The German Experience with Full Cost Recovery in the Water Sector
Dominic Marcellino, Fellow Ecologic Institute Washington, and Max Grünig, Fellow Ecologic Institute Berlin, published an article on cost recovery in line with the EU Water Framework Directive and related experiences in Germany. The text appeared in the March/April special edition of L’Acqua, an Italian journal for water issues. The paper builds off previous work done for the Organisation for Economic Co-operation and Development (OECD).
The Water Framework Directive (WFD) was enacted in 2000 to address issues of water quality and water quantity in the European Union. It aims to improve the ecological status of aquatic environment by 2015 through a number of sustainable management practices. An essential aspect is the WFD’s polluter-pays-principle, which not only incorporates financial costs, but also environmental and resource costs into the price of water. By 2010, the more accurate price of water is supposed to be an incentive for consumers to use the resource more efficiently.
The water service systems of two German cities give examples of two different utilities. Berlin’s water servicing company (Berliner Wasserbetriebe – BWB) is a large, public-private company. The city of Leipzig is served by a smaller, municipal utility (Kommunale Wasserwerke Leipzig – KWL). The applied method developed by Antonio Massarutto from the University of Udine allowed for an assessment of the cost effectiveness of the two different systems. Only the BWB’s tariffs and fees showed themselves to sustainably cover the full recovery cost and would therefore meet the requirements of the WFD.
Germany is in need of improved water legislation as it is facing a number of challenges in the field. Changing demographics put new demands on water infrastructure as will the predicted results of climate change. Addressing these issues will be costly, which makes the determination of effective cost recovery mechanisms, such as a split tariff structure, even more important. Germany’s laws and regulations should be adjusted to support the respective methodology.