[PPT] - (Dis-)proportionality of Costs in the Decision on Exemptions PowerPoint Presentation

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ecologic.de Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005

(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

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ecologic.de Datum ecologic.de Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 2

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

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ecologic.de Datum ecologic.de Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 4

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?

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ecologic.de Datum ecologic.de Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 5

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?

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ecologic.de Datum ecologic.de Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 6

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

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ecologic.de Datum ecologic.de Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 7

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

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ecologic.de Datum ecologic.de Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 8

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

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ecologic.de Datum ecologic.de Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 9

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!

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ecologic.de Datum ecologic.de Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 10

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?

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ecologic.de Datum ecologic.de Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 11

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

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ecologic.de Datum ecologic.de Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 12

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)

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ecologic.de Datum ecologic.de Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 13

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

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ecologic.de Datum ecologic.de Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 14

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

r + 20% on water costs
model-based assessment of sectoral impacts

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ecologic.de Datum ecologic.de Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 15

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

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ecologic.de Datum ecologic.de Implementing the Economic Aspects of the WFD - Leipzig, 7-8 July 2005 16

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?

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