Presentation - Workshop 2: The implementation of the Polluter Pays Principle, Christoph Czichy, BDEW Fund Solution

1. © BDEW Bundesverband der Energie- und Wasserwirtschaft e.V.
Extended Producer Responsibility
and the BDEW Fund Solution
Presentation of the BDEW Proposal | Christoph Czichy, M.Sc. (Managing Partner MOcons GmbH & Co. KG)
29.03.2022

2. slide
Trace substances and the EU Water Framework Directive
02.09.219
Article 9, section 1 EU Water Framework Directive:
„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.“
The relationship between water pollution and the
financial responsibility in regard to the problem of
trace substances is unambiguous.
A financial contribution of polluters shall in particular
foster a steering effect to force a reduction already at
the level of production.
fund
Polluter Wastewater company
refunding according to
total costs of treatment
contribution
according to share of
pollution
A fund solution can help to ensure the polluter pays principle and at the same time foster a necessary
steering effect to force a reduction of trace substances.
Proposal: fund solution
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3. slide
Basic concept of the fund solution
02.09.2019
A fund is established and financed by all polluters (manufacturers & importers). Major synergies for a
coordination unit may be generated due to strong analogies to emissions trading.
Polluters are all manufacturers & importers that place products with trace substances in the market.
Fund contributions are calculated according to the relative harmfulness of specific trace substances (on
the basis of environmental quality standards [EQS]).
Fund contributions are dynamically adjusted to the level of trace substances in water bodies by regular
water analyses (in regard to existing EQS as well as new legally binding EQS).
Waste water companies, under specific conditions, install a fourth treatment stage to reduce trace
substances and receive reimbursements from the fund.
Measures to reduce trace substances at source may also be financed by the fund.
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4. slide
Exemplary application of the fund solution for 4 water
bodies in North Rhine-Westphalia (1)
02.09.2019
# Trace substance EQS-value
pollution
coefficient
waste water
load (sum)
pollution
units (sum)
relative
harmfulness
Priority use respectively
source of trace substance
1 Ibuprofen 0,01 100,00 260,14 26.014 30,24 % pharmaceutical substance
2 Perfluorooctane sulfonic acid 0,00065 1.538,46 15,98 24.580 28,57 % e.g. impregnating products, galvanic
3 Diclofenac 0,05 20,00 964,17 19.283 22,42 % pharmaceutical substance
4 17-ß estradiol 0,0004 2.500,00 2,04 5.096 5,92 % pharmaceutical substance
5 Imidacloprid 0,002 500,00 3,84 1.921 2,23 % pesticides (insecticides)
6 Triclosan 0,02 50,00 27,53 1.377 1,60 % antiseptic (e.g. cosmetics)
7 Carbamacepine 0,5 2,00 603,40 1.207 1,40 % pharmaceutical substance
8 Clarithromycin 0,13 7,69 139,59 1.074 1,25 % pharmaceutical substance
9 Selenium 3 0,33 2.481,47 827 0,96 % e.g. food supplements, semiconductor
10 Flufenacet 0,04 25,00 19,29 482 0,56 % pesticides (herbicides)
sum 95,16 %
Niersverband Emschergenossenschaft Lippeverband Ruhrverband
total catchment area: 9,970 sq. km total population: 6.5 million people population equivalents: 11.1 million
Results of water analyses in the 4 water bodies (cumulated values; excluding substances from rain water):
How can these results be interpreted?
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example

5. slide
Exemplary application of the fund solution for 4 water
bodies in North Rhine-Westphalia (2)
Interpretation of the results*
 The top 3 trace substances reach in sum a relative harmfulness of more than 81 %.
 The relative harmfulness of the top 10 substances exceeds a value of 95 %
(→ extended to the top 20 substances the number climbs to 98 ,5 %)
 5 out of the top 10 (and 8 out of the top 20) are pharmaceutical substances
 2 out of the top 10 (and 6 out of the top 20) are pesticides (herbicides or insecticides).
Interim conclusion
 The problem of trace substances can be reduced to a small number of substances.
 14 out of the top 20 substances are products of only 2 industry sectors: The pharmaceutical and the pesticide
industry (the latter as part of the chemical industry).
 Applying the de minimis rule would reduce the number of polluters significantly – with positive impacts on the
level of information needs and transaction costs.
* Further water analyses are needed in order to make fully representative statements for the whole of Germany.
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6. slide
Economic and ecological benefits of the fund solution
02.09.2019
Cost allocation according to user-pays principle and thus financial incentives for polluters
to adapt production processes or develop sustainable substances.
Benefit 1
Dynamic design due to flexible fund contribution per pollution unit ensures a long-term
funding of measures taken by waste water sector.
Benefit 2
Economic efficiency (in respect to static and dynamic efficiency) by sending appropriate
price signals for pollution units.
Benefit 3
Financial incentives adapt dynamically to changing conditions, such as innovations in
production processes or in regard to sustainable substances.
Benefit 4
Adjustments by polluters due to financial incentives lead to a quality improvement of all
water bodies – even of those without EQS-exceedance.
Benefit 5
Financial incentives will lead to a reduction of trace substances which results in energy
savings of treatment plants and thus supports climate objectives.
Benefit 6
economic/ecological characteristic
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7. slide
Fund solution – conclusions
 The fund solution offers financial incentives to polluters to invest in less polluting production
processes or more sustainable substances.
 Therefore, it is reasonable from an economical and ecological point of view to force producers and
not consumers to contribute to total costs.
 The solution has strong analogies to the EU emissions trading so that great synergy effects can be
exploited while implementing the fund solution.
 The calculation of the fund contribution per pollution unit builds on the well-established
environmental quality standards (EQS) according to EU WFD. Extending the fund solution to the
European level would thus possible in principle.
 An exemplary application of the fund solution shows, that the problem of trace substances can be
reduced to a small number of substances: The relative harmfulness of the top 10 substances exceeds
a value of 95 %.
 Applying the de minimis rule would reduce the number of polluters significantly – with positive
impacts on the level of information needs and transaction costs.
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8. T +49 30 300199-
BDEW Bundesverband der Energie- und Wasserwirtschaft e.V.
Reinhardtstraße 32 · 10117 Berlin
BDEW Bundesverband der Energie- und Wasserwirtschaft e.V.
Reinhardtstraße 32 · 10117 Berlin
www.bdew.de
Folie
Vielen Dank für Ihre Aufmerksamkeit!
T +49 30 300199-
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Thank you very much for your attention!

9. © BDEW Bundesverband der Energie- und Wasserwirtschaft e.V.
Annex
29.03.2022

10. slide
The Swiss funding model
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Every treatment plant contributes
9 CHF per connected resident per
year to a fund (until end of 2040).
In case a fourth treatment stage
is required, 75 % of investment
costs are financed by the fund.
The concerning treatment plant stops fund-contributions
since it pays for operational costs of fourth treatment stage
(which are likely to be much higher than 9 CHF/resident).
Disadvantages of swiss approach
X No full adoption of polluter pays principle (if producer is regarded as polluter).
X No financial incentives for producers to invest in less polluting
production processes or more sustainable substances
 Increase of water-protective products would lead to enhanced water quality
in regions where many treatment plants do not have a fourth treatment stage
X Operational costs are not covered by the fund although energy consumption is significantly higher (depending
on process up to 50 % of total energy consumption of a treatment plant)  regions with many upgraded
treatment plants face relatively higher costs per resident.
X Exact estimation of future total national costs is very difficult and extending the financial resources of the fund
requires an increase of national contribution per resident  political struggles inevitable.
Special report 12/2021 of
European Court of Auditors
“The Polluter Pays Principle:
Inconsistent application
across EU environmental
policies and actions”

11. slide
Step 1: Calculating total costs for eliminating trace substances
02.09.2019
slide 11
Annexes of EU Water
Framework Directive
Specification of environmental quality standards (EQS) for
chemical elements or compounds
aqueous phase biota
sediments
1. Water monitoring reveals an EQS-exceedance in the water
body that is used by the company for sewage discharges.
2. Unambiguous emissions of the specific substance through
the treatment plant of the company.
Two conditions need to be fulfilled before a wastewater
company takes action:
Wastewater company installs fourth treatment stage,
calculates total costs (capital + operational costs) and reports
the amount to a national unit that coordinates the fund.
Example (for one wastewater company)
• EQS-exceedance in a water body for
two substances (A + B).
• Two companies (1 + 2) are responsible
for emissions of the substances.
• Wastewater company installs fourth
treatment stage and reports total costs
of 2 million € per year to fund (national
coordination unit).
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12. slide
Step 2: Determining pollution units for a specific substance
02.09.2019
slide 12
Example
Substance A
• EQS-value = 0.004
• η = 1 / 0.004 = 250
• yearly emissions = 60 [kg]
• pollution units
= 250 • 60 = 15,000
How can the pollution of a specific substance in relation to another substance be measured?!
reciprocal value of EQS
= pollution coefficient η
total national amount emitted
(per year) of a specific substance
number of pollution units
of the specific substance
pollution units substance A
pollution units substance B
…
pollution units substance Z
sum of national
pollutions units
Substance B
• EQS-value = 0.0008
• η = 1 / 0.0008 = 1,250
• yearly emissions = 20 [kg]
• pollution units
= 1,250 • 20 = 25,000
sum of national pollutions units
= 40,000
Exemplary EQS-values:
• Diuron = 0.2 µg/l
• Benzo (a) pyren = 0.00017 µg/l
• Cybutryn = 0.0025 µg/l
• Diclofenac = 0.005 µg/l
data collection by
coordination unit
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13. slide
Step 3: Calculating the fund contribution for the emission of
one pollution unit
02.09.2019
Example
• Wastewater company reports total costs
of 2 million € p. a. to national
coordination unit
• Sum of national pollution units = 40,000
( see step 2)
• Fund contribution = 2 mill. € / 40,000
= 50 € per pollution unit
Wastewater company I Wastewater company II Wastewater company III Wastewater company VI
…
Every wastewater company reports total costs for a fourth treatment stage to the coordination unit
(note: fourth treatment stage is only installed, if the two conditions of step 1 are fulfilled!)
total costs
II
total costs
I
total costs
III
…
total costs
IV
sum of national total costs
sum of national pollution units
fund contribution for the
emission of one pollution unit
see step 2
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14. slide
Step 4: Assessing the fund contribution of a specific polluter
02.09.2019
x pollution units
e.g. industrial facility
fund contribution
per pollution unit
sum of pollution
units by polluter
pollutes…
&
which equals…
Substance C
Substance K x pollution units
see step 2
total fund contribution by polluter
Polluter 1 of …
see step 3
coordination unit
refunds costs to waste-
water companies
…
Example
Company 1
Substance A
• emitted pollution units = 4,000
• 4,000 • 50 € = 200,000 €
Substance B
• emitted pollution units = 20,000
• 20,000 • 50 € = 1,000,000 €
Total fund contribution
= 1,200,000 €
Company 2
Substance A
• emitted pollution units = 11,000
• 11,000 • 50 € = 550,000 €
Substance B
• emitted pollution units = 5,000
• 5,000 • 50 € = 250,000 €
Total fund contribution
= 800,000 €
1,200,000 €+ 800,000 € = 2,000,000 €
 total costs of wastewater company
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15. slide
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costs p. a.
(expansion of TP ≥ 5.000 EW)
Part of technical expansion in
final stage
Costs for final expansion p. a.
(incl. aftertreatment)
Time to final expansion
1,229 Mrd. €* 25 % (= ca. 750 KA)** 307,2 Mio. € 15 Jahre
Underlying assumptions
for technical expansion
per year 50 TP will be expanded
year
Number of
expanded TP
costs p. a.
[in Mio. €]
year
Number of
expanded TP
costs p. a.
[in Mio. €]
year
Number of
expanded TP
costs p. a.
[in Mio. €]
t1 50 20,5 t6 300 122,9 t11 550 225,3
t2 100 41,0 t7 350 143,3 t12 600 245,7
t3 150 61,4 t8 400 163,8 t13 650 266,2
t4 200 81,9 t9 450 184,3 t14 700 286,7
t5 250 102,4 t10 500 204,8 t15 750 307,2
Annual costs till final
expansion in t15
ab t16 =307,2 Mio. € p.a.
Overall costs
von t1 bis t30
Further annual costs Costs for water analysis
Costs for coordinationcenter
3,9 Mio. € p. a. 3,0 Mio. € p. a.
5,85 Billion. € for timeline of 30 years
Question: costs only for diclofenac?
* ECB-Inflations objective
** on basis of the yield, ascertained and
promulgated by the Deutsche
Bundesbank, of fully-taxed fixed-interest
securities in the last 30 years
* Reference: Hillenbrand et al. (2016)  UBA-Studie (Texte 60/2016)
** base of calculation: in germany there are around 3.000 treatment plants
with a capacity of more than >5.000 inhibitants equivalent (GK 3 bis 5)

16. slide
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lfd.
Nr.
Trace substance
EQS
value
Harmful
value
Sum of
load
amount of
contami-
nation
Relative
harmfulness
1 Ibuprofen 0,01 100,00 260,14 26.014 30,24 %
2 Perfluoroktansulfans./Derivate (PFOS) 0,00065 1.538,46 15,98 24.580 28,57 %
3 Diclofenac 0,05 20,00 964,17 19.284 22,42 %
… …
Relative harmfulness in
analysed area
Question: Are the results for Diclofenac transferralble onto germany to consider environmntal costs for the substance
Factors, which potentially
influence the extrapolation
onto germany
• Number of inhibitants/age structure in 4 water bodies irrelevant for extrapolation
 neutral in reference of extrapolation of the Diclofenac-Charge (hiogher absolute use of Diclofenac-Nutzung due to higher
densitiy of inhibitants, which also causes a higher amount of sewage but the charge of Diclofenac stays the same level)
• „the structure of treatment plants of the 4 associationes shows a higher number of the 4th treatment stage than the average
number in germany
 Diclofenac-charge is tending to be underestimated and therefore in the analysed water bodies would be a better cleaning result
than in the average in germany
• Industry and producing trade is relatively higher in the 4 water bodies than in most parts of germany
 Diclofenac-charge would be underestimated in an extrapolation (a small charge of PFOS caused by industry/producing trade
cause a relatively higher Charge of Diclofenac)
• Diffuse sources from agriculture
 neutral in extrapolations of diclofenac charge (input is traceable but the relative charge is small)
Diclofenac causes environmental costs from 1,17 bis 1,46 Billion € in a period of 30 years
for the 4th treatment stage
Conclusion of BDEW
For the calculatioin of costs a corridor between 20 to 25 % diclofenac-charge seems plausible