Presentation on theme: "Aqua Publica Europea event"— Presentation transcript:
1 Aqua Publica Europea event Assessmentof cost recoverythrough water pricingGorm DigeTerritorial environment, policy and economic analysis
2 From the 2012 Water Eurobarometer 70% of Europeans realise the seriousness of water-related problems and support stronger EU action84% of consumers support charges for the volume of water they use12% disagree with pay-more-if-you-use-more-principle57% explicitly call for a fairerpricing policy47% want stricter water regulation
3 ChallengesArticle 9 of Water Framework Directive (WFD) – cost recovery of water services taking into consideration environmental and resource costs (ERC)Blueprint to safeguard Europe’s water – enforce water pricing/cost recovery obligations under WFD including metering when relevantAre Member States ready for the challenge?
4 Purpose of this studyCollates practical information on current state of water pricing in EuropeCost recovery of water services including ERCsAddresses issues of incentives, affordability and social equitySelected countries: Croatia, England, France, Germany, the Netherlands, Serbia, Scotland, Slovenia, Spain and WalesRecommendations - development of pricing models and water pricing reporting
5 Pricing of water serve as policy instrument to achieve: Cost recovery - financial recovery of water supply (including investments in infrastructure, operation and maintenance) and water use-related environmental and resource costsIncentives - conserve water and promote water efficiency
9 Evidence of water pricing schemes providing incentives to reduce household water use Czech Republic:Between the water and wastewater tariff for households increased from 0.8 to 48 CZK/m3. Fees increased for the extraction of both surface, ground water, and discharge of waste water. Household consumption decreased by 40% from 171 litres per capita per day in 1989 to 103 litres in 2002Denmark:Between real price of water (including environmental taxes) increased by 54 %. This has led to a substantial decrease in urban water demand from 155 to 125 litres per person per day, one of the lowest levels in OECD
10 Water pricing structures Water pricing schemes to recover costs in water and wastewater servicesCountryWater pricing structuresDrinking WaterSewage/SanitationIrrigationEngland and WalesHouseholds: fixed + rateable value (if unmetered) OR fixed + volumetricIndustry: fixed + volumetricHouseholds: fixed + rateable value (if unmetered) OR fixed + volumetricIndustry: Small users pay volumetric; large users pay fixed + higher volumetric rateAbstraction charges (fixed + volumetric) applyScotlandHouseholds: fixed (based on tax bracket)Industry: fixed + volumetric (based on size of meter)Households: fixed (based on tax bracket)Only abstraction charges applyThe NetherlandsHouseholds: fixed + volumetricHouseholds: fixed (based on size)Industry: variable (based on pollution units)Farmers using piped water are treated as business customers (industry); farmers using groundwater pay a groundwater charge; farmers using surface water pay nothingGermanyHouseholds: fixed +volumetricIndustry: fixed +volumetricHouseholds: fixed + volumetric + runoff charge based on land coverIndustry: N/AN/A
11 Cost recovery levels (water/sanitation tariffs) Note: For FR the estimated cost-recovery levels are evaluated together and should be 83% (median level) and not 138% as reflected in the table
12 Some issues related to financial cost recovery Difference in assessment methodologies including cost elements consideredOperation and maintenance costs recovered from water users in most countries/sectors – not the case for investment costsData on cost recovery are not homogenous across and within countries – and not always easily accessible
13 ERCs and cost recoveryVariability in the way Member States define and account for externalities in practiceMost MSs examined consider ECs by charging water polluters for purification of wastewater and for untreated pollution discharged in surface watersRCs to a lesser extent considered by setting charges on water abstraction, construction, operation, and maintenance of water storage facilities
14 Examples of revenue figures collected from env Examples of revenue figures collected from env. taxes for water servicesNew requirements in WFD Article 9 – not affect mechanisms put in place for recovering ERCs as indicated in total revenuesAbsence of drastic changes in revenues from env. taxes - indicating no additional efforts to internalise ERCs(000s Euros)20052006200720082009201020112012Germany (all Länder)339,480289,140269,330254,040 -- France (all agencies)1,789,3001,665,8001,730,4001,876,2001,838,7001,959,6002,044,7002,084,000Spain (ACA)326,110336,967322,127347,518366,420UK (EA)119,400114,300184,500188,900200,000200,600194,300196,700Scotland (SEPA)12,72813,94016,95418,86719,45219,08219,45919,929
15 Proposed options for reporting ERCs To ensure EU wide implementation of cost recovery principles - comparable systems for reporting of utility costs and revenuesA system is needed that indicates what areas of ERCs are coveredBenchmarking initatives are one promising option for such a reporting instrumentProposed reporting sheet for assessment of inclusion of environmental and resource cost in cost recovery (p. 103)
16 Affordability for the household sector [% of disposable income] Affordability levels for drinking water supply and sewage and wastewater treatment servicesCountryAffordability for the household sector [% of disposable income]Drinking Water SupplySewage and WastewaterYearEngland & Wales1.091.212009/2010Scotland0.962010/2011The Netherlands0.61.002009;n.d.France0.420.38Germany0.550.682010Slovenia1.40.2n.d.Spain (Catalonia)0.52
17 Do water pricing schemes account for social concerns? In each examined MS affordability taken into account. A variety of systems are foundWater authorities in some MSs perform periodical pricing studies - comparing family income with water billSome MS specify means to achieve affordability others leave this unaddressedArtificially low water prices not the best way to ensure affordabilty – risk of underfunded service providers....
18 Example of means for achieving affordability Via reductions in service chargesSocial welfare allowances earmarked for the payment of water servicesWater charges pegged to the value of the house (e.g. England, Wales, Scotland) and special tariffsSewage charge remission for households (e.g. the Netherlands) that cannot afford to payA remission for the purification, pollution and water system charges is also possibleSupport through social welfare – includes an allowance for the cost for water service (e.g. Germany)
19 In conclusion - ways forward for pricing schemes A substantial part of the water bill is variableVolumetric or increasing block rates are used - metering indispensableRates or rules for calculation fixed in a transparent wayRates high enough for water suppliers to invest in improvementsAffordability addressed through social measures - not by reducing water price incentives (such as reduced VAT rates)Regional variations in e.g. water scarcity reflected in water prices
20 Please do not hesitate to ask us Please do not hesitate to ask us! Contact the European Environment Agency for information
21 ERCs – the two attempts from Common Implementation Strategy (CIS) WATECO group (2003):Environmental costs: damages incurred by ecosystems and people as a result of water use...Resource costs: occur only when the resource is used beyond its natural regnerative capacity...(overexploitation)DG ECO2 group (2004):Environmental costs: env. damage costs of aquatic ecosystem depletion (e.g. pollution)....Resource costs: only arise if alternative water use generates a higher economic value......(misallocation)
22 Financial cost recovery (agriculture - where irrigation water tariffs are in place)
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