
and discharges (after current controls). This can include environmental damage costs such as
(risks of) stomach upsets from poor water quality at bathing waters and damage to
ecosystems. But it can also include foregone environmental benefits (e.g. for angling and
recreation) that could arise if water quality and flows and status were improved.
We believe that these environmental costs should be valued in line with economic theory on
the basis of the welfare preferences of the affected beneficiaries and not the costs of
controlling discharges and abstraction to meet good status. Moreover, information on the
environmental costs is designed to be used as input into the assessment of whether or not the
16
Environment Agency (2003a) Water Rights Trading Consultation Document. Available on our web site on
http://www.environment-agency.gov.uk/commondata/105385/wrt1_english_520982.pdf.
37
control costs are disproportionate (see below). Hence you obviously cannot use control costs
as the measure of environmental benefits when you need to consider the control costs against
the environmental benefits to determine if they are disproportionate. There are considerable
difficulties in deriving robust valuations of environmental damage costs, but we consider that
it is better to be gradually improving our valid assessment of this right concept.
Moreover, there are also difficulties in deriving valid and accurate estimates of control costs
provided by monopoly water corporations. Therefore they need to be carefully scrutinised.
This task is carried out by the economic regulator of water services in England and Wales
(Ofwat). Also the available accounting data (e.g. in Pollution and Abatement Control data)
has significant limitations as it relates to expenditures rather than economic costs. These latter
data also do not reflect costs in England and Wales since the public/private split in these data
does not allow for costs incurred by privatised water companies in England and Wales.
It will not be possible to estimate environmental costs for the 2004 reporting since it will not
be possible to quantify the scale of the gap between the likely position in 2015 and good
status. This will depend on the ongoing technical work on this. It will also depend on
clarification (from the intercalibration working group) on the categories below good status
and specification of their boundaries.
Our efforts will therefore focus on assessing environmental costs and benefits post 2006 so as
to input into assessment of whether measures in RBMPs are disproportionate and then, in
2008/9, in assessing the overall environmental costs for the residual water bodies likely to fail
good status.
8.4. Recent experiences
We currently envisage applying the following sort of methodology:
•
•
•
•
Set out water bodies at risk of failing to achieve good status (from the RBC
assessment).
Quantify the scale of the gap in each water body by using the specific information in
the risk assessment for each water body to indicate expected status in comparison with
good status. This will use information regarding for example:
- water quality data (using biology data)
- specific activities and pressures such as point source discharges, abstractions and
hydrology and hydromorphology.
Apply the available monetary valuations for specific environmental benefit types
associated with the different grades of water status to the gaps for each water body.
We will draw on our in-depth review of the available valuation studies17, which
describes the environmental states that they are based on. We will relate these
environmental states as well as possible to the ecological status grades regarding GES.
Aggregate the environmental costs for all water bodies at risk.
We have applied this sort of methodology to estimate that the overall environmental benefits
of our currently proposed programme of environmental benefits for the water industry in
17
Environment Agency (2003f) Review of Non-use Values for Water Quality and Water Resources and Values
for Bathing Water Improvements. Available on our web site. http://www.environmentagency.gov.uk/commondata/103599/petreport_673271.doc.
38
England and Wales for the period 2004 – 2009 would be of order of £200 – 400 million
annually (or a capitalised value of £2.8 – 6.0 billion)18.
Our economic appraisal of statutory and discretionary schemes in our current environment
programme for the water industry is line with the framework in the Wateco guidance for the
WFD19.
We developed systematic guidance for estimating the environmental outcomes and benefits of
measures in our environment programme for the water industry. This is detailed in our
Benefits Assessment Guidance (BAG), which is available on our web site on
http://www.environment-agency.gov.uk/business/444304/444643/425378/425401/425411/
507669/?version=1&lang=_e&lang=_e.
Our web site also gives answers to the most frequently noted queries and questions arising
from implementation of the above guidance – see Benefits Assessment Guidance – Frequently
Asked Questions - http://www.environment-agency.gov.uk/commondata/103599/ faqsheet.
rev6_564881.doc.
The BAG was peer reviewed. In particular, we held a seminar with leading economists in
Government, stakeholders (e.g. water companies and NGOs) and academia in January 2003 to
discuss our proposed approach to the assessment of benefits for the review of the water
industry and to look forward to the implementation of the Water Framework Directive (WFD)
– see Economic Appraisal and Assessment of Benefits in the PR04 Environment Programme,
which is available on our web site on:
http://www.environment-agency.gov.uk/
business/444304/444643/425378/425401/425411/563114/?lang=_e&lang=_e.
This seminar highlighted that a key area was estimating non-use benefits and benefits of
bathing water improvements. Similarly, the Amsterdam workshop highlighted the importance
of the former subject. Consequently, following the seminar’s recommendations, we held a
follow-up workshop in May 2003 with the leading researchers, stakeholders and public
agencies to review in-depth the valuation studies that we could use to assess these
environmental benefits. The proceedings and findings of this workshop are detailed in our
report “Review of Non-use Values for Water Quality and Water Resources and Values for
Bathing Water Improvements!, which is available on our web site on:
http://www.environment-agency.gov.uk/commondata/103599/petreport_673271.doc.
Head office economists provided training and support for our technical staff (who are not
economists), who applied the BAG to estimate the environmental outcomes and value the
environmental benefits of about 500 discretionary schemes. We quality assured their
estimates and discussed the findings with local stakeholders (e.g. water industry and
18
Environment Agency (2003c) Overall benefits of the Environment Programme for the Periodic Review of the
Water
Industry
(PR04).
Available
on
our
web
site
on:
http://www.environmentagency.gov.uk/commondata/103599/obafinal1dec_622424.doc. This report estimates the overall benefits of the
Environment Agency’s recommended programme, which were estimated to be 3.4 – 7.0 billion. The benefits
estimates above are for Defra’s approved environment programme for PR04 as a result of Defra’s consideration
of the environmental requirements and benefits and the costs and impacts on bills for water consumers. This will
yield the significant environmental benefits shown above that are about 85% of the Environment Agency’s
recommended programme.
19
Environment Agency (2003b) Economic Appraisal for the Environment Programme in
PR04.http://www.environment-agency.gov.uk/commondata/105385/economic_appraisal__552541.pdf.
39
consumers). In the light of their views, we re-examined the benefits of the schemes and reestimated the benefits.
We applied the BAG to aggregate the many diverse benefits into a summary benefits estimate.
We interpreted the estimates sensitively. We discussed the findings with our area experts and
local stakeholder advisory groups. Accordingly, as well as schemes that passed our
benchmark Benefit:Cost (B:C) ratio of 1.2:1, we also included schemes with a lower B:C
ratio, but which were considered important by local experts and stakeholders on account of
non-monetised benefits which we then described. In addition, we excluded schemes that had a
B:C ratio above 1.2, but which were not considered priorities.
Accordingly, the Environment Agency recommended about 270 schemes, which would yield
benefits with a capitalised net present value of almost £1.2 billion, which exceeds their costs
of about £650 million. We suggested that schemes that would have cost more than £1 billion
should be deferred. Our proposed schemes would deliver about 80% of the total
environmental benefits at 38% of the total costs of all the 500 schemes analysed20.
Most (about 75%) of the environmental benefits are for non-use benefits such as
improvements in aquatic natural habitats and ecosystems. This reflects the importance that
people attach to such ecological benefits and is in line with other environmental benefits
studies.
8.5. Challenges and lessons
The costs of developing and applying the BAG to 500 schemes included: about £165
thousand in consultancy support; 2 full-time equivalent (FTEs) persons economists plus 1-2
FTEs in head office policy and about 2500 person days work by area staff in applying the
BAG. In addition, Ofwat employed about 1 FTE economist and reporters to do the cost
assessments and Defra had more than 1 FTE economist working on the cost-benefit
assessment for the review of the water industry.
A key lesson from our experience is that the schemes must be correctly technically specified
throughout the assessments. Problems were encountered concerning the cost estimates, which
should be tackled better by WFD’s process for first sorting out the cost-effectiveness of
options and then moving on to assessing costs and benefits to determine whether costs of
measures are disproportionate.
The problems concerning the environmental benefits estimates mainly concerned estimating
the number of beneficiaries for the specific benefit types, especially non-use benefits. Further
details on the counterbalancing over-estimating and underestimating factors affecting the
benefits estimates are given in our forthcoming report (see the footnote).
We had recently carried out one original survey of a water resource improvement scheme (for
the Mimram) and Defra had carried out an original survey of bathing water improvements,
which enabled us to develop good transferable values for water resource improvement and
bathing water schemes. But it was not possible to carry out original valuation studies for
water quality improvement schemes. Nevertheless, the findings of the BAG assessments for
20
These findings are detailed in our report. Environment Agency (2004a) Report of the Environment Agency’s
Assessment of Benefits and Costs of ‘Choices Will be Made’ / ‘Subject to Policy Decisions’ Schemes. Available
on: http://www.environment-agency.gov.uk/commondata/ 105385/ schemeassessmentv7_784388.pdf.
40
water quality improvement schemes were broadly and consistent with those for the water
resource schemes.
BAG used benefits transfer to apply values given from other studies to the 500 schemes
covered. Benefits transfer has been criticised, but in considering such criticisms, it must be
borne in mind that it would only have been possible to carry out at most two or three
additional original valuation studies within the resources and time available. Consequently,
the Environment Agency would still have had to use benefits transfer to value the benefits for
the other 497 schemes. Therefore, the Agency focused its attention on achieving the best
possible benefits transfer values and applying these carefully consistently to all 500 schemes,
which gave the findings reported earlier.
8.6. Further work
Our recent work outlined above has highlighted a number of key priority research needs on
economic appraisal for the implementation of the Water Framework Directive (WFD).
Accordingly, we have outlined a collaborative research programme for 2004 - 2007, for which
the Environment Agency has provided £350k and English Nature £30k21. The research
programme will include regular peer review and periodic review seminars with the leading
public bodies, agencies, expert researchers and stakeholders.
In particular, this research programme focuses first on clarifying the decision-making
processes for the WFD, which the economic analyses should be designed to aid. It then
envisages scoping the scale and nature of the potentially disproportionate cost cases and
reviewing the available valuations of benefits for them and examining how to apply them to
aid decisions on these cases. In particular, it will examine carrying out new valuation studies
to improve the benefit transfer information on the values and the estimates of beneficiaries for
this.
Fred Wagemaker’s paper usefully indicates the potentially large number of water bodies that
could be at risk of failing to achieve good status and hence the potentially large number of
options that might need to be examined. This will necessitate considerable prioritisation and
streamlining of the economic assessments so that they can focus on the most important
potentially disproportionate cases. He also usefully highlights the considerable uncertainties
regarding the risks and also the effectiveness of options, which are the essential building
blocks for any cost-effectiveness analysis and any cost-benefit analysis.
Consequently, this suggests that we need to postpone the difficult decisions on this
controversial subject of applying cost-benefit analysis for WFD until 2006 when our work
with technical colleagues engaged in RBMP assessments in our countries will give us a better
idea of the position on these matters raised by Fred Wagemaker.
21
Environment Agency (2004b) Proposed R&D programme. Assessing costs and Benefits of River Basin
Management
for
the
WFD.
http://www.environment-agency.gov.uk/commondata/103599/
econrbmr_proposal_634206.doc. Further information on the research needs and this programme is also given in
our reports on our Peterborough workshop and our Oxford Seminar - available on our web site.
http://www.environment-agency.gov.uk/business/444304/444643/425378/425401/425411/563114/?lang=_e.
41
References
Environment Agency (2003a) Water Rights Trading Consultation Document. Available on our web
site on http://www.environment-agency.gov.uk/commondata/105385/
wrt1_english_520982.pdf.
Environment Agency (2003b) Economic Appraisal for the Environment Programme in
PR04.http://www.environment-agency.gov.uk/commondata/105385/
economic_appraisal__552541.pdf.
Environment Agency (2003c) Overall benefits of the Environment Programme for the Periodic
Review of the Water Industry (PR04). Available on our web site on:
http://www.environment-agency.gov.uk/commondata/103599/obafinal1dec_622424.doc.
Environment Agency (2003d) Economic Appraisal and Assessment of Benefits in the PR04
Environment Programme, which is available on our web site on: http://www.environmentagency.gov.uk/business/444304/ 444643/425378/425401/425411/563114/?lang=_e&lang=_e.
Environment Agency (2003e) Economic Appraisal and Assessment of Benefits in the PR04
Environment Programme. http://www.environment-agency.gov.uk/business/444304/444643/
425378/ 425401/425411/ 563114/?lang=_e&lang=_e.
Environment Agency (2003f) Review of Non-use Values for Water Quality and Water Resources and
Values for Bathing Water Improvements. Available on our web site.
http://www.environment-agency.gov.uk/commondata/103599/petreport_673271.doc.
Environment Agency (2003g) Benefits Assessment Guidance (BAG).
http://www.environment-agency.gov.uk/business/444304/444643/425378/425401/
425411/507669/ ?version=1&lang=_e&lang=_e.
Environment Agency (2003h) Benefits Assessment Guidance – Frequently Asked Questions
http://www.environment-agency.gov.uk/commondata/103599/faqsheet.rev6_564881.doc.
Environment Agency (2004a) Report of the Environment Agency’s Assessment of Benefits and Costs
of ‘Choices Will be Made’ / ‘Subject to Policy Decisions’ Schemes. http://www.environmentagency.gov.uk/commondata/105385/schemeassessmentv7_784388.pdf.
Environment Agency (2004b) Proposed R&D programme. Assessing costs and Benefits of River
Basin Management for the WFD. http://www.environmentagency.gov.uk/commondata/103599/ econrbmr_proposal_634206.doc.
42
9.
Environmental and resource costs and their link to Impress
Fred Wagemaker (RIZA, The Netherlands)
9.1. Introduction
The analysis of pressures and impacts and economics are both part of Article 5 in the Water
Framework Directive (WFD). Since these analyses will be the fundament for all subsequent
steps, it is important that they are solid, consistent and comparable throughout Europe. The
analysis of pressures and impacts gives an overview of which water bodies are likely to fail to
meet the environmental quality objectives in 2015, and which significant pressures are
responsible for this failure. This result sets the agenda for the subsequent process of appraisal
and decision-making regarding the required programme of measures. The economic analysis
gives an overview of the economic aspects of water using sectors and methods to balance
water use and their impacts, such as cost-effectiveness analysis and environmental costing.
The necessity to analyse pressures and impacts is stated in Article 5 of the WFD, requiring for
each river basin district:
• An analysis of its characteristics.
• A review of the impact of human activities on the status of surface waters and
groundwater.
• An economic analysis of water use.
The IMPRESS guidance addresses the second requirement, but must be fully integrated with
the economic analysis, for which a guidance document has been prepared by the working
group WATECO. Both guidance documents express a clear intention to closely link the two
activities to one another.
The WFD requires these tasks specified under Article 5 to be completed by 2004. They will
then be reviewed by 2013, and subsequently every 6 years (2019, 2025 etc.). Given the
overall purpose of the WFD, the analysis undertaken in 2004 must consider the current
condition for each water body and provide a prognosis for the period to 2015. In this way, the
WFD initiates an on-going process of assessment, re-iteration and refinement. Problems
which were considered less significant in the first cycle may become more significant in one
of the following cycles.
9.2. Analysis of pressures and impacts
The analysis of pressures and impacts contains an identification of anthropogenic pressures
and assessment of their impacts on water bodies. The WFD clearly defines the various
aspects, which have to be taken into account in this analysis (Annex II, sub 1.4 and 1.5 for
surface waters and sub 2 for groundwater), while the IMPRESS guidance gives further
support for a clear understanding of the requirements and the way they should be executed.
Below, I will focus on the requirements related to surface water.
The WFD asks Member States to collect information about the type and magnitude of
significant anthropogenic pressures and indicates a broad categorisation of possible pressures
into:
43
•
•
•
•
Point sources of pollution
Diffuse sources of pollution
Effects of modifying flow regime and water levels through abstraction or regulation
Morphological alterations.
Any other pressures, which do not fall within these categories, must also be identified. In
addition, there is a requirement to consider land use patterns (e.g. urban, industrial,
agricultural, forestry etc.) as these may be useful to indicate areas in which specific pressures
are located. The impact assessment should use information from the review of pressures and
any other available information, for example environmental monitoring data, to determine the
likelihood that the (surface) water body will fail to meet its environmental quality objectives.
For bodies at risk of failing their specified objectives, additional monitoring has to be
considered and a programme of measures has to be implemented.
9.3. Putting the analysis of pressures and impacts into practise
Although no final reports are available yet, a preliminary overview of some approaches and
results can be elaborated from the:
- RBMP-pilots
- UK-G technical seminar in Edinburg
- working process in the Netherlands
- EC paper on strategy of the impress analysis.
Taking into account its wide scale and complexity, the actual undertaking of the impress
analysis is a learning process. The analysis is based on best intentions and efforts through
which a lot of problems and obstacles have to be dealt with:
•
•
•
•
•
•
•
Waterbodies are not yet clearly defined and differ from present operational working
units (and hence requires adjustment of datasets and tools).
River basin management planning requires a common understanding and performance
of the risk analysis between contributing parties (this takes time to settle into practise).
The environmental objectives to be analysed are many and numerous at various levels
of waterbodies (it’s an extensive task in a very short period of time).
The criteria defining good environmental status (both ecological and chemical) are not
yet clearly defined and are still subject to both national and international decisionmaking processes (co-decision and intercalibration).
The understanding of being at risk implies on the one hand dealing with uncertainty
and the precautionary principle, but implies on the other hand also consequences for
the implementation of the WFD, which are not yet fully and clearly understood.
The assessment requires a lot of data and knowledge on pressure-impact relationships
which are more often than not insufficiently available yet.
The principle of “one out, all out” contradicts the simultaneous ranking of pressures
on water bodies (in terms of significance of failure to achieve environmental
objectives).
Looking at the first results so far, it seems that a large number of water bodies will be
classified as (possibly) at risk. It has also become clear that hydro-morphological pressures
are a very important factor in determining whether or not water bodies are at risk. Since it is
not yet clear which of these pressures will eventually be accepted as legitimately
underpinning the designation of heavily modified water bodies, this provides an uncertain
44
basis for the subsequent discussion about possible measures. Classification schemes for
biological quality elements according to WFD requirements are in most cases not available
yet, so a lot of analyses use various available (and therefore difficult to compare)
classification schemes.
The second most important pressure appears to be agriculture as a result of leaching of
nitrogen and phosphorous caused by long periods of intensive fertilisation and manure
application. These pollutants are addressed by the Nitrate Directive. The more traditional
chemical pollution (e.g. heavy metals) show a more scattered result with lots of white spots
due to lack of data, which makes it difficult to assess the magnitude and scale of the potential
gap.
The priority substances do not seem to cause too much trouble yet in the available pilot
studies, but this is mainly caused by lack of data and they could therefore not yet be taken
fully into account. Results from the Netherlands, which are supported by results from
Germany, show a major importance of these substances though for water bodies becoming at
risk if the limited available data are considered representative for all water bodies. However,
also here there is a lot of uncertainty because of the preliminary status of the environmental
objectives used (still in preparation phase). Here, also some pesticides appear in the analysis.
These are expected to be a problem in rural areas. Discussion on measures related to
pesticides (e.g. ban on their use) depends on 91/414/EEG.
9.4. How can the economic analysis be linked to the Impress analysis?
In theory it looks very logical to link the analysis of failure to achieve environmental
objectives to economic methods to assess the cost effectiveness of potential measures to
prevent or remediate this failure. The magnitude of the gap multiplied by the relevant scale
and divided by the environmental quality objective in order to make it comparable with other
pressures, will provide a pragmatic way of ranking pressures and impacts. However, as can be
concluded from the previous, the actual process of the analysis of pressures and impacts is
facing a number of important obstacles and difficulties. In my opinion, therefore, the results
from Impress so far do not yet seem solid enough to provide a sound basis for the
environmental costing procedure as proposed by the DG-ECO2 or the cost-effectiveness
analysis. A fully integrated environmental costing procedure will therefore not yet be feasible
nor be the most appropriate step in the next phase of the planning process. It may possibly
even complicate decision-making, because of the large uncertainties surrounding the available
data, the on-going methodological discussions and the overall learning process underlying the
implementation of the WFD so far.
In summary, I believe that the current and near future analysis of pressures and impacts is still
too weak and surrounded by too many uncertainties and unknown factors to provide a sound
basis, as proposed by the DG-ECO2, to underpin the subsequent economic estimation of
environmental and resource costs. More time and research is needed in order for the working
group Impress to be able to underpin the broad damage categories identified by the DGECO2. I have no doubt, however, that linking the analysis of pressures and impacts and the
economic analysis is essential in order to be able to facilitate future decision-making in the
context of the WFD, including the estimation of environmental and resource costs. This
means that intensifying the collaboration between economists and impress experts and
moving forward together should receive adequate attention.
45
Finally, I would like to point out that the planning process of the RBMP takes place at
different levels of decision-making:
- a strategic level (national and international river basin)
- an operational level (water body or business level).
These levels of decision-making do not require the same type of information or the same level
of detail and accuracy. Therefore, an important point to bear in mind is to get clear which
decisions have to be supported at which point in time in the whole planning and decisionmaking process. This will determine the required information level. For example, taking
possible measures to reduce hydro-morphological pressures on a specific water body can very
well be decided upon at an operational level, through participatory approaches involving the
relevant local interest parties. The discussion about reducing pressures from agriculture, I
expect, requires decision-making at national and European level. A complex and fully
integrated environmental-economic analysis will in this case probably not have a significant
value added to the overall decision-making process in view of the fact that this process is to a
large extent dominated by political and socio-economic aspects. This too requires political
choices.
46
10. Conclusions and recommendations
Roy Brouwer (RIZA, The Netherlands) & Pierre Strosser (Acteon, France)
The workshop’s main objective was to share the work carried out in the European Drafting
Group (DG) ECO2 regarding the concept of environmental and resource costs with a broader
community of interested economists and non-economists working on the implementation of
the WFD. Since September 2003, the DG ECO2 has been working on a further clarification of
the concept of environmental and resource costs in the context of the WFD. At the workshop,
work in progress in a limited number of European countries was presented to illustrate how
environmental and resource costs are dealt with in practice so far in these countries.
In summary, the main messages from the DG ECO2 are:
•
Conceptually and empirically, there may be different costs for different purposes.
•
In practice, there are two mutually non-exclusive approaches to the estimation of
environmental and resource costs: a cost based approach and a benefit based approach.
•
Their empirical estimation is based on (available information about) the physical
characteristics of the water system, such as the environmental damage involved and
the underlying cause-effect relationships. The link to the work on pressures and
impacts in the WFD is therefore essential.
•
The choice for one of these approaches depends among others upon:
- the specific purpose they are used for;
- the availability of data (about the environmental cause-effect relationships and the
associated economic values involved);
- the quality of these data, i.e. their reliability and accuracy in view of their purpose;
- decision-maker demand for reliability and accuracy at a specific point in the WFD
policy and decision-making cycle.
Environmental and resource costs are a difficult concept, both theoretically and empirically.
There was a lot of discussion about their definition. The DG ECO2 should further clarify the
definition of both environmental and resource costs in a clear and unambiguous way. From
the presentations during the workshop, it was observed by workshop participants that except
for Spain, most work today focuses on environmental costs with limited or no attention paid
to resource costs. One reason for this may be the fact that the concept of resource costs and its
relation to the concept of environmental costs is still unclear.
According to some workshop participants, a clear distinction should furthermore be made
between environmental damage costs and the costs and expenditures associated with
environmental protection measures. The latter are used in some countries as proxies for
environmental damage costs because of a lack of knowledge and information about the total
economic damage costs, measured for example through existing revealed or stated preference
techniques such as contingent valuation. The costs of measures already taken are used in a
47
cost based approach for the 2004 reporting requirements as a rough indication of revealed
social preferences. Nevertheless it was acknowledged that the cost approach is theoretically
speaking a second best option if the main aim is to estimate the total economic damage costs.
It is used in the specific context of cost recovery because of a lack of data and information in
many countries about the total economic value of environmental damage and an incomplete
understanding of the underlying environmental cause-effect relationships needed in order to
be able to allocate economic damage costs across different causes of the damage (polluters).
Their use may create misunderstanding and double counting though if the distinction between
environmental damage costs and the costs for environmental protection measures is not made
clear, especially in future cost-benefit analyses of measures to reach the WFD objectives as
the same cost proxies would appear both on the cost and benefit side.
In this context, finalising the draft background note prepared by ECO2 will focus on (1)
refining definitions in order to avoid possible misunderstanding and (2) integrating the
illustrations and examples presented during the workshop. This will emphasise the existence
of a variety of approaches to the analysis of environmental and resource costs and their
relevance to the specific issues raised in the WFD. The background note should also clearly
specify its boundaries, e.g. stressing that it does not investigate non-water related
environmental costs, which may be relevant for example for possible derogation and for the
designation of heavily modified water bodies.
Another recommendation was to achieve a common understanding and interpretation between experts and the stakeholders involved in the implementation of the WFD - of
environmental damage based on the environmental standards set in this directive. Whilst the
importance and need to ensure integration between experts working on the economic analysis
and the analysis of pressures and impacts is recognised, it is probably too early to make the
link operational at the moment. There are still too many uncertainties surrounding the driving
force-pressure-state-impact relationships and the ‘right’ environmental standards, making an
assessment of the environmental damage and thus environmental costs difficult.
There is a real need for more knowledge, experiences and data regarding environmental and
resource costs. An important knowledge gap is how to estimate economic damage costs
through existing valuation procedures in a reliable and broadly supported (interactive and
participative) way, resulting in acceptable numbers in policy and decision-making. Pilot case
studies used for comparing different approaches to assess environmental and resource costs
are expected to be very instrumental in explaining to non-specialists and decision-makers the
potential differences between methods and possible biases in results. A co-ordinated effort
through, for example, European research programmes such as the sixth Framework is highly
recommendable as experiences with water valuation is rather limited throughout Europe.
Turning environmental and resource costs into operational concepts in the context of the
WFD appears to be an important learning process for experts working on pressures and
impacts, economists, decision-makers and other stakeholders. This learning process should
not be confused with a knock-out competition, where one single method or approach
ultimately remains and becomes the best way of addressing this issue. In practice, there
usually does not exist just one single best method or approach. Although the possibility and
need for (international) transboundary river basin comparisons is an important criterion in this
process, the selection of one approach or method in the practical implementation of the WFD
is not purely an objective process, but depends on a number of issues as outlined before,
including subjective decision-maker demand for reliable and accurate estimates.
48
ANNEX I
Workshop Programme
09.00
Introduction
Thierry Davy, European Commission
09.15
The concept of environmental and resource costs in the context of the WFD:
Lessons learned from ECO2
Roy Brouwer, RIZA The Netherlands
09.45
Practical experiences in France
Franck Fredefon, Ministry for the Environment and Yann Laurans, Agence de l’Eau
10.15
Practical experiences in Sweden
Oskar Larsson, Swedish Environmental Protection Agency
10.45
Coffee break
11.15
Practical experiences in Spain
Joaquin Andreu, University of Valencia
11.45
Plenary discussion main outcomes, problems and challenges
Facilitator: Pierre Strosser, Acteon
12.30
Lunch break
13.30
Practical experiences in the Netherlands
Roy Brouwer, RIZA
14.00
Practical experiences in Belgium
Ann Beckers, Vlaamse Milieumaatschappij
14.30
Practical experiences in England and Wales
Jonathan Fisher, Environment Agency
15.00
Coffee break
15.30
How are environmental and resource costs linked to IMPRESS?
Fred Wagemaker, RIZA The Netherlands
16.00
Plenary discussion main outcomes, problems and challenges Facilitator:
Pierre Strosser, ACTEON
16.30
Final notes
Roy Brouwer, RIZA The Netherlands
49
ANNEX II
Workshop Participants
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Surname
ANDREU
ANDREWS
BAUDUIN
BETTENDROFFER
BECKERS
BÉGUÉ
BONARDET
BORSALINO
BROUWER
COLARULLO
DAVY
DEHOUX
DI MARCELLO
DRIESSCHE, VAN DEN
ESTEBAN
EUVERTE
FISHER
FREDEFON
GATEL
GATTA
GOEDEMANS
HEINZ
JESUS DOS SANTOS
KACZMAREK
KIRHENSTEINE
KYRKJEBO
LARSSON
LAURANS
LEUSSEN
MATZ
First name
Joaquin
Kevin
Philippe
Anne
Ann
Valérie
Pierre
Giuseppe
Roy
Giordano
Thierry
Fabrice
Marzia
Lien
Aniol
Cyrille
Jonathan
Franck
Dominique
Leonardo
Lisa
Ingo
Maria da Conceição
Bernard
Ilona
Hilde
Oskar
Yann
Wim
Manfred
Country
Spain
United Kingdom
France
Belgium
Belgium
Luxembourg
France
Belgium
The Netherlands
United Kingdom
France
Belgium
Italy
Belgium
United Kingdom
France
United Kingdom
France
France
Italy
The Netherlands
Germany
Portugal
France
Latvia
Norway
Sweden
France
The Netherlands
Germany
Institute
Instituto de Ingenieria del Agua y Medio Ambiente de la Universidad Politecnica de Valencia
Department for Environment, Food and Rural Affairs (DEFRA)
Electricité de France
Universite Catholique de Louvain, Centre Entreprise-Environnement - IAG
Flemish Environnment Agency (VMM)
Services de la Gestion de l'Eau - Luxembourg
Lyonnaise des eaux France (Suez Environnement)
European Commission
RIZA
Office of Water Services
European Commission
Université catholique de Louvain
Environmental Ministry – DG Quality of life
Flemish Environnment Agency (VMM)
Royal Society for the Protection of Birds (RSPB)
Agence de l’Eau Artois-Picardie
Environment Agency (England and Wales)
French Ministry of Environment
Veolia Environnement
Tevere River Basin Authority
RIZA
University of Dortmund
Instituto da Água - Institute of Water
Délégation des Agences de l’Eau
State Geological Survey, River Basin Authority
Directorate for Nature Management
Swedish Environmental Protection Agency
Agence de l’Eau Seine Normandie
Rijkswaterstaat Directie Oost-Nederland
German Technical Cooperation (GTZ)
E-mail address
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
50
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
Surname
MAESTU
MC RORY
MOLNAR
PRAST
RECHENBERG
REINHART
ROLSTAD
ROOY, DE
SALOMON
SAHA
SCATASTA
SCOGNAMIGLIO
SKOURTOS
STROSSER
THOMAS
VITALE
VEEREN, VAN DE
VERSTER
VLAANDEREN
WAGEMAKER
First name
Josefina
Eric
Ferenc
Juliaan
Jörg
Stijn
Marianne
Marc
Marie-Anne
Dieter Michael
Monica
Renato
Michalis
Pierre
Paola
Valentina
Rob
Nol
Niels
Fred
Country
Spain
Scotland
Hungary
The Netherlands
Germany
The Netherlands
Norway
The Netherlands
France
Germany
Italy
Italy
Greece
France
Germany
Italy
The Netherlands
The Netherlands
The Netherlands
The Netherlands
Institute
Ministerio de Medio Ambiente
Scottish Environment Protection Agency
Budapest University of Economic Sciences and Public Administration
Ministerie VROM
Federal Environmental Agency
Landbouw-Economisch Instituut (LEI)
Norwegian Pollution Control Authority
RIZA
Electricité de France (EDF) R&D
International Commission for the Protection of the Rhine (ICPR)
European Investment Bank
Sogesid S.p.A
University of the Aegean
Acteon
University of Leipzig
Tevere River Basin Authority
RIZA
Ecorys-Nederlands Economisch Instituut (NEI)
RIZA
RIZA
E-mail address
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
n.verster.riza.rws.minvenw.nl
[email protected]
[email protected]
51
ANNEX III
Workshop Presentations
52
Presentation 1: Introduction Thierry Davy, European Commission
Progress report on economic
activities
DG leaders: the Netherlands, France, the Commission
The CIS 2002-2004:The economic
drafting groups
• Two drafting groups have been created:
– DG eco 1 dealing with « horizontal issues »
– DG eco 2 dealing with “environmental and resource
costs”
DG eco 1: the state of play
• The tasks
Three practical information sheets needed to be produced for 2004
requirements , they were dealing with:
– Characterisation
– Baseline
– Cost recovery
•
For each of these three subjects an IS has been delivered. These IS
have been disseminated by email for remarks to WG2B members
since the February 13
53
DG eco 1 the state of play
• The meetings
–
–
–
–
First meeting of the group July 9th of 2003
Second meeting October 10th of 2003
Third meeting November 17th of 2003
Last meeting January 27th in 2004
DG eco 1 has now achieved its mandate.
Some members of it could participate in the
drafting group dealing with program of measures
(especially for cost effectiveness)
DG eco 1 the results
• The three IS (no guidance document):
–
–
–
–
About 15 pages for each IS
Focusing on how to do, for practitioners at river basin scale
Presenting a lot of examples coming from different countries
Proposing pragmatic approaches in order to solve remaining
issues in the short term (scale, data availability): expert
judgment, proxies,…
– The IS have been presented at SCG meeting on march 15 they
are available on CIRCA
– The IS will be presented on April 22 and 23 during the meeting
of WG2B in Madrid
DG eco 2 state of play
• The tasks:
– The main task of the group is to facilitate cost recovery
calculation and reporting, by investigating
environmental and resource cost
• The work has been divided in sub tasks:
–
–
–
–
–
Definition of environmental and resource costs
Links with IMPRESS (damages determination)
Methodological issues (scale, transfer values)
Purpose and usefulness of the approaches
Collection and synthesis of country case studies
54
DG eco 2 state of play
• The meetings:
–
–
–
–
First meeting September 9th of 2003
second meeting November 18th of 2003
Third meeting January 28th in 2004
A workshop in Amsterdam on march 26
DG eco 2 : the members
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Erna Etlinger (aut),
Jeanne Golay (Eureau),
Josefina Maestu (SP),
Judith Rakosi(Hu),
Hilde Kirkjebo (NO),
Roy Brouwer (NL),
Ian Dickie(RSBP),
Kevin Andrews (UK),
Jonathan Fisher (UK),
Frank Fredefon (F) ,
Jean pierre Rideau (F),
Joerg Reichenberg (D),
Philippe Bauduin (Eurelectric),
David Barton (No),
Thierry Davy (Com)
55
Presentation 2: Lessons learned from ECO2, Roy Brouwer
Environmental and resource costs
Lessons learned from ECO2
Roy Brouwer
RIZA, The Netherlands
Main objective
Presentation main outcomes work carried out in
drafting group “ECO2” under Working Group 2B
Structure
„ What
What are we talking about?
„ How
How do we measure them?
„ Why
What do we use them for?
56
Mission
„ What are we talking about?
WE NEED A CONCEPTUAL FRAMEWORK
„ How do we measure them?
WE NEED TO ADVISE WHEN
TO USE WHICH APPROACH
„ What do we use them for?
WE NEED TO ADVISE HOW TO USE
OUTCOMES FOR DIFFERENT PURPOSES
What are ERC?
Wateco
„
Article 9: Take account of the principle of recovery of the costs of
water services, including environmental and resource costs,
costs,
according to the polluter pays principle.
principle.
FURTHER DEVELOPMENT NEEDED …
Overall, using the present guidance will help developing practical experience, will increase
the knowledge base and will develop capacity in the integration of economics into water
management and policy.
Selected issues can already be identified as requiring further investigation:
¾ On environmental and resource costs. How to operationalise methods for assessing
environmental costs that would be of direct use for developing river basin management
plans?
57
Wateco
Wateco definitions
„Environmental costs represent the costs of damage that water uses impose on the
environment and ecosystems and those who use the environment (e.g. a reduction in
the ecological quality of aquatic ecosystems or the salinisation and degradation of
productive soils).
soils).
„Resource costs represent the costs of foregone
opportunities which other uses suffer
due to the depletion of the resources beyond its natural rate of recharge or recovery
(e.g. linked to the overover-abstraction of groundwater).
groundwater).
ECO2
Starting points:
„
NeoNeo-classical economic (welfare) theory
„
Loss of economic welfare as result of
environmental depletion and degradation:
degradation:
Environmental damage
Conflict of water use
•
•
58
Environmental and resource costs
„
Environmental costs:
costs: damage to environment
as a result of competing alternative water use
(sociosocio-economic actions/
actions/activities/
activities/pressures)
pressures)
„
Resource costs:
costs: arise as a result of inefficient
water use (quantity or quality)
quality) over time and
across different water use(r)s
use(r)s
Environmental damage categories
Pollution
„ Eutrophication
„ Salinisation
„ Dessication
„ Loss of biological diversity
„ Morphological change
„
Economic value?
value?
Resource costs
There are always opportunity costs when
there is scarcity
„ Strong resemblance resource costs and
environmental costs
„ Resource costs specifically related to
inefficiency
„
59
Important points/issues
Internal and external environmental and
resource costs
„ Strong dependence estimation ERC on physical
status of water system and knowledge and
information about this physical status (link
IMPRESS)
„ Damage = difference between current or
expected state water body in 2015 and WFD
water quality objectives
„
Important points/issues
There may not exist clearclear-cut standards for
environmental damage,
damage, only for specific
pollutants
„ Existing standards for pollutants may be
difficult to relate to environmental damage
„ Even if standards are met, there may still be
damage,
damage, e.g. because of fundamental
uncertainties
„
How do we measure them?
60
How do we measure them?
„
Two approaches based on the basic
economics of pollution control:
control:
a)
estimation of costs or
b)
estimation of benefits
How do we measure them?
„
Estimation of benefits through:
through:
a)
WTP to prevent damage (water quality deterioration)
deterioration)
from occurring
b)
WTAC when damage (water quality deterioration)
deterioration)
has actually occurred
Estimating public demand for
environmental quality (WTP/WTAC) is
„
Theoretically sound, but
„
Practically difficult and sometimes not workable
-
Time consuming,
consuming, context specific studies
Specific expertise required
Controversial,
Controversial, especially in the case of single species
valuation or where nature is considered ‘not for sale’
sale’
Requires belief in economic markets as being procedural
right way to manage environmental problems
-
61
Costs of pollution control
and damage repair
Estimating costs of pollution
control and damage repair is
Theoretically second best, but
„ Practical approach as data and information about
costs is more often available
„ Integrates well with the rest of the economic
analysis in the WFD (cost
(cost--effectiveness analysis)
analysis)
„
Flow diagram to
assess environmental costs
62
Significant pressure
Impact on (a)biotic water environment
Damage to water environment
Damage to other water uses
Measures taken to
prevent/avoid/mitigate?
yes
Financial costs
=
Proxy potential
environmental costs
Costs of these measures
Effect of these measures:
standards met?
yes
Significant pressure
Impact on (a)biotic water environment
Damage to water environment
Damage to other water uses
Measures taken to
prevent/avoid/mitigate?
yes
Costs of additional
measures
no
or
Direct or indirect
valuation method
Costs of these measures
Estimation of external
environmental costs
no
Effect of these measures:
standards met?
yes
Significant pressure
Impact on (a)biotic water environment
Damage to water environment
Damage to other water uses
Measures taken to
prevent/avoid/mitigate/substitute?
yes
Costs of these measures
Proxy (potential)
environmental costs
Defensive expenditures/
Averting behaviour
63
Significant pressure
Impact on (a)biotic water environment
Damage to water environment
Damage to other water uses
Measures taken to
prevent/avoid/mitigate/substitute?
yes
Costs of
these measures
no
or Direct or indirect
valuation method
Estimation of external
environmental costs
What do we want to
use them for?
Role environmental and resource
costs in the WFD
„
„
„
„
Cost recovery (article 9)
Water pricing policies (article 9)
CostCost-effective measures (Annex III and article 11)
Derogation (article 4)
64
Role environmental and resource
costs in the WFD
Art. 9: (full
(full)) costcost-recovery assessment
„ Art. 9: Pricing/
Pricing/tariff setting
„ Annex III/Art.4: CostCost-benefit analysis (CBA)
„
Different purposes require different
degrees of accurateness and reliability !
So, …
…the question is how reliable and accurate
the environmental cost estimates have to be
for the different purposes
…hence,
hence, the purpose or objective determines
the most appropriate estimation method
…but,
but, this also depends on decisiondecision-maker
demand for reliable and accurate estimatres
Main message from ECO2
„
Different costs for different purposes
„
Different methods to estimate env.
env. costs:
costs:
-
based on cost estimates
based on benefit estimates
„
Choice for either approach depends on:
on:
-
use or purpose
(required)
required) reliability and accuracy estimates
data availability
-
„
Estimation depends on physical chars water system;
system;
hence link to IMPRESS vital
65
Presentation 3: Practical experiences in France, Franck Fredefon
Direction des
Etudes
Economiques et
de l’Evaluation
Environnementale
Experiences in France
in
“environmental costs”
valuation
Amsterdam
[email protected]
26 March 2004
1
Table of contents
Direction des
Etudes
Economiques et
de l’Evaluation
Environnementale
I.
Presentation of the reference work by
INRA
II. Some medium-term goals
III. Work in progress
Amsterdam
26 March 2004
2
I. Reference work (1/7)
Direction des
Etudes
Economiques et
de l’Evaluation
Environnementale
Amigues J.P., Arnaud F., Bonnieux F.
INRA report for the French Ministry of
Ecology and Sustainable Development –
«Damages valuation in the water field»,
2003, May
Amsterdam
26 March 2004
3
66
I. Reference work
(2/7)
Direction des
Etudes
Economiques et
de l’Evaluation
Environnementale
Three aims :
z
Illustrate the state of the art of water-related
damage valuation in France
¾ 40 studies clearly identified
Amsterdam
z
Establish reference values for water-related
services
z
Assess strengths and weaknesses in expertise
and formulate recommendations
26 March 2004
4
I. Reference work (3/7)
Nomenclature
Direction des
Etudes
Economiques et
de l’Evaluation
Environnementale
The Framework Directive distinguishes:
SERVICES
Amsterdam
USES
Activities
Elaboration of a table of studies
26 March 2004
5
I. Reference work (4/7)
Direction des
Etudes
Economiques et
de l’Evaluation
Environnementale
List of water uses
Amsterdam
26 March 2004
6
67
Water Uses category
Water Uses
Water supply,
withdrawal, storage
Drinking water supply (purification, distribution, storage)
Health (mineral water, hydrotherapy…)
Production uses
Commercial fishing, aquaculture and shellfish farming
Industrial water : industries supply
Hydroelectricity
Agriculture : water supply, irrigation
Fluvial and seaside materials extraction
Waste treatment,
transport and storage
Industrial and household waste treatment
Diffusion of farming pollution
Sludge disposal
Networks,
infrastructures
Navigation : rivers, inland waterways…
Harbor activities (trade and leisure cruising)
Recreational uses :
leisure, contemplation
Recreational fishing, hunting
Bathing and other water sports, walks
Contemplation of beauty spots and landscapes
Ecological uses :
biodiversity,
protection
Fauna and flora protection, reproduction
Deferred uses for oneself or coming generations
Passive use (existence value of biodiversity…)
Flood protection (wetlands)
Fire protection
Direction des
Etudes
Economiques et
de l’Evaluation
Environnementale
Amsterdam
26 March 2004
7
I. Reference work (5/7)
Direction des
Etudes
Economiques et
de l’Evaluation
Environnementale
Breakdown of French studies
according to water uses categories
z Water supply :
2 studies
z Production
:
2 studies
z Waste
treatment,
transport and storage :
z Networks
(inland navigation) : 1 study
z Recreational
Amsterdam
26 March 2004
3 studies
z Ecological
uses :
17 studies
uses and protection: 15 studies 8
I. Reference work (6/7)
Direction des
Etudes
Economiques et
de l’Evaluation
Environnementale
Breakdown of French studies according
to valuation methods
Method
Contingent Valuation
Number of
studies
19
Travel costs
7
Hedonic pricing models
3
Others (market prices…)
11
Amsterdam
26 March 2004
9
68
I. Reference work (7/7)
Example
Direction des
Etudes
Economiques et
de l’Evaluation
Environnementale
Study
USE : Drinking water supply - Purification
Nitrate pollution impact on economic activity
Assessed Good initial quality : 0,02 to 0,06 Euros/ m3
Bad initial quality :
0,02 to 0,16 Euros/ m3
values
Very bad initial quality : 0,17 to 1,6 Euros/ m3
Site and Loire-Bretagne Basin - Drinking water
catchments, 1995
year
Method Treatment costs
Amsterdam
26 March 2004
10
II. Some medium-term goals
Direction des
Etudes
Economiques et
de l’Evaluation
Environnementale
ƒ Carrying out routine studies
¾ Market uses
¾ Elaboration of studies’ typical specifications
¾ Specifying uses and variations of water quality
linked to uses (for future CBA)
ƒ Improving knowledge about value
transfers for non-market uses
¾ Data reliability
¾ Counting of “users”
Amsterdam
26 March 2004
11
III. Work in progress…(1/2)
ƒ
Direction des
Etudes
Economiques et
de l’Evaluation
Environnementale
Archiving the work carried out
¾ A data base bringing together all the main
information concerning studies (OIEAU)
¾ Compatible with EVRI : www.evri.ca
ƒ
Elaboration of a table of reference
values ranked according to uses
¾ for costs & benefits valuations at
water bodies scale (justifying
disproportionate costs)
Amsterdam
26 March 2004
12
69
III. Work in progress… (2/2)
ƒ
Direction des
Etudes
Economiques et
de l’Evaluation
Environnementale
Elaboration of a costs valuation method
at the district scale, for water services
(for cost-recovery purpose)
¾ Costs of avoidance and restoration linked to
pressures
o
Amsterdam
26 March 2004
Based on the French guidelines from the document
“pressures and impacts” (list of pressures linked to
services)
¾ 3 main categories of costs :
o “Quality” costs
o “Quantity” costs
o “Morphological” costs
13
70
Evaluation and Prospective
Presentation 4: Practical experiences in France, Yann Laurans
Environmental cost
assessment and the WFD
experience from trying...
Agence de l’Eau Seine-Normandie - Evaluation and Prospective Division- Yann Laurans
Plan
Evaluation and Prospective
Environmental valuation for policy-making:
ÖMessages from water managers and
stakeholders
ÖMethodology and first results
ÖOrientations for the WG “products”
Evaluation for policy-making
Orientation 1
Evaluation and Prospective
Try to present the whole image at once,
even if provisional.
Board and stakeholders need to understand:
Ö1) Relationships between the different
concepts of WFD economics
Ö2) Where are we going in the end
71
Evaluation for policy-making
Evaluation and Prospective
Orientation 2
Propose different economic evaluations of
environmental costs, do not pretend looking
for one “scientific truth” and leave room for
discussion and choice among references.
We need to take in account for policy-making:
Ö1) Various geographical scales
Ö3) Various stakes:
importance of investments, cost distribution,
awareness of damage to environment
Evaluation for policy-making
Consequences for methodology:
Evaluation and Prospective
Ö1) Gross evaluation first, as comprehensive as
possible (≈ a screening; Refine later
according to relative weights and discussion)
Ö2) Different kinds of non-exclusive economic
environmental values. Not seeking a unique
value (≈ explore and present different
methods)
Methods & results
presented so far
1) Is water paying for water and only for water?
Subsidising rate of water services invoice,
incl. industry self-service (≈ 5-10%).
Evaluation and Prospective
ÖBasin statistical invoices survey every 3 years
ÖNational survey on subsidies from public bodies
2) Are there cross-subsidies from water agency
and operation of services? (≈ 4-8 %)
ÖPrecise breakdown tax revenues/destination of
aid & loans
ÖEstimates on w services operation transfers (free
water, benefits from sludge spreading…)
72
Methods & results
presented so far
Evaluation and Prospective
3) Value of mitigation costs?
(8-20% of households invoice)
ÖBasin light survey on mitigation costs in various
types of treatment plants
ÖEvaluation of treated volumes and multiplication
Methods & results
presented so far
4) Possible values of environmental cost?
ÖPresent actual protection expense
Evaluation and Prospective
ÖAgency (aid system) data on environment
restoration works
ÖGross appraisal of potential Cont. valuation
result
ÖUnitary values from British WRC survey
ÖApplication to lengths of rivers /
quality categories (Impress)/ population
Methods & results presented so far
ÖAppraisal of needed “total” restoration cost
Evaluation Base
(source: Impress)
Types / surfaces /
lengths of damaged
wetlands
Number & height of
dams disabling fish
circulation
Unitary costs applied
Ecological engineering
costs / ha/l.km
Lowering/suppressing
dams costs/metre;
Fish pass cost / metre
Types / volumes /
Fixed sum per equipment
Not exactlyof«pollutions
restoration »:
no possible restoration
breakdown
/ proportional
value per
for chemicalkg/day
pollution
of poll. abatement
73
Agriculture
Craft & small
industry
Industry
Households
5%
3%
2%
6%
3%
5%
1,5 %
35 %
640
1400
45
2%
55 %
2500
3%
4%
4%
+8/+20 %
First estimation of
inhabitants
“willingness to pay”
100-200
or + ?
130 +
60
60
260
Removal of
almost all
emissions
Reactions from stakeholders
Environmental local NGOs
Evaluation and Prospective
ÖSceptical about contingent valuation
ÖDemand variety of methods
ÖDemand evaluation of services rendered by
wetlands/potential loss for activities
ÖProvide examples and illustrations
Consumer NGOs
ÖNot much on environmental costs (more on
subsidies)
Reactions from stakeholders
Mayors / town services representatives
ÖSceptical on mitigation costs (think it’s more)
Evaluation and Prospective
ÖDemand environmental costs at local level
74
Reactions from stakeholders
State local staff
ÖPoints out danger of “focussing” on a few
figures
Evaluation and Prospective
ÖDemand clarity on assumptions
ÖSuggest comparing mitigation costs with cost
of reaching good status
ÖProvide data on small connected industrial
pollution sources
Inputs to Eco1 topics
From Baseline scenario
ÖBreakdown of discharge among polluters
Evaluation and Prospective
To Baseline scenario
ÖEffect of present environment expense to
ecological status
ÖLikelihood of changes in public demand for
water quality and environment protection
ÖPresent investment rate (through invoices)
Integration in Eco1 works
For Cost-recovery assessment tasks
ÖConfirm tackling progressively: subsidies
then mitigation then environmental costs
Evaluation and Prospective
ÖTry to provide at least some insights at local
level, esp. w. respect to:
ÖMitigation costs compared to invoices
ÖServices rendered by wetlands to w. management
ÖNon-market values
75
Inputs to Eco1 topics
For Cost-recovery assessment
ÖTry a “screening” of all kinds of costs
Evaluation and Prospective
ÖImportance of breakdown of pollution
sources to distribute origin of costs
(ÍImpress and BLS)
Inputs to Eco1 topics
From RB Characterisation
ÖAbstraction volumes
Evaluation and Prospective
ÖContaminated volumes / type of pollution /
treated volumes
ÖLengths of rivers & table surface / status
category / region
To RB Characterisation
ÖSocial and economic importance of water
services as an economic sector
Thank you
Evaluation and Prospective
[email protected]
76
Presentation 5: Practical experiences in Sweden, Oskar Larsson
Valuing water resources
- A pragmatic approach
Oskar Larsson, Swedish Environmental Protection Agency
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
1
WATECO definitions
•
•
Environmental cost
1. Cost of damage that water uses impose on the
environment and ecosystems and those who
use the environment
Resource cost
1. Cost of foregone opportunities which other uses
suffer due to the depletion of the resource
beyond its natural rate of recharge or recovery
2. Scarcity cost
3. Opportunity cost
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
2
Introduction
How to value these costs?
• Direct methods (stated preference methods), for
example the contingent valuation method (CVM),
choice experiment (CE), experimental markets;
• Indirect methods (revealed preference methods), for
example the production cost method, the travel cost
method, the hedonic pricing method, the preventive
expenditure/averting behaviour method; and
• Methods not strictly based on economic welfare
theory, for example the replacement cost method,
restoration cost method, political WTP, and the
human capital approach.
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
3
77
Introduction
Approach in Sweden? A mixture
• New studies and benefit transfer?
• http://www.beijer.kva.se/valuebase.htm
• Not enough studies or resources (time and money)
to carry out new studies
• Likely minimum recommendations:
– Cost recovery: environmental (water) protection
expenditures + water related taxes and fees –
water related subsidies
– Cost effectiveness: As above
– Cost benefit analysis: Indirect and/or direct
methods
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
4
Case study: A pragmatic
approach to valuing water
resources in monetary terms
“Uses of the River Emå – a study of
monetary values”
Marianne Löwgren (2001), University of
Linköping
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
5
Case study
M. Löwgren (2001)
Univ. of Linköping
Steps taken
1.
2.
3.
4.
Identify uses
Identify stakeholders
Choose valuation methodologies
Estimate values of uses
Objective: Estimate the values attached to the
water resource
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
6
78
Case study
M. Löwgren (2001)
Univ. of Linköping
Brief background data
• Area of river basin: 4 460 km2
• Water area (lakes + river): 300 km2 (or 7% of total
area)
• Length of river: 320 km
• River runs through 4 counties and 12 towns/villages
• Population: ~80 000 inhabitants
• Rich in flora and fauna with many rare species and
unique populations of sea trout and salmon
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
7
Case study
M. Löwgren (2001)
Univ. of Linköping
Different uses and primary
stakeholders
Uses
Stakeholders
Irrigation
Agriculture
Hydropower
Power producers (individuals + companies)
Water used in production of goods
Industry
Recipient capacity
Urban (connected) and rural (unconnected)
population, industry, agriculture
Drinking water
Urban (connected) and rural (unconnected)
population
Habitat (flora and fauna)
Beach owners, fisheries, local population,
anglers, hunters
Recreation
Tourist companies, local population
”Archive”
Researchers, cultural heritage trust
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
8
Case study
M. Löwgren (2001)
Univ. of Linköping
(Adapted from Turner et al., 1994)
Water resource
Non-use values
Use values
Direct
Indirect
hydropower
drinking water
irrigation
water in prod.
recreation
fishing
etc.
Option
e.g.
recipient
flow regulation
biodiversity
etc.
use
Total use value
e.g.
future use
values
Existence
e.g.
preserved
biodiversity
conservation
Total value of conservation
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
9
79
Case study
M. Löwgren (2001)
Univ. of Linköping
How to measure these values?
Use values
Non-use values
Market based
methods
Direct methods
Conservative estimates
Value of use
Value of
conservation
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
10
Case study
M. Löwgren (2001)
Univ. of Linköping
Problems with approach
• Markets are not perfect
• Allocation of property rights may be
inefficient
• Water is not the only input in production
(-> “value supported by water”)
• Difficult to allocate values to different uses
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
11
Case study
M. Löwgren (2001)
Univ. of Linköping
Methods for estimating values
X
X
Biodiversity
X
Recreation,
tourism
X
Fish farming
Fisheries
Mitigation costs
Drinking
water
Value of extracted
water
Recipient
Value of water in
in-situ production
Industrial
and agr. use
Valuation
methods
Hydropower
Uses
X
X
Restoration costs
X
Costs of
”strategic”
measures
X
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
12
80
Case study
M. Löwgren (2001)
Univ. of Linköping
Points to note
• Time period: years leading up to 2020
(national environmental quality objectives)
• Annuities (discount rate 5 percent)
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
13
Case study
M. Löwgren (2001)
Univ. of Linköping
Value of water in in-situ production
and extraction
• Hydropower: Total annual production 114 GWh *
price 0,03 €/KWh = €3.2 million
• Extraction
– HHs (connected): 5 million m3 * 1.4 €/m3 = €6.9
million
– Agriculture: 2.5 million m3 across 2900 ha * 151.3
€/ha = €0.4 million
– Industry: 22 million m3 * ?
• Fisheries: catch * price/kg = €4.4 million
• Recreation (angling): Fishing permits €0.2 million
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
14
Case study
M. Löwgren (2001)
Univ. of Linköping
Mitigation costs
• Wastewater treatment
– HHs (connected): 4.9m3 * 13.6 €/m3 = €7.3
million
– Industries: local emissions from sectorsij
as % of sectors’ij total emissions = %
sectorsij total EPE = €1.3 million
• Reduction of diffuse pollution: ?
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
15
81
Case study
M. Löwgren (2001)
Univ. of Linköping
Restoration costs
• Fishery management: ?
• Decontamination/remediation: €1.7 million
• Liming schemes: €0.2 million
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
16
Case study
M. Löwgren (2001)
Univ. of Linköping
Costs of “strategic” measures
• The River Emå Project (excl. fishery
management and decontamination/
remediation): €0.1 million
• Creation of Nature Reserves (land
acquisitions + compensation): €0.1 million
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
17
Case study
M. Löwgren (2001)
Univ. of Linköping
Summary (million €/year)
0.4 + x
Biodiversity
4.4
Recreation
(angling)
3.2
Fish farming
Mitigation costs
Drinking
water
Value of extracted
water
Recipient
Value of water in
in-situ production
Industrial
and agr. use
Valuation
methods
Hydropower
Uses
0.2
6.9
7.3 + 1.3
Restoration costs
1.7 + 0.2
Costs of
”strategic”
measures
0.1 + 0.1
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
18
82
Case study
M. Löwgren (2001)
Univ. of Linköping
Comments
• Risky to add up
• Non-use values and several use values (e.g.
industrial use) not included
• Significant further measures planned. If
implemented, estimated value will increase
• Potential uses in the WFD?
– Mitigation costs: Cost recovery
– Other costs/values: Cost benefit analysis
(derogation)
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
19
Concluding notes
• Not easy to separate the different types of
costs
• A wide set of methods can be used for
different purposes
• Double counting a risk
• Methods more rooted in welfare theory may
be preferable, but there are reality
constraints
NATURVÅRDSVERKET/SWEDISH ENVIRONMENTAL PROTECTION AGENCY
20
83
Presentation 6: Practical experiences in Spain, Joaquin Andreu Alvarez
Workshop on “Environmental and Resource Costs in
the Water Framework Directive”
Amsterdam
26 March 2004
Methodology and Tools
for Assessing Resource Costs
in Water Systems
by Joaquin Andreu
Water Resources Engineering Research Group
Institute for Water and Environmental Engineering (IIAMA)
Universidad Politécnica de Valencia (SPAIN)
www.upv.es/iiama/
e-mail: [email protected]
www.upv.es/aquatool/
U. POLITÉCNICA DE VALENCIA
www.upv.es/iiama
ERC-WFD 1
www.upv.es/aquatool
Amsterdam
26 March 2004
A methodology for calculating marginal
opportunity cost of water use
z
z
The task is the calculation of the economic costs for
the system (economic uses) of having available one
unit less of resource.
But ...
U. POLITÉCNICA DE VALENCIA
www.upv.es/iiama
ERC-WFD 2
www.upv.es/aquatool
WR Systems INTEGRATE at the BASIN SCALE:
Water Bodies, W.Uses (Demands), Infrastructures
AQUIFERS
Complex relationships
that affect water
availability both in
SPACE &TIME
Implications on
economics can only
be captured by
means of adequate
HYDROLOGICAL
modeling
84
Amsterdam
26 March 2004
A method for calculating marginal
opportunity cost of water use
z
z
The task is the calculation of the economic costs for
the system (economic uses) of having available one
unit less of resource.
are variable in space-time B hence the need for
calculating resource costs on the basis of
INTEGRATED HYDROLOGIC-ECONOMIC
MODELLING
U. POLITÉCNICA DE VALENCIA
www.upv.es/iiama
ERC-WFD 4
www.upv.es/aquatool
Amsterdam
26 March 2004
The use of Simulation and Optimization
Hydro-Economic Models
The approaches followed are based on:
z
Integrated modelling of the WR System. Conjunctive modelling of surface
and groundwater availability. Management modelling.ISOLATED WATER
BODIES ANALYSIS IS NOT ADEQUATE.
z
...
U. POLITÉCNICA DE VALENCIA
www.upv.es/iiama
ERC-WFD 5
www.upv.es/aquatool
Amsterdam
26 March 2004
JUCAR RIVER BASIN
Water Management model (SIMWIN-AQUATOOL)
U. POLITÉCNICA DE VALENCIA
www.upv.es/iiama
ERC-WFD 6
www.upv.es/aquatool
85
Amsterdam
26 March 2004
AQUATOOL:
DSS designed for integrated management
of complex water resource systems
including CONJUNCTIVE USE OF
SURFACE AND GROUND WATERS
J. Andreu, J. Capilla, y E. Sanchis, “Generalized
decision support system for water resources planning
and management including conjunctive water use”,
Journal of Hydrology, Vol. 177, pp. 269-291, 1996.
U. POLITÉCNICA DE VALENCIA
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ERC-WFD 7
www.upv.es/aquatool
Amsterdam
26 March 2004
Available from Basin Plan’ s
studies
U. POLITÉCNICA DE VALENCIA
www.upv.es/iiama
ERC-WFD 8
www.upv.es/aquatool
Amsterdam
26 March 2004
The use of Simulation and Optimization
Hydro-Economic Models
The approaches followed are based on:
z
Integrated modelling of the WR System. Conjunctive modelling of surface
and groundwater availability.
z
Incorporation of the economic value functions of the water uses and
circulation costs in the the basin and the variable operating cost in the
system .
...
U. POLITÉCNICA DE VALENCIA
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ERC-WFD 9
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86
Amsterdam
26 March 2004
valor unitario (€/m3)
CURVA DE DEMAN DA
q (m 3)
coste (€)
COSTES EN CONDUCCIÓN
q (m 3)
U. POLITÉCNICA DE VALENCIA
ERC-WFD 10
www.upv.es/iiama
www.upv.es/aquatool
Amsterdam
26 March 2004
The use of Simulation and Optimization
Hydro-Economic Models
The approaches followed are based on:
z
Integrated modelling of the WR System. Conjunctive modelling of surface
and groundwater availability.
z
Incorporation of the economic value functions of the water uses and
circulation costs in the the basin and the variable operating cost in the
system .
z
Monthly time scale (to capture the time variability)
U. POLITÉCNICA DE VALENCIA
ERC-WFD 11
www.upv.es/iiama
www.upv.es/aquatool
Amsterdam
26 March 2004
Irrigation demand economic function
350,000
300,000
PRECIO UNITARIO (€/Hm3)
250,000
ANUAL
ANNUAL
200,000
Junio
Febrero
Marzo
Abril
Julio
Mayo
Agosto
Septiembre
TOTAL
150,000
JUNIO
100,000
AGOSTO
MARZO
50,000
MAYO-JULIO
FEB SEPT-ABR
0
0.0
2.0
U. POLITÉCNICA
DE VALENCIA
4.0
6.0
8.0
www.upv.es/iiama
10.0
SUMINISTRO (Hm3)
ERC-WFD
12
14.0
12.0
16.0
18.0
20.0
www.upv.es/aquatool
87
Amsterdam
26 March 2004
Associating to each element annual and/or monthly economic functions (e.f.),
which represents the unit cost/benefit for the system from the different
levels of flow or supply for each element
Once determined, the functions are
introduced as data for the evaluator,
which, based on the water allocation
given by the simulation, estimates the
economic benefits for each location and
time. These are obtained by entering the
quantity of water supplied in the
economic function and calculating by
integration the corresponding benefit.
U. POLITÉCNICA DE VALENCIA
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Amsterdam
26 March 2004
DEMANDA RIEGO1
600,000
500,000
COSTE (€)
400,000
300,000
MAYO-JULIO
Junio
Febrero
Marzo
Abril
Julio
Mayo
Agosto
Septiembre
JUNIO
200,000
AG OSTO
100,000
MARZO
FEB
SEPT-ABR
0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
SUM INISTRO (Hm 3)
U. POLITÉCNICA DE VALENCIA
www.upv.es/iiama
3.5
4.0
4.5
ERC-WFD 14
www.upv.es/aquatool
Amsterdam
26 March 2004
URBAN DEMAND
COSTE de ESCASEZ vs. SUMININISTRO
3,000
Meses de Invierno
2,500
Coste de escasez (1000 €)
z
enero
febrero
marzo
abril
m ayo
junio
julio
agosto
sept
octubre
noviembre
diciembre
2,000
1,500
Meses de Verano
Meses Intermedios
1,000
500
0
0.0
0.4 DE VALENCIA
0.6
U.0.2
POLITÉCNICA
0.8
1.0
ERC-WFD
151.2
1.4
1.6
3
Suministro (Hm )
www.upv.es/iiama
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88
Amsterdam
26 March 2004
The use of Simulation and Optimization
Hydro-Economic Models
The approaches followed are based on:
z
Integrated modelling of the WR System. Conjunctive modelling of surface
and groundwater availability.
z
Incorporation of the economic value functions of the water uses and
circulation costs in the the basin and the variable operating cost in the
system .
The optimization approach offers an UPPER BOUND of the economic value of
water at a certain location, with the system operated in an economically
optimal way.
The simulation approach allows to determine the resource costs according with
a set of OPERATING AND ALLOCATING RULES established a priori.
These rules reproducing the current modus operandi of the system.
U. POLITÉCNICA DE VALENCIA
ERC-WFD 16
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Amsterdam
26 March 2004
Optimization model
MIN.
s. to:
z=
¾
¾mass
120 ⎡ nd
∑ ⎢∑
t =1 ⎣ d =1
CE d , t +
Scarcity Cost
Demands
inf raest
⎤
inf =1
⎦
∑ CO inf, t ⎥
Operating Cost
Infraestructures
BALANCE in Nodes, and Reservoirs
CAPACITY constraints in conduits, pumpings,
reservoirs, ...
¾
¾
Minimum flows &/or volumes
¾
mass BALANCE and flow in aquifers (Autovalores /
¾
Signs, ...
M.P.E.)
U. POLITÉCNICA DE VALENCIA
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26 March 2004
Optimization
The shadow prices of the balance constraints
in nodes of the optimization model provide
marginal resource opportunity cost time series
at certain locations of the system.
z system operated in an economically optimal
way.
z Upper bound of the opportunity cost (¿best
approximation?)
z
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Simulation
Amsterdam
26 March 2004
STEPS:
1).Setting-up a SIMULATION MODEL allowing representation of different
management policies in a way that properly reproduces the current water
allocation, integrating legal aspects, institutional issues, etc.
2).Setting-up an ECONOMIC ASSESSMENT of the resource allocation
undertaken by the previous model.
3) Use of specific routines that allows the sequential and iterative use of the
previous models to obtain the RESOURCE OPPORTUNITY COSTS, based
on the definition: the economic costs for the system (economic
uses) of having available one unit less of resource.
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Phase 3 (simulation and assessment):
Amsterdam
26 March 2004
There are 2 cases:
-the system for a given hydrologic scenario is named as base
case.
-A modified case corresponds to the simulation and assessment with a
perturbation that depends on the variable to be estimated:
U. POLITÉCNICA DE VALENCIA
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ERC-WFD 20
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Amsterdam
26 March 2004
Marginal Resource (opportunity )cost estimation: an approximation of the resource cost
at a certain location and time (a given month), the perturbation entails to subtract (add) a
differential water volume at the location of interest.
MES 1 DE LA SIMULACIÓN
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90
Phase 3 (simulation and assessment):
Amsterdam
26 March 2004
There are 2 cases:
-the system for a given hydrologic scenario is named as base case.
-A modified case corresponds to the simulation and assessment with a perturbation
that depends on the variable to be estimated:
Marginal Resource (opportunity )cost estimation: an approximation of the resource cost at
a certain location and time (a given month), the perturbation entails to subtract
(add) a differential water volume (∆Volume) at the location of interest.
Thereafter, the model carries out a new resource allocation, using the
allocating rules, and after that, the total economic benefit of this modified
case is evaluated.
The difference in total benefit from the base to the modified case is computed
(∆Benefit), and
MRC = ∆Benefit/∆Volume
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Phase 3 (simulation and assessment):
Amsterdam
26 March 2004
For this phase 3, routines in module EVALGES
of AQUATOOL have been implemented to
carry out these tasks for each of the points or
elements of the basin selected and for all the
months in the hydrologic scenario. The
results can be depicted in graphs.
U. POLITÉCNICA DE VALENCIA
ERC-WFD 23
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26 March 2004
Scarcity
situations
Valor del recurso en un nudo
90
80
70
Abundance
situations
60
50
40
30
20
10
U. POLITÉCNICA DE VALENCIA
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oct-68
oct-66
oct-64
oct-62
oct-60
oct-58
oct-56
oct-54
oct-52
oct-50
oct-48
oct-46
oct-44
oct-42
oct-40
0
ERC-WFD 24
www.upv.es/aquatool
91
CASO de
Marginal opportunity cost Node & Reservoir
ESTUDIO
300
280
260
240
220
200
180
160
140
120
100
80
60
40
20
0
Amsterdam
26 March 2004
NUDO
EMBALSE
High Deficit
Empty Reservoir
Deficit 0
Full reservoir
Excess flow
oct .1945
ene.194
abr.1946
jul.1946
oct .1946
ene.194
abr.1947
jul.1947
oct .1947
ene.194
abr.1948
jul.1948
oct .1948
ene.194
abr.1949
jul.1949
oct .1949
ene.195
abr.1950
jul.1950
oct .1950
ene.195
abr.1951
jul.1951
oct .1951
ene.195
abr.1952
jul.1952
oct .1952
ene.195
abr.1953
jul.1953
oct .1953
ene.195
abr.1954
jul.1954
oct .1954
ene.195
abr.1955
jul.1955
3
VALOR (€/1000 m )
z
U. POLITÉCNICA DE VALENCIA
MES
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Conclusions
Amsterdam
26 March 2004
z
Resource cost as opportunity cost of a scarce resource for the system
z
Dynamic concept - spatial and time variability
z
Need for integrated hydrologic-economic modeling
z
Need for basin scale integration (including surface and groundwater
integration)
z
Systematic approach.
z
Combined use of optimization and simulation allows comparison of
opportunity costs for current allocation conditions and efficient
(optimal) economic allocation conditions.
z
Economic demand functions required.
U. POLITÉCNICA DE VALENCIA
www.upv.es/iiama
ERC-WFD 26
www.upv.es/aquatool
Extensions
z
Amsterdam
26 March 2004
The hydro-economic tools provide additional results and with an
extended methodology, the economic analysis can provide:
z
Marginal opportunity cost of the mitigation measures and
environmental constraints (can provide insight for cost effectiveness
and environmental costs, AS PROPOSED BY PREVIOUS
PRESENTERS)
z
Quality & ecological assessment (integrated approach)
z
Used in an integrated, iterative and interactive way:
z
Sensitivity analysis.
z
WORK IN PROGRESS ...
U. POLITÉCNICA DE VALENCIA
www.upv.es/iiama
ERC-WFD 27
www.upv.es/aquatool
92
Amsterdam
26 March 2004
References:
z
Andreu, J., J. Capilla y E. Sanchís, 1996. AQUATOOL, a generalized decision support system
for water-resources planning and management, Journal of Hydrology, 177, 269-291.
z
European Union, 2000. Directive 2000/60/EC of the European Parliament and of the Council of 23
October 2000 establishing a framework for Community action in the field of water policy. Official
Journal of the European Communities (OJ L 327), 22 December.
z
European Commission, 2000. Pricing and sustainable management of water resources.
Communication from the Commission to the Council, European Parliament and Economic
and Social Committee, COM(2000) 477, Brussels, Belgium.
z
MIMAM (Ministerio de Medio Ambiente) y Gobierno de Navarra, 2002. Análisis Económico
del Plan de Cuenca del Cidacos. Aplicación de la Guía de Análisis Económico. Mto. Medio
Ambiente y Gobierno de Navarra, España.
z
US EPA (U.S. Environmental Policy Agency), 2000. Guidelines for preparing economic analysis.
United States Environmental Policy Agency. 179 pp.
z
WATECO, 2002. Economics and the Environment. The implementation challenge of the Water
Framework Directive. A Guidance Document. Working group for the economic studies of the
WFD.
U. POLITÉCNICA DE VALENCIA
www.upv.es/iiama
ERC-WFD 28
www.upv.es/aquatool
Amsterdam
26 March 2004
Methodology and Tools
for Assessing Resource Costs
in Water Resource Systems
by Joaquin Andreu
Water Resources Engineering Research Group
Institute for Water and Environmental Engineering (IIAMA)
Universidad Politécnica de Valencia (SPAIN)
Thank you!
www.upv.es/iiama/
e-mail: [email protected]
www.upv.es/aquatool/
U. POLITÉCNICA DE VALENCIA
www.upv.es/iiama
ERC-WFD 29
www.upv.es/aquatool
93
Presentation 7: Practical experiences in the Netherlands, Roy Brouwer
Environmental and Resource
Costs in the Netherlands
Roy Brouwer
RIZA
Different costs
for
different purposes!
Environmental costs and ….
„
Cost recovery (Art.9)
Cost approach
„
Derogation (Art.4)
Benefit approach
94
Why cost approach for CR?
„
Existing methodology for environmental cost calculation
„
Cost data ready available
„
More confidence in available cost data than outcomes economic
valuation studies such as CV, TC or HP for this specific purpose
MetaMeta-analysis of wetland contingent valuation studies
(WTP/household/year in 2002 £)
Wetland characteristic
Mean WTP Standard error
N
Wetland type
Saltwater
62
30
4
Freshwater
65
7
97
Flood control
103
27
5
Water generation
24
8
9
Water qualkity
58
7
43
Biodiversity
85
14
46
Use
76
9
50
Non-use
39
5
13
Use and non-use
71
14
40
Wetland function
Wetland value
Continent/country
North-America
79
9
80
Europe
36
9
23
UK
39
18
12
Source: Brouwer et al. (1999)
Studies testing the reliability of benefits transfer
Study
Valuation method
Benefits
Transfer errors Transfer errors
point estimates benefit functions
Loomis (1992)
travel costs
sport fishing
5 – 40 %
5 – 15 %
Parsons and Kealy (1994)
travel costs
water quality improvements
4 – 34 %
1 – 75 %
Bergland et al. (1995)
travel costs
water quality improvements
25 – 45 %
18 – 41 %
Downing and Ozuna (1996)
contingent valuation
saltwater fishing
1 – 34 %
-
Kirchhoff et al. (1997)
contingent valuation
white water rafting
24 – 56 %
6 – 228 %
Brouwer and Spaninks (1998) contingent valuation
biodiversity conservation
27 – 36 %
22 – 40 %
Brouwer and Bateman (2000) contingent valuation
flood control
4 – 13 %
17 – 51 %
Brouwer and Bateman (2000) contingent valuation
UV health risk reductions
0 – 127 %
6 – 783 %
0 – 137 %
2 – 155 %
Source: Brouwer (2000)
95
Overview water valuation
studies in the Netherlands
(price level 2002/2003)
Study
Method
TC €50-53/visit
Ecological
restoration
lakes
Total Protest Difficulty Information
supply
value bidders
Average
values
€10,9m/yr
-
-
-
€186-194 /visit
CV
€58-93/yr
€11,8m/yr
14%
70%
70%
BWQ
Directive
CV
€35-45/yr
€170m/yr
8%
20%
93%
WFD
CV
€75-90/yr
€525m/yr
16%
20%
90%
Rules of thumb cost estimation
L
U
Confidence interval
1.0
1.0*σ
15%
15%
70%
1.3
1.6
1.3*σ
1.6*σ
10%
5%
10%
5%
80%
90%
2.3
2.3*σ
1%
1%
98%
Estimate Factor k Margin
µ
µ
µ
µ
• Explorative phase:
σ/µ*100%: +/- 50%
• Planning phase:
σ/µ*100%: +/- 25%
• Implementation phase: σ/µ*100%: +/- 5%
(k=1.0)
(k=1.6)
(k=2.3)
Environmental costs and cost recovery
Interdepartmentally agreed definition and
calculation method
„ Environmental costs are annually calculated by
Statistics Netherlands
„ Corresponding to International (OECD) and
European (EUROSTAT) accounting system
„
96
INTERNATIONAL
OECD/EUROSTAT
Pollution Abatement and Control
(PAC) Expenditures
Classification of Environmental
Protection Activities (CEPA)
97
PAC Expenditures I in 2000
(millions, price level 1995)
Source: OECD/EUROSTAT
NATIONAL
Environmental costs related to water
„
„
„
„
„
Water boards (1999), industry (1997(1997-2001), agriculture
(19902001)
(1990
Mainly waste water treatment
However,
However, also reduction (more efficient)
efficient) water use and
prevention of thermal pollution
Investment costs,
costs, environmental costs,
costs, taxes,
taxes, subsidies
In the Netherlands:
Netherlands: besides investment costs also capital
costs (depreciation and interest)
98
Total environmental costs in
agriculture and industry in 2000
water
air
soil
1400
Million euro
1200
1000
800
600
400
200
0
agriculture
industry
Source: Statistics Netherlands
Environmental costs
water boards, 1999
„
Investment costs
M€ 386
„
Total environmental costs
M€ 936
- Labour costs
- Capital costs
- Intermediate goods & services
- Energy costs
- Sludge processing
- Other
- Revenues
M€ 179
M€ 380
M€ 43
M€ 51
M€ 78
M€ 241
M€ -35
Water services in the Netherlands
Drinking water supply
„ Wastewater collection
„ Wastewater treatment
„ (Water system management)
„
99
Water services in the Netherlands
Drinking water supply
„ Wastewater collection = environmental costs
„ Wastewater treatment = environmental costs
„ (Water system management)
„
Costs of pollution control and damage repair
Costs (€ yr-1)
A = actual costs
B = future costs
A + B = total env. costs
Ecological standard
B
A
Present ecological state
Problem Caused by Measures Costs Paid by
Emission reduction
(e.g. T N or P yr-1)
Instrument
Pricing
Revenues
authority
Pollution
Households
Industry
Agriculture
Waste
water
collection
Households
Sewerage Municipalities
848 Industry
Agriculture levy
Households
Waste
1199 Industry
Pollution State
water
Waterboards
treatment
Agriculture levy
723
1025
100
In conclusion …
Driven by the idea of different costs for different
purposes and corresponding policy demand for
reliability and accuracy …
„
Current environmental costs for the purpose of CR based on
existing methodology and available data about the financial
costs of measures whose primary aim is to protect the water
environment
„
Future environmental costs based on the CEA for the purpose of
incentive pricing following Baumol and Oates (1971)
„
Economic valuation of GEQ for the purpose of derogation
Remaining research issues …
„
„
„
„
Relationship between pressures,
pressures, impact and costs
Current pollution levels and existing standards
Indirect spinspin-off costs and costs of measures not
aimed directly/
directly/specifically at water?
Allocation of costs to different environmental
domains or problems (accounting problems)
problems) and
regions
101
Presentation 8: Practical experiences in Belgium, Ann Beckers
Vlaamse
Vlaamse Milieumaatschappij
Milieumaatschappij
Workshop environmental and resource
costs
Amsterdam 26th March 2004
VMM
A. Van de Maelestraat 96
9320
- Erembodegem
1
content
1. ECO II vision - interpretation in Flanders
2. ECO II vision - Implementation in Flanders
A. 2004 cost recovery
B. AFTER 2004 : contribution cost effective programme of measures : the
Environmental Costing Model for Flanders
3. ECM - Link ECM and impact and pressures
4. Methodology
5 . Utility/usefulness of ECM
6. Conclusions/questions
2
1. ECO II vision interpretation in Flanders
ECO II : 4 places where environmental costs, resource costs
come into play :
assessment- approach in function of
purpose
ARTICLE 4 :
• economic arguments (disproportionate costs)
for demand for
derogation -
(objectives - time )
ENVIRONMENTAL DAMAGES COSTS & RESOURCE COSTS
3
102
1. ECO II vision interpretation in Flanders
A R T IC L E 9
• A R T IC L E 1 1
• A p p ly p rin cip le o f co st
re co v e ry fo r w a te r
se rv ice s
In cl
E n v iro n m e n ta l a n d
R e so u rce c o sts
• C o n trib u tio n e la b o ra tio n
co s t-e ffe ctiv e p ro g ra m m e
o f m e a su re s
• In c e n tiv e p ricin g in
o rd e r to co m e to
e ffic ie n tly u se o f
w a te r re so u rc e s
ENVIRONMENTAL COSTS_COSTS OF MEASURES &
RESOURCE COSTS
4
2. ECO II vision Implementation in Flanders
• Most important items worked on until now :
A. 2004 cost recovery
• designation of water services (WS)
• assessment of level of cost recovery of WS
B. AFTER 2004 contribution cost effective programme of
measures
5
A. 2004 cost recovery
A. 2004 cost recovery
designation of water services (WS)
•
•
•
•
public production and distribution of drinking water
public collection and treatment of waste water
self services of drinking water production
self services of waste water treatment
assessment of level of cost recovery of WS
Environmental costs = costs of measures
Resource costs
6
103
A. 2004 cost recovery
1. ASSESSMENT LEVEL OF COST RECOVERY
of
Public production and distribution of drinking water
Taken into account :
• Financial costs <> environmental costs
• Resource costs (LEVY on abstraction of groundwater) =
internalised
• No environmental costs known at this moment - extra costs of
purification due to e.g. nitrates part of financial costs
(!!!! double counting)
• Calculation method
•based on annual accounts <> information sheet
7
• levy dbase of groundwater abstraction
A. 2004 cost recovery
2. ASSESSMENT LEVEL OF COST RECOVERY
of
public collection and treatment of waste water
taken into account :
• Financial costs
= environmental costs = internalised costs
• No resource costs (not known)
8
A. 2004 cost recovery
3. ASSESSMENT LEVEL OF COST RECOVERY
of
self service ; treatment of waste water
taken into account :
• Financial costs
= environmental costs = internalised costs
• No resource costs (not known)
PROBLEM
• what to do with the levy on discharges of wastewater
into surface water (environmental damage costs individual WWTP are exempted of this levy)
9
104
A. 2004 cost recovery
4. ASSESSMENT LEVEL OF COST RECOVERY
of
self services of drinking water
Taken into account :
• Financial costs <> environmental costs
• Resource costs (LEVY on abstraction of groundwater) =
internalised
• No environmental costs known at this moment - extra costs of
purification due to e.g. nitrates part of financial costs
(!!!! double counting)
10
B. AFTER 2004 : contribution cost effective
programme of measures : the Environmental
Costing Model for Flanders
ECM = “a tool to allocate emission reduction efforts between
target groups in a cost effective way given an emission
reduction target” (Flemish Environmental Policy Plan 2003-2007)
• test case : 3 air pollutants and industry
• second case : development of model for compartment of water,
COD, N, P
11
B. AFTER 2004 : contribution cost effective
programme of measures : the Environmental
Costing Model for Flanders (ECM)
2 pilot studies for water :
• study 1 : elaboration of method
• for inventory of existing emissions and measures for
emission reduction
• for linking water quality model and cost effectiveness
(ECM)
• study 2 : inventory of potential emission reduction
measures + annual costs
12
105
3. ECM - Link ECM and impact
and pressures
2 choices have been made
1. Scale for modelling
2. Way of linking for CE
13
3. ECM - Link ECM and impact
and pressures
Choice 1. Scale for modelling
Where the EQS needs to be attended?
At the end of the basin or everywhere
Opportunitie
s enough for
CE policy
No opportunities for
CE-policy
Decission : VHA level (+/260) (midway solution)
14
3. ECM - Link ECM and impact
and pressures
Choice 2. Way of linking for CE
concentrations - model
model
weather)
15
load reductions objectives (dry versus rainy
decision : link modelling : load reduction
106
4. Methodology
1. ELEMENTS of ECM
• techno-economic dbase with potential measures per
VHA-segment
• sources : hh, WWTP, industry individual and per
sector, agriculture (diffuse and point )
• measures : emission reduction, degree of
application, degree implementation
• mathematical optimalisation model
16
4. Methodology
2. METHODOLOGY for CE
source
VHA 1
VHA 2
estuary
17
4. Methodology
2. METHODOLOGY for CE
•step 1
• calculation of the necessary load reductions/VHA
segment
• point of monitoring (downstream VHA segments) in
order to determine real load discharges (5 years)
• calculate the total allowable load discharges in the
VHA segment
calculate difference between ‘real load discharges’ and
‘total allowable load discharges’ = the necessary load
reductions/VHA segment
18
107
4. Methodology
Conclusion per VHA segment
if difference < 0 : surplus
if difference > 0 : load reduction needed
19
4. Methodology
Step 2 : (methodology can change in function of
knowledge)
• upstream-downstream relations are taken into account
•how?
• Model selects CE set of measures in upstream VHA 1
in order to realise ESQ,
then
•CE analyses downstream VHA 2 optimalisation
• measures
taken into VHA 1 = fixed
• potential measures not selected into VHA 1 can
still be taken into VHA 2
20
5 . Utility/usefulness of ECM
ECM :
•contribution to the realisation of an CE programme of
measures for the river basin (2009)
• work out CE sub river basin programmes
• scenario analyses
• determine CE- maximum reduction potential per target
group
• determine CE-policy as combination of measures and
instruments (permits, EQS, levies)
21
108
6. Conclusions/questions
Guidances of ECO II : more of less view in the Flemish region
•article 4 : - environmental costs = environmental damage
costs : OK (but is not under discussion at this moment)
- resource costs = depletion
(qualitative/quantitative way)
•article 9 & 11 : - environmental costs = costs of measures
and instruments
- resource costs = question of depletion
(qualitative/quantitative)
BUT
22
6. Conclusions/questions
But questions to guidances of ECO II
- what with self services in case of levy on ‘rest’
discharges (environmental damage?)
-methodology to define % of cost recovery pro target
group if costs cannot be assigned or/ allocated
-Uncertainties link pressure impact
-Use to designate self services as WS
23
109
Presentation 9: Practical experiences in England and Wales, Jonathan Fisher
110
111
112
113
114
115
116
117
Presentation 10: How are environmental and resource costs linked to Impress?
Fred Wagemaker
Analysis of pressures and impacts
link to environmental and resource costs
Fred Wagemaker
RIZA, NL-national working group impress-analysis
(with use of slides from Ingrid Braber (Scotland), Volker Mohaupt
(Germany), Ruth Jones (UK), Joachim d’Euginio (EC))
26 march 2004
Content:
1.
2.
3.
4.
5.
The impress-analysis & RBMP process
Principles for analysis (SCG)
Key obstacles and some examples of results
Link to environmental & resource costs
Conclusions and recommendations
1. WFD-requirements
¾ Article 5: end of 2004 a description and analysis of impacts
of antropogenic pressures
¾ Annex II, sub 1.4, specified aspects; pollution,
watermanagement, hydromorphology, other pressures
¾ Annex II, sub 1.5; assessment which waterbodies are at risk
failing to meet EQS by 2015
¾ Article 11: programme of measures takes into account the
results of the ‘impress analysis’
¾ Annex V, sub 1.3; design monitoring programmes in
accordance with the results of the ‘impress analysis’
¾ Article 15: submit a summary report to the EC
118
Impress-analysis essential step in RBMP
state
EQS 2015
Current policy
pressures
2004
Significant issues
2006
Monitoringprogramme
Analysis
Output
Subsequent
actions
Analysis &
decision
measures,
time table
2009
Measure programme RBMP
2015
Execution & target-evaluation
Æ summary
report
Results
2. Proposed principles for the analysis
1. Transparent, comprehensible and public
2. “Worst case” assumption (most discussion on)
3. Risk analysis is not classification
4. Gap analysis for planning beyond 2004
5. From “no information” to “quantitative data”
6. Iterative process to improve analysis
Main elements risk analysis
Current state
& pressures
I
x
II
Baseline & trends
x
Results current policy
2015
state & pressures
:
> 1 = at risk
< 1 = not at risk
EQS 2015
III
119
3. Key obstacles as presented in SCG
¾ Criteria for objectives preliminary,
WFD classification schemes not in place
¾ Lack of data
(absence, insufficient or appropriate)
¾ Uncertainties / likelihood
¾ Time and spatial variations
¾ Short time for first analysis,
particularly for international coordination
3. Some examples (VK-D seminar Edinburg)
¾ 70-90% of waterbodies at risk for various pressures
¾ Prime pressures: 1) hydromorphology, 2) eutrofication, 3)
traditional chemical substances
¾ Priority substances (GCS) limited results, but when done of
simular importance hydromorphology
¾ Limited knowlegde on impacts and ranking various pressures
(mostly just presence, except eutrophication)
¾ Much discussion on objectives & classification schemes
¾ Much public and political discussion on possible consequences
¾ Effective RBMP requires priority setting through derogations
Pressures (WFD, Annex II)
Morphological
Alterations
Flow
Regulation
Monitoring
(ecological and chemical
Status)
Water Abstraction
GW-Abstraction
diffuse Source
Point Source
Point Source
(urban)
(industrial)
120
UK-Risk Assessment approach
Vulnerability map
Water body risk
categorisation map
Exposure
pressures map
Modify according
to available
quality monitoring
data & pollution
impact evidence
Pressure
Pressure/Activity map
High
Vulnerability
High Intermediate Low
H
M
L
Moderate M
Low
L
M
L
Combine with
other IMPRESS
results for overall
risk of failing to
achieve chemical
objectives
L
N
Pressure and vulnerability
data combined to generate
exposure pressure map
Scottisch
risk analysis
inland
waterbodies
Dams and Weirs in the Upper Main Area
and their Biological Continuity (Ge)
Coburg
Datenquelle: Bezirksfischereiverband
Oberfranken e.V. (1998):
Analyse der biologischen Durchgängigkeit
des oberfränkischen Mains
und seiner wichtigsten Nebenflüsse.
Lichtenfels
Main
Kulmbach
We
iß e
rM
n
ai
M
ter
Ro
Not passable
Partly passable
Largely passable
passable
ain
Bayreuth
Bamberg
121
Rhine-centre area
barriers at micro level
¾ man made hydraulic
structures
¾ available data
¾ shows the intense
regulated and modified
state
Prognosis 2015 Exceedance current
Nitrogen EQS (=WFD-proof?)
2015 ratio N-prognosis/N-EQS
in larger waterbodies
2015 ratio N-prognosis/N-EQS
in small rural waterbodies
Priority substances (GCS) in Netherlands
Stofnaam
Alachloor
Antraceen
Atrazine
Benzeen
Gebromeerde difenylethers
cadmium en cadmiumverbindingen
C10-13 - chlooralkanen
Chloorfenvinfos
Chloorpyrifos
1,2-dichloorethaan
dichloormethaan (methyleenchloride)
bis (2-ethylhexyl)ftalaat (DEHP)
Diuron
Endosulfan
Fluorantheen
Hexachloorbenzeen
Hexachloorbutadieen
Hexachloorcyclohexaan
Isoproturon
Lood en loodverbindingen
kwik en kwikverbindingen
Naftaleen
Nikkel en zijn verbindingen
Nonylfenolen
Octylfenolen
Pentachloorbenzeen
pentachloorfenol (pcp)
PAK -benz(k)fluorantheen
PAK-benzo(a)pyreen
Simazine
Tributyltinverbindingen (tributyltinoxide)
trichloorbenzeen (alle isomeren)
trichloormethaan (chloroform)
trifluralin (trifluoralin)
> FHI-jaargem > FHI-max
2000-2002
2000-2002
j
j
n
n
NA
j
j
j
j
NA
NA
NA
j
j
NA
n
j
j
n
n
j
j
j
NA
j
j
n
n
NA
n
j
j
j
j
j
j
j
j
j
n
n
j
n
j
j
n
n
j
n
j
n
n
n
n
j
j
>FHI-zout
belangrijkste
binnenlandse bron
landbouw
vervoer
landbouw
vervoer
consumenten, rwzi's
landbouw
consumenten, rwzi's
landbouw
landbouw
industrie
industrie
rwzi's
landbouw, rwzi
landbouw
atm depositie
consumenten, rwzi's
industrie, diffuus
rwzi's
landbouw
landbouw
rwzi's
vervoer
rwzi's
industrie
industrie
landbouw,diffuus
rwzi's
vervoer
vervoer
landbouw
vervoer
rwzi's
rwzi's
depositie
Probleemprognose
2015
?
122
Transnational
pressures
Downstream
of 4 large
international
river catchment area’s
‘Knowlegde status’ RBMP-tools
(added to Mohaupt)
• Current status data
(biological, physico-chemical, morphological)
• Good Status Definition
(biological, physico-chemical, morphological)
• Pressure <-> Impact (Status) Relations
• Selection of Cost-Effective Measures
Models & knowledge exist (at least one time), could be developed
(Scientific Basis Exists) or is not Available Yet (No Scientific Basis)
4. Linking to environmental & resource costs
¾ There plenty presures & impacts present
¾ They cause damage or lost opportunities: but most pressures
and impacts are not yet clearly determined or analysed
¾ Present state-of-the-art gap-analysis is learning process,
contains too much uncertainties & noncomparibilities to be
used as a solid basis for accounting envvironmental costs
¾ Knowlegde Impact-response of measures is limited
¾ WFD is already a whole new approach which needs getting
adjusted and political commitment.
123
Linking to environmental & resource costs
Proposed damage categories:
Possible other damage categories:
¾ Eutrophication
¾ Chemical contamination
(potable water)
¾ Salinisation (probably reduced
by HMWB-approach)
¾ Increased flood risk
¾ Dessication (= dehydration?)
¾ Loss of biological diversity or
biomass (link to classification
schemes for GES & GEP)
¾ Hygienic contamination
(swimming water)
¾ Reduced natural resilience
¾ Cultural inheritage
¾ Morhophological change (as
previous or reduced shipping?)
5. Final remarks & recommendations
¾ Analysis 2004 is learning process, many uncertainties in gapanalysis (objectives, state, pressures)
¾ By far insufficient knowledge yet on link between pressures,
state & impact and response on measures
¾ Dominant issues do not yet (!) require sophisticated economic
tools on environmental cost to appraise maesures, it might just
make process 2005-2008 too complicated
¾ Prime need for clarification and practical guidance on costeffectiveness and ‘disproportionate cost & societal impact’
analysis for hydromorphology & agriculture
¾ Increase collaboration with IMPRESS on main pressure topics
124
Presentation11: Final notes, Roy Brouwer
Final notes
Roy Brouwer
Workshop objectives
Presentation main outcomes ECO2
„ Illustration European case study examples
„
WE SAW: WORK IN PROGRESS!
How to proceed?
Get to work:
work: gaining more experiences through
practical applications and data search
„ Guidelines about the validity and reliability of
estimation methods in specific applications
„ Coordinated efforts together with IMPRESS
„
125
What next?
„
Workshop proceedings end of April
„
ECO2 paper end of May
-
-
Clear framework,
framework, definitions and terminology
Which approach for which purpose?
purpose?
Practical illustrations
Evidence of links with IMPRESS
What more?
„
Further links with IMPRESS?
„
European and national research programmes
focusing on the further operationalisation of ERC
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