Opinion of the Economic and Social Committee on the "Communication from the Commission to the Council, the European Parliament and the Economic and Social Committee — Pricing policies for enhancing the sustainability of water resources"
Date: 2001-01-24
Institutions: European Economic and Social Committee
Subjects: fixing of prices, use of water, water management, water resources, water supply

25.4.2001

EN

Official Journal of the European Communities

C 123/65

Opinion of the Economic and Social Committee on the ‘Communication from the Commission
to the Council, the European Parliament and the Economic and Social Committee — Pricing
policies for enhancing the sustainability of water resources’

(2001/C 123/15)

On 27 July 2000 the Commission decided to consult the Economic and Social Committee, under
Article 175 of the Treaty establishing the European Community, on the above-mentioned communication.

The Section for Agriculture, Rural Development and the Environment, which was responsible for
preparing the Committee’s work on the subject, adopted its opinion on 20 December 2000. The
rapporteur was Mrs Sa´nchez Miguel.

At its 378th plenary session (meeting of 24 January 2001), the Economic and Social Committee adopted
the following opinion by 82 votes with three abstentions.

1.

Introduction

1.1.
The broad debate within the EU on water policy,
encompassing the scientific community, environmental organ-
isations, consumer representatives and the main economic
sectors affected, agriculture and industry, has resulted in the
draft Water Framework Directive (1) (WFD), which offers a
framework for a sustainable water resource policy.

The ESC welcomed both the Communication on
1.2.
European Community water policy (2) and the draft WFD (3). It
did however comment on the need to lay down rules on
pricing to make sustainable use of water resources possible.

1.3.
Similarly, the ESC acknowledges how important the
draft Parliament and Council decision establishing the list of
priority substances in the field of water policy (4) is for the
application of the WFD.

2.

The objectives of the communication

2.1.
The main objective in formulating a water pricing
policy is to enhance the sustainability of water resources by
encompassing all those elements relating to the quantity of
water extracted and the pollution emitted into the environ-
ment.

— Financial costs of water services, including the costs of
providing and administering these services, operation and
maintenance costs, and capital costs.

— Environmental costs

that

represent damage to the

environment, ecosystems and users themselves.

— Resource costs, covering those caused by losses for other
users, particularly through depletion of water resources.

2.3.
The guiding principles in implementing water pricing
policies which take account of environmental protection and
economic efficiency focus on:

— Improving the knowledge and information base, taking
into consideration the estimated demand for water and
costs of water services and use.

— Setting the right water prices, at a level that ensures cost
recovery for each sector (agriculture, households and
industry), taking account not only of surface water but
also groundwater.

— The river basin as the basic scale for assessing environ-
mental and economic costs, since it represents the level
at which environmental externalities take place.

2.2.
It is important to clarify the concepts on which pricing
theory and practice are based, particularly the different cost
types to be applied with a view to achieving sustainable water
use:

3. General comments

(1) OJ L 327, 22.12.2000.
(2) OJ C 30, 30.1.1997.
(3) OJ C 355, 21.11.1997.
(4) OJ C 268, 19.9.2000.

3.1.
The WFD believes that pricing has a key role to play in
encouraging sustainable water use, recovering the costs of the
associated services and achieving the objectives set in a cost-
effective way.

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3.2.
The ESC acknowledges and fully supports the idea that
prices should clearly convey that water is a scarce resource in
order to encourage users to reduce consumption and pollution.
At the same time, it would make the following comments.

matching price with the need for major infrastructure invest-
ment. At the same time, affordability (the relative proportion
of water service costs to users’ disposable income) is seen as
the major problem in developing countries.

3.2.1. While acknowledging that a large proportion of
water use is accounted for by productive activities (agriculture,
industry, tourism, etc.) of huge economic significance, it must
be borne in mind that water is more than just an economic
asset: it is a basic entitlement of human beings, and is essential
to ecosystems. The link between these aspects must be made
clear, so that in practice it is not purely economic factors alone
which are considered, contrary to the Commission’s intention.
Essential water supplies to all — even those unable to pay for
them — must therefore be guaranteed.

If pricing is to play this important role, a real link
3.2.2.
between sustainable use and cost recovery must be established,
as set out in Article 9 of the framework directive. Variables
which go unmentioned in the communication, such as owner-
ship of water resources (since existing ownership and user
rights must be maintained), public or private management etc.,
may put these two elements at odds with each other.

3.3.
A shift away from obsolete management and consump-
tion patterns towards a sustainable model is currently under
way. The framing of demand management policies is hampered
not only by the difficulties affecting any change of direction,
but also by unawareness of these traditional methods and
customs.

3.4.
This lack of knowledge can result in some measures,
which ought to trigger change, not having the expected effects;
in the case of water, introducing economic principles and
instruments may generate speculative prices, non-sustainable
changes in use, etc. The traditional cost-benefit analysis is
incomplete insofar as the market fails to recognise these
elements.

3.5.2.
However, other potential negative effects, touched
upon in the general part of this document, need to be examined
further. These include possible changes in ‘ownership of water
resources’ contrary to the objectives of the WFD and price
speculation or excessive development or scale of infrastructure
in Member States, applicant states or developing countries,
sometimes combined with illicit or unlawful practices. The
aim here is to be able to anticipate the impact of economic
activity and provide for measures to adjust public and private
administrations to the new situation.

4.

Specific comments

4.1. Water pricing policy should be coordinated with other
Community policies, particularly the CAP as amended by
Agenda 2000, social cohesion, regional development and
environmental policy, etc. in order to reinforce the relevant
instruments.

4.2.
Point 1.3 of the communication states that efficient
pricing ensures that available resources are efficiently allocated
between different water uses. This idea should be defined more
clearly, for which purpose the following is necessary.

4.2.1.
Balanced prioritisation of uses should be introduced
in keeping with social and environmental criteria, so that
sustainable use is not defined exclusively by price, or in other
words by users’ economic means. In areas suffering shortages,
for example, fierce competition for use of water resources
can arise between well-established, sustainable traditional
agriculture and the leisure and tourism industries (golf courses,
theme parks, etc.) which can pay more and recover costs by
passing them on to consumers. Traditional farmers can only
do this in part.

4.2.2.
area (1), uses should be prioritised as follows:

In accordance with the ESC’s earlier views in this

The second section of the communication reviews the
3.5.
main features of pricing policies in the Member States, the
accession countries and developing countries, and considers
the possible impact of pricing on economics, environment and
society.

3.5.1.
The ESC fully agrees with the analysis that within the
European Union, the greatest price imbalances concern urban
treatment and agriculture in the southern
waste water
It also endorses the reference to difficulties in
countries.

— supplies for human consumption,

— guarantee of ecological requirements,

— agricultural and industrial use,

— leisure and other non-essential uses.

(1) OJ C 30, 30.1.1997.

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C 123/67

4.2.3
Prioritisation and weighting of uses should be inte-
grated as another element in boosting sustainable use. The
way this information is reflected in pricing needs to be studied
before drawing up a series of helpful recommendations for
water resource managers.

technical difficulties, not because of any lack of suitable
devices, but on account of the problems arising from selection
of sampling points, the way farming has historically been
transparency among industries —
organised,
especially those of greatest environmental
impact — and
organisational changes in the supervisory authorities.

the lack of

4.3.
Point 2.1 lists the different types of water use and
introduces the concept of environmental use. To define an
‘environmental use’ of water and, in particular, to compare it
with other water uses, seems inappropriate. Conserving the
environmental characteristics of water in terms of quality (a
key objective of the WFD) and quantity, in order to safeguard
ecosystems and fulfil regulatory functions, is a prerequisite for
any other possible uses.

4.3.1.
The communication should expand upon this aspect
to prevent misinterpretation of the function of water and the
way it is used. As the communication points out, the natural
water cycle needs to be considered as a basic element which
limits the possible uses of water resources, as a guarantee of
sustainability.

The third section of the communication lays down the
4.4.
requirements for moving towards water pricing policies that
enhance sustainable use. It opens with two statements which
deserve our full support: firstly, there is no intention of seeking
a uniform price, since this will depend on local environmental
and socio-economic conditions; and secondly, the necessary
regulation cannot be replaced with economic instruments and
pricing.

4.4.1.
In implementing all the requirements of the WFD,
pricing must not be allowed to become the main priority for
the relevant authorities, to the detriment of other priorities
which are mostly expensive and not immediately cost-effective
in economic terms, such as data collection, analysis of uses,
preparation of management plans, etc.

4.5.
Point 3.1 of the communication argues that knowledge
about demand for water and the pollution load generated by
users is necessary: such data generally lack sufficient reliability.
The Commission advocates progress towards installing meter-
ing devices and testing of methods for validating the collection
of important data.

4.5.1.
The need for this knowledge should be highlighted
but, most importantly, metering devices must be introduced
across the board, particularly in agriculture and industry. This
is because consumption for domestic purposes is generally
under closer observation. Such a measure obviously poses

Estimation of the cost of use and services is divided
4.6.
into financial costs, environmental costs and opportunity
costs.

4.6.1
Two questions arise in relation to financial costs. The
first is the reference to forward assessment of situations in
which, under exceptional circumstances — such as droughts
or other obstacles to normal service — pricing does not enable
these costs to be recovered. This is a highly sensitive issue,
particularly where private operators are involved. There have
already been cases where consumption has fallen in reaction
to a rise in the price of supply and treatment, lowering business
forecasts and triggering a further price rise. The message to
society is negative: water saving and recycling push prices up
rather than down (Eurowasser, Germany, 1994).

4.6.1.1.
It must be borne in mind that one of the defects of
the market system is that in the case of certain resources such
as water, what is good for society — water saving — is bad for
the private interests which draw their profits from selling
larger quantities.

The second question also concerns cost recovery by
4.6.2.
private operators. The communication considers that
the
financial cost structure should also cover return on equity
‘where appropriate’. The Commission’s
(including profits)
future recommendations must include the responsibility on
the part of the relevant authorities to supervise such returns in
order to safeguard the essential objectives of the WFD.

4.6.3. With regard to environmental costs and resource
costs, the communication simply describes the difficulties in
integrating them into pricing and the lack of calculation
models beyond economic research. It is, however, essential for
a harmonised structure and criteria to be available in order to
evaluate such costs accurately. Otherwise, the WFD might be
understood to have recovery of financial costs as its sole
objective in this area.

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4.6.3.1.
Steps must therefore be taken to produce relevant
guidelines and criteria for action reasonably soon, by analysing
and reconciling the various schools of thought concerned:
these range from evaluation of assets and opportunities in
monetary terms to support for multi-criteria methodologies
based on an understanding of sustainability which embraces
environmental and social objectives.

4.6.4.
The ESC believes that a code of good practice on
how to calculate the various use and service costs should be
compiled in order to prevent any interpretation or application
of concepts contained in the communication which might
nullify the objectives based on the principle of full recovery of
costs.

The communication’s definition of the ‘right price’
4.7.
starts with the claim that ‘in theory, the overall optimum of
water use is reached where the marginal benefits from water
use match the marginal costs, including environmental and
resource costs’. The approach is based on a dual price structure:
a variable element (volume, level of pollution, time of year,
location), and a fixed element, in order to allow financial costs
to be recovered under all circumstances.

4.7.1.
The communication proposes a phased implemen-
tation plan for reasons of affordability, political acceptability
and adaptability, and is of the view that in situations of
unsustainable water use, social concerns must be taken into
consideration but must not be the main objective of pricing
policy.

4.7.2.
Although this approach should be supported, it must
be ensured that the accompanying social measures are shaped
in tandem with pricing policy, that they are closely linked to it
and do not disturb the sustainability not only of water
resources, but also of the rest of the system, channelling
investment to other activities of similar or greater impact.

The communication acknowledges the importance, as
4.8.
an economic instrument, of combining water charges and
subsidies in order to point investment and economic activity
in the right direction. For example, the duties, taxes or charges
incorporated into water prices must be earmarked for specific
purposes, so that a significant proportion of them is ploughed
back into the sectors most affected by any restructuring. In
this way, any loss of profit or income which might be caused
by higher water prices would be partly or fully offset by
investment, aid, subsidies or other instruments, such as
modernisation of urban supply networks, irrigation systems,
treatment plants, etc.

4.9.
Such steps must be backed by initiatives to educate
and instruct the general public so that the new water culture,
particularly in its anti-pollution and water saving aspects,
becomes firmly entrenched in European society.

Particular importance is attached to the involvement
4.10.
of users and consumers and the existence of transparent
information on the part of the operators concerned, to help
frame appropriate prices,
increase social acceptability and
ensure successful implementation.

The user and consumer concept needs to be
4.10.1.
broadened. Water issues have traditionally been seen as the
preserve of operators, administrative authorities and technical
experts; in some countries, this extends to electricity generating
and construction companies and in others, especially in
southern Europe, to farmers ‘and irrigators’ associations. This
community of interests, with its deeply rooted traditional
water culture, is in the process of taking on board the new
social and environmental demands which are shaping a new
water culture. Water management must be opened up to the
guiding ideas and concepts of this culture: water saving, non-
pollution, re-use, etc.

4.10.2.
New social entities must be brought in who can
bring innovation and change to bear on the shift to a new
water culture. In particular, environmental NGOs, business
associations and trade unions have a crucial role in keeping
watch over environmental protection, water saving and the
reduction of industrial pollution. These bodies also have the
degree of organisation and social authority required to launch
campaigns mobilising and boosting public awareness to
strengthen pricing policy.

4.10.3.
To this end, changes must be made to the insti-
tutional framework enabling users and consumers to con-
tribute as described in Article 9(1) of the framework directive,
and rights must be introduced in law. Without these, it will be
difficult to monitor operators, especially in the quasi-mon-
opoly situations the communication refers to. Official machin-
ery allowing for independent monitoring of public — and
private — sector operators must therefore be provided.

4.11.
Community research and development programmes
must specifically include objectives contributing to proper
application of these economic recommendations both directly
(research into methods for calculating environmental costs,
resource costs, etc.) and indirectly, in order to cushion the
socioeconomic effects of implementation (research into plant
species with low water consumption; water-saving techniques
in industry, agriculture and domestic supplies; how to reduce
leakage losses in distribution networks, etc.).

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4.12.
The communication refers in several places to agricul-
tural sectors experiencing severe difficulties in achieving
appropriate pricing: difficulty in estimating sustainable demand
and consumption, heavily subsidised crops, measurement of
the diffuse pollution caused by nitrates and pesticides, the CAP
and the lack of a methodology for reliable evaluation of the

environmental costs and benefits. Water pricing for agriculture
requires a separate document and process of consideration.
for example, of the beneficial
Account should be taken,
aspects of cereal irrigation in preserving threatened species or
improving soil characteristics, or agriculture’s contribution to
the CO2 sink effect in relation to climate change.

Brussels, 24 January 2001.

The President

of the Economic and Social Committee

Göke FRERICHS

Opinion of the Economic and Social Committee on the ‘Proposal for a Council Directive on
Community measures for the control of classical swine fever’

(2001/C 123/16)

On 2 October 2000 the Council of the European Union decided to consult the Economic and Social
Committee, under Article 37 of the Treaty establishing the European Community on the above-mentioned
proposal.

The Section for Agriculture, Rural Development and the Environment, which was responsible for
preparing the Committee’s work on the subject, adopted its opinion on 20 December 2000. The
rapporteur was Mr Scully.

At its 378th plenary session (meeting of 24 January 2001) the Economic and Social Committee adopted
the following opinion with 81 votes in favour and two abstentions:

1.

Introduction

1.1. Classical swine fever (CSF)

1.1.1. G e n e r a l c h a r a c t e r i s t i c s o f t h e d i s e a s e

— It is a disease infecting pigs (domestic and wild) and it is
caused by a well known Pestivirus (no risk for humans is
known).

— Clinical signs: fever, anorexia, respiratory signs, haemor-
rhages in the skin; however clinical signs are extremely
variable as well as their severity.

— Mortality is also variable (from very low in sows to very

high in piglets).

— There is no known cure. Some pigs develop into a chronic

state showing ill-thrift etc.

1.1.2.
Clinical diagnosis can be very difficult, in particular
at the early stage of disease in a farm; also laboratory diagnosis
may be difficult.

— Incubation period: 7-10 days in the single animal, 15 to

30 days in the farm.

— Main route of infection: direct or indirect contact with
infected pigs (airborne infection possible); movements of
pigs incubating the disease play an important role in the
spread of the disease.

1.1.3.
The virus survives in pig meat for a considerable
time, and can be spread through illegal use of swill-feeding;
this represents the most usual method of spread of the disease.
Affects the trade in pig meat.