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Environmental and Resource Costs under Article 9 of the Water Framework Directive

Challenges for the Implementation of the Principle of Cost Recovery for Water Services

Gawel, Erik

Studien zu Umweltökonomie und Umweltpolitik, Vol. 13


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About The Author

Univ.-Prof. Dr. Erik Gawel ist Inhaber des Lehrstuhls für Volkswirtschaftslehre, insbesondere Institutionenökonomische Umweltforschung, und Direktor des Instituts für Infrastruktur und Ressourcenmanagement der Universität Leipzig. Er ist zugleich Leiter des Departments Ökonomie am Helmholtz-Zentrum für Umweltforschung – UFZ in Leipzig. Prof. Gawel promovierte in Köln und habilitierte sich in Augsburg im Fach Volkswirtschaftslehre zu umweltökonomischen und finanzwissenschaftlichen Themen und war Gastprofessor der Universität Bremen im DFG-Graduiertenkolleg »Risikoregulierung und Privatrechtssystem«. Nach wissenschaftlichen Stationen am Finanzwissenschaftlichen Forschungsinstitut an der Universität zu Köln, dem Zentrum für Interdisziplinäre Forschung der Universität Bielefeld, dem Max-Planck-Institut zur Erforschung von Gemeinschaftsgütern (Bonn) und dem wissenschaftlichen Stab der Energie-Enquete-Kommission des Deutschen Bundestages ist er seit 2001 Professor für Volkswirtschaftslehre. Vor der IHK Frankfurt am Main ist er öffentlich bestellt und vereidigt für Entgeltfragen der kommunalen Ver- und Entsorgung. Er ist u.a. Mitglied der European Academy of Sciences and Arts, des umweltökonomischen Ausschusses im Verein für Socialpolitik und gehört dem wissenschaftlichen Beirat der Zeitschriften »Energies« und »Zeitschrift für Umweltpolitik und Umweltrecht« an. Als Umwelt- und Institutionenökonom blickt Prof. Gawel auf ein mittlerweile 25jähriges Schaffen im Dienste der Umweltforschung zurück. Er ist insbesondere als Brückenbauer zwischen Wirtschafts- und Rechtswissenschaft bekannt und gehört zu den profiliertesten deutschsprachigen Experten für ökonomische Instrumente in der Umweltpolitik, insbesondere für die Wasserwirtschaft. Erik Gawel is Full Professor of Economics, esp. Institutional Environmental Economics, Director of the Institute for Infrastructure and Resource Management (University of Leipzig) and Head of the Department of Economics at the Helmholtz Centre for Environmental Research – UFZ (Leipzig). Furthermore, he serves as a Publicly Certified Expert for Public Cost Accounting. As such, he is consultant to several German local authorities, municipal supplier and public enterprises with respect to water and waste water pricing and management as well as forensic expert for water and waste water pricing. His scientific research fields comprise, inter alia, public finance aspects of water policy, particularly economic instruments (water tariffs and charges), cost accounting for water pricing and new institutional economics of water resources (political economy of water resources management, water law and economics). He has conducted numerous interdisciplinary studies on water policy issues in Germany, the EU as well as at the international level and is, as an economist, also considered an excellent connoisseur of water law. Outstanding expertise in the field of water pricing has made Erik Gawel one of Germany's leading and most recognised experts.


Article 9 of the EU Water Framework Directive (WFD) requires Member States to take account of the principle of recovery of the costs of water services, including environmental and resource costs (ERC). Whilst Member States in practice claim discretion when applying Article 9, there is, however, an ongoing discussion of what is, in concrete terms, meant by and due for recovering full costs in European water policy. To make matters worse, in its judgement of 2014, the EU Court of Justice abstained from clarifying pestering problems of interpreting the legal requirements. What is more, this debate still lacks insights from decades of scientific discussion on water pricing in environmental economics. Therefore, the book provides a current in-depth analysis of all related questions of recovering the costs (ERC definition, concepts and instruments of cost recovery etc.), referring to both the legal as well as the economic aspects of pricing water services in line with Article 9 of the WFD.

Table of Contents

Section Title Page Action Price
Preface 5
Inhaltsverzeichnis 7
List of Tables and Figures 10
List of Abbreviations 11
A. Problem Statement 13
B. The Term “Environmental and Resource Costs” 16
C. The Term “Water Services” 21
I. Problem Statement and State of the Debate 21
II. Proceedings Before the European Court of Justice in 2014 24
1. Infringement Proceedings Against Germany 24
2. Water Services: No Definition of Scope by the ECJ 25
3. The ECJ's Goal-oriented Approach 26
4. Commission Invited to Take Renewed Action 27
5. Causa Non Finita: Continuation Foreseeable 28
III. Is a Narrow Definition of “Water Services” Necessary to Limit Harm from Cost Recovery? 28
1. Misleading Interpretations of Economic Instruments 29
2. Responsibility for Costs as a Means of Water Conservation 31
IV. Interim Conclusion 32
D. Position of Environmental and Resource Costs in the Norm Architecture of Article 9 WFD 33
I. Definition of the Problem 33
II. Legal Interpretations of the Norm Architecture 33
III. “Efficient Use of Resources” as a Key Term 35
IV. Relevant and Irrelevant Environmental and Resource Costs 40
V. Interim Conclusion 41
E. Environmental and Resource Costs as a Component of Cost Recovery: Which Costs Are to Be Recovered? 43
I. Principle of the Purpose Relatedness of the Costs 43
II. The Cost-related Purpose of Article 9 of the WFD 45
III. Extent of ERCs – Dependant on Both Water Status and Function of Cost Recovery 47
IV. Reference to Water Status as a Recovery Concept: Achievement of Environmental Objectives According to Article 4 WFD as an Abolishment Threshold? 49
1. Overview 49
2. Functionality of ERC Allocation in Case of Achieved Environmental Objectives 50
3. Target-relatedness of Article 9 of the WFD 53
V. Interim Conclusion 57
F. Concepts for “Taking Account” of ERCs: How Should These Costs Be Recovered? 58
I. Interpretation Efforts in the Legal Literature: “Taking Account” as an Obligation Problem 58
II. Taking Account as a Calculation Problem 60
III. Approximation of Environmental and Resource Costs by Means of the Costs of the Measures? 66
IV. Concepts for “Taking into Account” Provided by the Economic Theory of Environmental Policy 72
V. Nine Arguments Against Focusing on Calculating Environmental and Resource Costs 75
1. Environmental and Resource Costs Cannot Even Remotely be Calculated Accurately in Practice 76
2. There is More to Taking Account of Environmental and Resource Costs than Identifying Formal Cost Recovery Levels 76
3. Calculation Problems Give Rise to Dubious Derivative Concepts 77
4. There is No Legal Obligation to Provide a Calculation Solution 79
5. Environmental Economics Does Not Necessarily Support Calculation Approaches 80
6. Calculation Approaches are Costly and Time-consuming 83
7. Calculation Approaches Distract from the Real Challenges 83
8. Calculation Approaches are Not Required from a Conceptual Point of View 84
9. Calculation Approaches Weaken the Political Legitimation of Cost Recovery Policy 85
VI. On the Critique of Decisionist Approaches to “Taking Account” of ERCs 86
1. Overview 86
2. Four Arguments in Favour of Politically Defined Environmental and Res‍ource Costs 87
a) No Watering Down of the Legal Requirements 87
b) No Particular Estimation Problems and No Inefficiency 89
c) Avoiding the Political Paradox: Do the Obvious Instead of Waiting for the Impossible 89
d) The Lack of Enforcement Monitoring and Vested Interests in a Calculation Approach to Taking ERC into Account 90
3. Interim Conclusion 90
4. Farewell to ERC Accounting? 92
G. Instruments for ERC Accounting 94
I. The Question of Instrument to Comply with Article 9 WFD 94
II. Efficient Resource Use – an Equivalent Case for Command-and-control Policies? 95
III. Interim Conclusion 98
H. Conclusions 100
List of References 104
Subject Index 114