The Principle of Cost Recovery and the Level of Cost Coverage in Croatia

Transcription

1 The Principle of Cost Recovery and the Level of Cost Coverage in Croatia Peter Kessler Zagreb, April

2 Considerations of the WFD (38) The principle of recovery of the costs of water services, including environmental and resource costs associated with damage or negative impact on the aquatic environment should be taken into account in accordance with, in particular, the polluter-pays principle.

3 More Concrete: Article 9 WFD Member States shall take account of the principle of recovery of the costs of water services, including environmental and resource costs in accordance with the polluter-pays principle.

4 and (Article 9 WFD cont.) that water-pricing policies provide adequate incentives for users to use water resources efficiently and thereby contribute to the environmental objectives of this Directive.

5 The Message A cost recovering water price leads to responsible and efficient use of water.

6 Economy Supports Ecology Water: - part of the ecosystem - an economic good Cost recovering water prices: incentives to save water & accumulate funds to maintain and renew infrastructure Subsidized water prices: Subsidized water prices: inefficient use of water resources & lack of funds to maintain and renew infrastructure

7 Cost Recovery: A Controversial Issue High subsidies in Member States with agricultural irrigation Case of Ireland: a political / social tradition of household water consumption free of charge Issue of environmental and resource costs

8 Functions of Cost Recovering Water Prices Information about water use Incentive function: Water users decide if their water use is worth its price Financing: Fees to cover the costs of water supply and waste water collection and treatment as well as for water protection measures (polluter-/user-pays principle)

9 Water Services (Article 2, No. 38) All services which provide abstraction, impoundment, storage, treatment and distribution of water, waste-water collection and treatment facilities which subsequently discharge into surface water. WFD, Art. 9: Member States shall take account of the principle of recovery of the costs of water services

10 Water Use (Article 2, No. 39) Water services together with any other activity having a significant impact on the status of water WFD, Art. 9: An adequate contribution of the different water uses to the recovery of the costs of water services (??)

11 Costs (as defined in Communication COM(2000) 477 final of ) Financial costs Environmental costs Resource costs

12 Financial Costs Costs of water services, that include the costs of providing and administring these services including operation and maintenance costs capital costs (principal and interest payment, and return on equity where appropriate)

13 Environmental Costs Costs of damage that water use imposes on the environment and ecosystems (e.g. a reduction in the ecological quality of aquatic ecosystems or the salinisation and degradation of productive soils)

14 Resource Costs Costs of foregone opportunities which other uses suffer due to the depletion of the resource beyond its natural rate of recharge or recovery (e.g. linked to over-abstraction of groundwater)

15 Open Questions Environmental and resource costs: What is the difference? Resource costs: Do they only occur in cases of water scarcity (competing uses)? Environmental and resource costs: How to set a price? e.g. What is the value of wetlands?

16 Croatia: Water Charges Water contribution Water use charge Water protection charge Sand and gravel excavation charge Water regulation charge Amelioration drainage charge Amelioration irrigation charge

17 Revenues from the Charges (in Kuna) Water charge Revenues 2007 Revenues 2008 (scheduled) Water regulation charge Water contribution Water protection charge Water use charge Sand and gravel excavation charge Amelioration drainage charge Total The whole Budget of HV in 2008 is Mill. Kuna. The share of the charges is 76%.

18 The Function of the Charges The charges all contribute to the coverage of financial costs. The water protection charge contributes to the coverage of environmental and/or resource costs to the extent it is used for water protection measures. The water use charge and the water protection charge have an incentive function to use water resources efficiently.

19 Charges cont. Without a detailed analysis of the concrete use of the funds it cannot be determined to what degree these charges contribute to the different kind of costs.

20 Estimated Level of Cost Coverage in Croatia Three case-studies: Kupa River Sub-Basin County of Karlovac 18 selected utility operators from all over Croatia including large, medium and small operators

21 Estimated Level of Cost Coverage in Croatia cont. Results of the three case-studies: Project Cost coverage level Kupa River sub-basin 87,3 % County of Karlovac 84,0 % 18 relevant companies 80,0 % The calculations include operation and maintenance costs. It is not quite clear to what extent investment costs are included.

22 Estimated Level of Cost Coverage in Croatia cont. Note the large difference between the cost recovery level of industry (106%) and households (72%) Cross-subsidy! Cost coverage rate for water services (County of Karlovac): % household industry total

23 Level of Cost Coverage in Croatia cont Investments (including funds from charges and fees, taxes, credits and subsidies): Sufficient data to determine the level of cost coverage not available Operation and maintenance: Cost coverage between 80 and 87% with large differences between commercial and household use; industry cross-subsidizes households Environmental and resource costs: The water protection charge contributes to E&R costs to the extent its funds are used for water protection measures.

24 Conclusions The level of coverage of financial costs is relatively high.to determine this level exactly the data base has to be extended to the whole country. As for investments, is has to be clearly differenciated between funds paid by users on the one hand and grants and subsidies from taxpayers money on the other. To cover an increasing part of E&R costs the revenues from the water charges should be diverted towards environmental measures. In order to comply with Article 9 WFD (water pricing policy) the incentive function to use water efficiently should be strengthened from water use to (metered) water consumption.