Water Economics, Ecosystem Accounts and Water Resource Efficiency
One goal of the Water Framework Directive (WFD) is to strengthen economic approaches in water management by including economic data in the river basin management plans. Simultaneously, the European Environment Agency is working on an Ecosystem Accounting tool that could benefit from inclusion of the economic data gathered in the implementation of the WFD. This project aims to bridge the gap between the two, and to integrate water-economic information from the WFD into the European Environment Agency’s (EEA) methodology of ecosystem accounting.
The WFD, the single most important piece of legislation relating to the quality of Europe's fresh and coastal waters, includes a strong economic component which implements the "polluter pays principle". This includes the full cost recovery of environmental and resource costs of water services and the use of water pricing as an incentive mechanism. Simultaneously, the EEA is implementing a system of "fast track ecosystem accounts" targeted at measuring ecosystem degradation and relating this to the capacity to deliver services in a sustainable way, both today and in the future. Water accounts are part of the fast-track ecosystem accounts. The goal of this project is to link the economic information generated in the WFD implementation with the information requirements of the fast track ecosystem accounts. Further, this project shall support the EEA in including water economic components into its EEA 2012 assessment by developing water economics case studies and supporting the resource efficiency assessment.
As part of the Framework Contract on Water Economics and Ecosystem Accounts, this project builds upon previous work done in 2010 on capturing economic information in a common framework to allow for integration with the EEA’s fast track ecosystem accounts. The methodology of these fast track ecosystem accounts is based on physical accounts, rather than on benefits and asset values, while the goals are set by existing policy statements, such as EU regulations. The work in 2011 will focus upon the incorporation of remediation and maintenance costs within the fast track accounts. Specifically, water economics information from two river basin districts will be used – Seine-Normandie (FR) and Ebro (ES), whereby data is available at the scale of individual sub-basins and per sector (i.e. households, industry, agriculture etc). This data describes the cost of measures proposed, the current water status and the status anticipated following the implementation of measures. In this way, the cost of the programme of measures to reach and maintain good status under WFD will be used as a proxy for the capital depreciation of the water ecosystem. The aim is to develop practical applications of the fast track ecosystem accounts with respect to the freshwater environment.
A growing body of evidence indicates that demand management (of water resources) makes financial sense relative to the continued expansion of water supply – this shall be demonstrated by means of a quantitative case study. The case study shall illustrate quantitatively that demand management is the most cost-effective approach across all sectors.
A key component in the EEA’s 2012 report on the state of Europe's water will be an assessment of water resource efficiency encompassing both water quantity and quality. Ecologic Institute is working on the assessment and development of water resource efficiency indicators as part of its work for the European Topic Centre on Inland, Coastal and Marine waters (ETC/ICM) – this project shall emphasize and focus on the integration of water economic information with these water resource efficiency indicators.