WFD, water tariffs and cost-recovery levels

1. Using economic instruments (EIs) for supporting the
implementation of the WFD:
what do two decades of WFD implementation tell us?
EUWI+ Regional Capacity Development Event on
Economic Instruments for Strengthening Water Management
- Paris, November 27, 2019
Pierre Strosser

2. Once upon a time…
• A new directive was born… the EU Water
Framework Directive (2000)
• Much hope … many challenges…
• Including for economists (and for water managers
facing economics and economists…)

3. Economics fully internalised in the WFD
• Principles
• Assessments
• Instruments – with many expectations on the
role water pricing could play for supporting
water (ecological) policy
• Recovering costs – including environmental & resource costs
• Incentive pricing – supporting more sustainable use of water

4. 20 years later…
• What did we gain in relation to the
application of economic instruments?
• What has been the added value of the
WFD Article 9?
• Where could we put efforts… today?

5. Message 1 – Knowledge has improved
• Thanks to the WFD, knowledge on water tariffs
and cost-recovery levels has improved – and is
more widely shared
• But… not on everything and for everybody!
• Environmental & resource costs « roughly » assessed (existence
of env. taxes/charges or costs of the efforts required for reaching
good water status)
• No attention given to the « incentive character » of water pricing
• Households > irrigation > industry, public > self

6. Message 2 – Policy changes addressing
economic instruments have been marginal
• Changes in Ireland (water tariffs do exist now),
Portugal (reform/reporting/new water tax), some
CEE countries (compliance to structural funds),
increase in existing charges/taxes
• But… was the WFD the main driver ?
• Financial crisis and economic reforms
• Need for additional financial resources
• But environmental taxes/charges have lost « political attention »
(and acceptability…)
• Economic instruments/water tariffs are often « out of the hand »
of water managers/the water administration

7. Message 3 – Still, economic instruments
can be (are) very useful
• Raising financial resources for water services (water
tariffs) and ensuring their financial viability
• Households contribute much more than irrigation (although very diverse)
• Full cost-recovery not yet the norm (irrigation, countries with upgrading
of water services/recent investments subsidied…)
• Raising financial resources for supporting measures
and investments in the water sector – including for
legacy from the past with no « polluter » anymore
• Subsidies can support transition to better practices
(agriculture, industry, households…)
• Which is rarely obtained by pricing/tax/charge only (in particular if not
combined with other measures)

8. Message 4 – Stronger attention to
economic instruments remains relevant
• Enhance transparency in « who pays for what » (and is
this equitable and acceptable as compared to the
pressures everyone impose on aquatic ecosystems…)
• Water charges are still very useful – to gain autonomy
in supporting the implementation of measures
• Subsidies to translate « paper plans » into real measure implementation
• Very useful when financial crisis and government budget constraints
• Ensure rates are « high enough » to deliver sufficient financial resources
that can help support effective (visible) changes
• Financing needs remain…significant => more
financial resources are required (with more
strategic advocacy from the water community)

9. Message 5 – Let’s keep our heads out of
the water…
• Capture sector financing – ensuring the right priorities for
investment and financing conditionnalities (e.g. financing
for agriculture, energy, transport…)
• Have others financing your water projects (e.g. wetland
restoration by Carbon Funds) => promote multifunctional
measures that are beneficial to the others
• Support the emergence of new contractual arrangements
– when changes in practices from one sector (e.g.
agriculture) can deliver multiple (ecosystem) and wider
benefits (e.g. better local food) to sectors that might be
ready to pay/finance

10. Many thanks for your attention!!
For more information: p.strosser@acteon-environment.eu
EUWI+ Regional Capacity Development Event on
Economic Instruments for Strengthening Water Management
- Paris, November 27, 2019
Pierre Strosser