Rationalizing EU Regulation & Investment

With cost-benefit analyses an afterthought to the WFD, implementation of these landmark water and wastewater regulations are being re-weighed both in terms of economics and efficacy.

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By Christopher Gasson

With cost-benefit analyses an afterthought to the WFD, implementation of these landmark water and wastewater regulations are being re-weighed both in terms of economics and efficacy.

European water policy is said to have been designed by Germans and Scandinavians to deprive Southern Europeans of cost advantages derived from a lax approach to water and the environment. If that was the objective, it failed. Latin countries continue to find ways of avoiding compliance, while Germans and Scandinavians have discovered the cost of achieving infinitesimal improvements in water quality are disproportionately high.

That said, EU regulation remains one of the most important drivers of expenditure in the European water and wastewater sector today, and with compliance deadlines for the new accession nations spread over the next decade, it looks set to remain a significant market driver over the next decade. So what are the main directives affecting this sector?

Integrated Pollution Prevention and Control Directive, IPPC (1993/423/EC, amended 1995/88/EC) – Compliance dates: Phase 1 by 2005. The directive was adopted from the UK’s Integrated Pollution Control concept. It’s practical effect will be to make life simpler for industry by reducing the number of regulators each company has to deal with. The directive will be closely linked to the European Environment Agency (www.eea.europa.eu).

Urban Waste Water Treatment Directive (1991/271/EC, amended 1998/15/EC) – Compliance date: 2005. This directive is concerned with standards of treatment, as opposed to the actual environmental impact of effluent discharges. It requires all sewage effluent discharges from towns be subject to either secondary or tertiary treatment, with appropriate measures taken to ensure correct disposal of sewage sludge.

By the end of 2005, all towns and villages with a population equivalent of 2,000 or more, as well as coastal towns with seasonal populations in excess of 10,000, were expected to comply. Likely timings for implementation under this directive were made flexible because of capital costs and planning work required. Some of the opportunities created are in the fields of:

  • Process integration and flow management systems
  • Pumps, valves and flow systems
  • Wastewater effluent treatment
  • Wastewater and sludge recovery

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Drinking Water Directive (1980/778/EC & 1994/612/EC, revised 1998/83/EC) – Compliance dates: In effect; new standards are to be introduced in 2013. The original 1980 directive defines drinking water quality in terms of 65 microbiological, physical, chemical, and aesthetic parameters.

The revised directive is developing into a more pragmatic set of measures, reflecting a greater understanding about actual toxicology of the various contaminants.

The standards will thus relate to human health concerns, rather than technical compliance, and are being used to bring World Health Organisation standards into effect.

These regulations continue to create opportunities for water technologies that deliver existing standards of service at lower capital or operational costs, as well as those that can deliver higher standards of service and reliability.

EU Water Framework Directive (2000/60/EC) – Compliance dates: regulatory, 2009; environmental, 2015-2027. The WFD was adopted in 2000, and is the most significant development in the field of EU water management since the 1991 Urban Waste Water Treatment Directive. It seeks to develop a river basin management model based on about 40 major basins across Western Europe, and requires all inland and coastal waters to achieve so-called “good status” by 2015. The directive involved repeal of a number of previous directives, and will involve tighter standards than those which had previously been envisaged in the doomed Ecological Water Quality Directive.

Total cost of implementing it is estimated at €100 billion, and due to this, the legislation will involve a wider degree of public consultation than previously carried out by the EU. While desire for “good” quality river water to be the norm by 2010 appears to pose an immense challenge, implementation of the Urban Waste Water Treatment Directive means much of the compliance work will have been carried out before that date.

The WFD introduces novel tools and instruments into EU water law: an ecological, holistic approach to water status assessment; river basin planning; a strategy for elimination of pollution; greatly increased provision for informing and consulting the public; and economic instruments to help meet environmental objectives. The principle of cost recovery for all of the compliance work is enshrined within the directive via the “polluter pays principle” (although it isn’t clear how this will apply to agricultural runoff).

The timetable for implementing the directive calls for member states to present draft river basin management plans in 2008, with final versions due in 2009. Proposed programmes of measures are designed to become operational in 2012, with the full set of environmental objectives set to be met by 2015. The first management cycle is scheduled to end in 2021, with 2027 identified as the final deadline for meeting the overall objectives of the legislation.

As part of its drive towards achieving “good status”, the WFD calls for discharges of hazardous substances to cease or be phased out within 20 years of identification as dangerous substances.

To guarantee existing levels of groundwater resource protection, member states will have to take measures to prevent deterioration in the status of all bodies of groundwater and prevent or limit input of pollutants into groundwater systems.

A daughter directive (2006/118/EC) concerned with reversing an increasing trend in groundwater pollution was adopted in December 2006, while the proposed Priority Substances Directive, a further daughter of the WFD, is currently under consideration.

Author’s Note:

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Christopher Gasson is publisher of Global Water Intelligence, a monthly journal published by Media Analytics Ltd., with offices in the UK, India, Philippines and China. Contact: +44 (0) 1865 204 208 or
www.globalwaterintel.com for more information.

A Directive Too Far?

When it was drafted, the EU Water Framework Directive wasn’t subject to cost-benefit analysis and, given that implementation costs were never properly balanced against the potential economic benefits to society, the detailed measures required for implementation still are being worked out. A few of the 27 member states now, somewhat belatedly, are producing data on the rational policy decisions that could be made to realize the directive’s aims.

EU member states finally are waking up to the cost implications of the WFD, but are understandably nervous about the requirement to pass on these costs to householders, farmers, business users and other consumers. Already, there have been warnings an overzealous interpretation of the directive’s intentions could result in unwelcome taxes for many EU consumers.

Central to the deliberations of the economists responsible for establishing practical guidelines on how the WFD should be implemented is the notion of “disproportionate cost”. This allows member states to delay or evade implementing it if specific measures are “disproportionately” expensive. With no clear thresholds defined, however, economists have been left to interpret this concept and produce operational rules for its application. Costs can be disproportional in relation to various yardsticks – similar measures elsewhere, current spending plans, national budgets, expected benefits, etc. The only consensus seems to be that disproportionality is fundamentally a political concern.

All is not lost, though. A number of economists argue that disproportionality is about affordability, or the ability to pay – i.e., will the measure concerned require a disproportionate charge to users from whom costs are meant to be recovered? This line of reasoning could be the rescue of the WFD. It creates the pragmatic link between costs, benefits and affordability that the directive otherwise lacks, but which it badly needs in order to gain public and political support. Equally, it could impact heavily on the implementation schedule for the directive, giving politicians a useful handle for seeking delays and exemptions. One can only hope the propensity of decision-makers to seek ways around the issue won’t be disproportionately large.

Christopher Gasson

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