ecologic.de (Dis-)proportionality of Costs in the Decision on Exemptions Implementing the Economic Aspects of the WFD Leipzig, 7-8 July 2005 Benjamin Görlach & Eduard Interwies, Ecologic Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005
ecologic.de ecologic.de Contents • the concept of disproportionality in the WFD • different takes on disproportionality • economic, political and pragmatic view • disproportionality in WATECO & CIS docs • approaches in the different Member States • some flashlights from selected MS Datum Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 2
ecologic.de ecologic.de Disproportionate costs in the WFD • Disproportionate costs: mentioned on several occasions in Art. 4 WFD • 4 (a), 5 and Annex II.2: “disproportionately expensive” - may lead to extended time or less stringent objectives for selection of measures • 3 (b), 5 (a) and 7 (d): “disproportionate cost” - justifies designation of HMWB, new modifications and less stringent objectives • not a clearly defined economic concept Datum Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 3
ecologic.de ecologic.de Disproportionality - an economic view • (dis-)proportionality as a relation between • cost of measures to improve water status (inputs) • benefits of improved water status (outcomes) ...do the ends justify the means? • Assessment of benefits (necessarily) in monetary terms? • Disproportionality := costs > benefits ? • Relation between inputs and outcomes? Datum Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 4
ecologic.de ecologic.de Disproportionality - a political view • (dis-)proportionality as a relation between • costs of measures to improve water status • affected parties’ ability to pay (resp. available budget for measures) • In this case: carrying capacity as main criterion • by sectors / groups (or individual firms?) • on a regional basis • More susceptible to strategic behaviour? • May require substantial modelling efforts? Datum Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 5
ecologic.de ecologic.de Disproportionality - a pragmatic view • (dis-)proportionality as a comparison of • cost-effectiveness of similar measures in different locations (benchmarking) • Polluter-pays-principle and past expenditure • costs of reaching different water-related targets (chem. / biol. quality, morphology) • costs of water- and non-water-related targets • ultimately, shortened form of CBA w/o benefits quantified in monetary terms Datum Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 6
ecologic.de ecologic.de Disproportionality in the WATECO guidance • Disproportionality of costs decided by Member States on a case-by-case basis • Disproportionality is a “political judgement informed by economic information.” • Uncertainty around cost & benefit estimates • not simply c > b, but “appreciable margin” • qualitative & quantitative components • consider also the ability to pay of groups and sectors affected by measures • No clear definition on applicable criteria Datum Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 7
ecologic.de ecologic.de Disproportionality in the CIS process • DG Eco I&II: not much on disproportionality • Drafting group on CEA (in progress) • not at the centre, but links from CEA to disproportionality assessment are mentioned • scale issue - disproportionality understood as applicable at water body level • discussion doc on environmental objectives: • calculate environmental benefits more fully • agreement or common interpretation unlikely - hence need for transparency Datum Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 8
ecologic.de ecologic.de Disproportionality in the Member States • No official procedures established yet • Some opinions on the basis of grey literature, personal communication, draft documents etc. • Flashlights and glimpses, not official positions! Please feel free to comment and correct! Datum Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 9
ecologic.de ecologic.de Disproportionate Cost in MS: Germany • Draft working paper on economic analysis: 1. First: proportionality of costs & benefits • proportionality of “comprehensive costs” & benefits (investment, adaptation, administration, opportunity) • Monetising benefits may be disproportionately costly by itself, verbal description instead 2. Second: ability to pay & polluter-pays • assessed for user groups, not individual actors • additional cost only - consider previous investments • if costs are disproportionate - should gainers pay? Datum Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 10
ecologic.de ecologic.de Disproportionate Cost in MS: Scotland • SNIFFER report „The case for valuation studies in the WFD“ • Emphasis on proportionality of information- gathering - valuation studies only if needed • Suggested procedure for disproportionality: • Rough economic viability for individual users - based on expert judgement, proformas etc. • Sectoral implications assessed through macroeconomic analysis or qualitative assessm’t • CBA of PoM at the national (Scottish) level • Local-level CBA if above fails to secure agreement Datum Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 11
ecologic.de ecologic.de Disproportionate cost in MS: UK • Scoping study by RPA (2004) for DEFRA, WAG, SE and DoENI • Comprehensive discussion of criteria • Combination of four criteria proposed 1) net present value for PoM (accompanied by benefit-cost ratios properly caveated); 2) simplified economic viability assessment to examine implications for the sector; 3) details by sector of estimated costs and contribution to total benefits (indication on PPP); 4) distributional assessment (end incidence of c&b) Datum Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 12
ecologic.de ecologic.de Disproportionate Cost in MS: Finland • No approach defined yet! • Affordability vs. economic benefit criterion - as yet undecided • Economic actors calling for affordability on the sectoral level as main criterion • Choice of measures may determine scale of analysis • Water quantity / rivalry is a non-issue • Role of BAT, environmental permits and EIA - thus far unclear Datum Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 13
ecologic.de ecologic.de Disproportionate Cost in MS: NL • Description based on Roy Brouwer’s work • Two-step approach: 1. Economic assessment of costs vs. benefits (net present value > 0 or b/c-ratio > 1) 2. Financial assessment of affordability • Some discretion necessary - but lack of a common reference, benchmark noted • national assessments of WTP for reaching the WFD objectives: 90 - 105 Euro /household or + 20% on water costs • model-based assessment of sectoral impacts Datum Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 14
ecologic.de ecologic.de Disproportionate cost: common points • Common two-step approach emerging: 1. First: comparison of costs and ‘benefits’ 2. Secondly: assessment of ability to pay / distribution of costs 3. C-E comparison, benchmarking etc. considered as supporting criterion (if at all) • Not all benefits (& costs) must be monetised • Political nature of decision acknowledged Datum Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 15
ecologic.de ecologic.de Disproportionate cost: differences • How far do you go in monetising benefits - where & when to take a shortcut? • Scale of the analysis: • Local-level decision at WB scale (local CBA for most complex cases, as exemptions are decided at the water body level), or • Strategic decision on the RB / national level • combination of both - approaching from two ends, depending on the measure? Datum Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 16
ecologic.de Thank you for your attention. Benjamin Görlach Ecologic, Pfalzburger Str. 43-44, D-10717 Berlin � +49-30-86880-0, � +49-30-86880-100 goerlach@ecologic.de, www.ecologic.de Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005
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