The review of costs and benefits of the WFD has concentrated on identifying the major factors that drive the level of costs and benefits. Some factors are particular to either costs or benefits, whereas in some cases the factors apply to both estimating costs and benefits.
The factors that apply to both estimating costs and benefits are: the GAP analysis; the selected Programme of Measures; income level; effectiveness of measures, timing of measures, assumptions about the time frame and discounting rates. The factors particular to only costs are: efficiency of policy instruments and efficiency of implementation. The factors particular to only benefits are: the number of people affected and the degree of willingness to pay.
As noted above it is too early to have information on the costs and benefits of implementation of the WFD. It would require a full cost-benefit analysis based on recent assumptions on reference scenarios and ambition levels for a good estimate to be made. The information that is available today (reports and studies from the Member States, and on the basis of the available data on costs of environmental measures from Eurostat) suggests that the implementation of the WFD is likely to involve substantial costs. However there are large uncertainties associated with these estimates, and
will depend largely on the level of ambition in terms of reaching good ecological status. The level of ambition can effect costs by a factor of 3 to 5. In addition, it is very unsure what the efficiency of measures is likely to be, which will depend on the costs of measures in the pipeline and renewal of existing infrastructure. Only for one country (NL) can we compare WFD and current costs, and with current information this gives a range from 5 to 30 %, compared to the baseline situation. Although uncertainties are very large, the information available today indicates that costs of WFD implementation in the EU are likely to be substantial but unlikely to be greater than costs for current measures and measures in the pipeline.
The information on benefits of the WFD across Europe is limited. Three Member States that have a long and extensive traditions in benefit assessment have published first results, as a starting point for further research into the benefits of WFD. The review of these studies show that even for these countries it remains difficult to get a complete picture of the full benefits. The overview will become more complete in the coming years.
These first raw and incomplete data show that benefits are very diverse and include avoided costs for water supply and management, benefits for water related recreation (angling, kayaking) and informal recreation, amenity benefits for populations close to rivers, non-use benefits related to improved environments for plants and animals, and the better protection of water resources. None of these single categories dominate the total benefits.
The factors that determine benefits include definition of GAP and ambition levels, the extent to which all relevant benefit categories and water bodies have been included, the number of people affected and their willingness to pay, and the scope for win-win measures with water supply and management. Again it is not possible at this stage to predict what the scale of the benefits may be, though available assessments indicate the benefits in the region of quantified is 10-100 €/household/year. These assessments were based on assumptions that reflect the understanding of WFD implementation at that time, and for some without sufficient information on the status of water bodies or the standards which are needed to deliver good status.
This variety in benefits is good news for those that look for support for the implementation of the WFD, because a wide range of people are likely to benefit from the WFD measures, especially through non-market benefits. The other side of the coin is that it makes benefit estimation a complex and challenging task, especially in Member States that have no tradition in economic benefit assessment, and less studies and expertise to build on.
Further assessments of potential benefits of the WFD at the national or EU level could be carried out by using a top-down questionnaire approach. However the benefit analysis of individual or packages of measures requires using bottom up accounting techniques. The identification and quantification of benefits is only appropriate at the river basin level. The FP6 AquaMoney research project is developing guidelines for the valuation of benefits of WFD and will ease the use of benefit transfer. In addition, the WFD will give a boost to valuation studies throughout the EU.
The information available today is not accurate enough for Member States to already fine tune the selection of measures but rather to indicate in which direction further development of packages of measures should head and identify priorities for further research or data collection. Studies on specific WFD measures suggest that there is a large potential for cost-beneficial measures. But with benefit-cost ratios depending on the context it is necessary to undertake a local analysis of the cost and benefits in the further selection of the Programme of Measures.
The studies illustrate that the WFD is not a single, well defined objective or set of measures, but offers the opportunity for Member States to define ambition levels and select measures taking economic analysis into account. The data suggest that there may be large differences for both costs and benefits between small and big gap scenario's or between low to high ambition levels.
11.3
Specific issues and measures
A review of information available on the administrative costs related to the WFD indicates that there are certainly some extra administrative costs that will be attributable to the to setting-up of plans for and implementation of the WFD. Presently, estimates are not easy to make, but are roughly estimated at € 50 million per year for the Netherlands, being 25% more to the current administrative costs of managing water bodies. Although in absolute terms the administrative costs of water management may assumed to increase (in line with additional expenditures due to implementation of policies in pipeline and the WFD), it is reasonable to assume that administrative costs in relation to total costs will remain constant.
It should also be pointed out that the benefits of administrative requirements that attribute to setting up plans for the WFD will result from integration with other water/nature related policies/planning and result in a more effective decision making process (obligation to achieve results). If sound administration really supports cost-effective implementation, the savings may be much larger than the additional costs. However, to reap these benefits sound economic analysis is required.
A review of the costs and benefits associated with wetlands indicates that the most important value attached to measures enhancing wetlands (creation, restoration, management) is in the multi-purpose solutions that are on offer (solutions for different policy-objectives). In addition, it is observed that the creation of wetlands (floodplains), can be, in some cases, the most cost effective measure for HMWBs to achieve GEP. It needs, however, a case specific assessment of marginal costs and benefits to check to what extent this message applies to the measures evaluated.
Our analysis shows a great deal of information is available on different fish by-passes, but little information on actual costs and benefits. There were no published assessments of the costs and benefits of fish migration measures in Europe. A couple of North American studies, however, provided evidence that the removal of unused dams or weirs brought benefits to local communities in the form of improved recreational fishing facilities.
A good cost-effectiveness analysis is needed to compare different measures: • removal of obsolete (i.e. not in use) obstacles could be cost-effective;
• upgrading the older installations with fish-friendly turbines could be more cost-effective than building fish by-passes/ new installations (lower fish mortality, higher productivity) – but cannot not accommodate fish that migrate upstream;
• an integrated approach is necessary for the design of new fish by-pass installations and creation of suitable habitats.
A review of the costs and benefits of specific measures to improve irrigation methods and management indicates that one of the main impacts of the WFD on irrigation water demand will be through the Art. 9 requirement that water services should recover the costs, including environmental and resource costs. This will affect agricultural sectors in different ways: some parts of agriculture (esp. fruits and vegetables) account for a high share of irrigation water demand, but at the same time the marginal productivity of irrigation water is high in these sectors, even in the absence of CAP payments. Hence the price elasticity of demand for irrigation water is relatively low: if the water price rises, irrigation water demand will not fall very much. Thus, if the WFD should lead to higher cost recovery levels and thus higher prices for irrigation water, demand for irrigation water in these
agricultural sectors will not be affected very much. The objective of cost recovery would thus be
reached without significant improvements of water quantitative status. In these regions and for these types of crops, water pricing may thus be helpful as a support instrument to provide adequate incentives, but it will need to be complemented by other measures and instruments to bring about improvements in water quantitative status. By contrast, cereals and crops such as sunflowers and cotton can only be produced in many regions because the irrigation infrastructure is subsidised and
because cost recovery levels are low. If the WFD should lead to higher cost recovery levels, such production could become unprofitable for many farms. Thus, cost recovery would be achieved as well as improvements of water quantitative status, but at the risk of reducing the profitability of many farms. Again, water prices should therefore not be the sole instrument of choice, but need to be complemented with measures targeted at reducing irrigation water demand.
A review of the costs and benefits of specific measures to reduce the diffuse pollution of Phosphorous from agriculture indicates that the costs for the agricultural sector for achieving the necessary phosphorous emission reductions will be substantial. While WFD implementation will certainly impose hardships on some parts of agriculture and in some regions, most of the available estimate expect that the overall costs of the Directive would lie between 0.6% and 5.6% of agricultural gross value added. Whether or not this represents an unacceptable hardship is clearly debatable. In particular, there still appears to be some potential for emission reductions at little or no additional costs, but their importance will depend inter alia to the extent these have already been implemented in the reference scenario. The benefits will be mainly due to limiting eutrophication, and the evidence suggests that the public in many European countries attaches a high value to reduced eutrophication. It needs further and case specific assessment to evaluate to which extent reduction of P from agriculture contributes to that objective.
Finally, it should be noted that the cost and benefits are distributed unequally among the different agricultural sectors.