SCOPING THE ECONOMIC ANALYSIS OF THE WATER FRAMEWORK DIRECTIVE

CIDACOS RIVER BASINCIDACOS RIVER BASIN

NAVARRA-SPAINNAVARRA-SPAIN

Presentation 3: Cost-effectiveness analysisPresentation 3: Cost-effectiveness analysis

Ministerio de Medio AmbienteMinisterio de Medio Ambiente

Gobierno de NavarraGobierno de Navarra

Good

Ecological

Quality:

•Stretch I•Stretch II•Stretch III

Baseline

Ecological

Quality:

•Stretch I•Stretch II•Stretch III

The GAP

Water Quantity

Rate of flowWater Quality:

•pH

•Susp.Mat

•Conduct

•DBO5

•Nitre

•Nitrate

•Ammonia

•Sulfate

•Chloride

Quantity:

Rate of flow

Quality:

•pH

•Susp.Mat

•Conduct

•DBO5

•Nitre

•Nitrate

•Ammonia

•Sulfate

•Chloride

Good Ecological Quality Parameters

Baseline Target Baseline Target Baseline Target

Flow (lts/s) 250 280 750,00 850 980,00 1100

PH 8,18 5,5-9 8,01 5.5_9 8,08 5.5_9

Susp.Mat. 108 25 37,30 25 32,50 25

Conduct. 619 1000 700,00 1500 1055,00 1500

DBO5 4,7 6 9,40 6 8,50 6

Nitre 0,16 0,03 0,26 0,03 0,79 0,03

Nitrate 45,56 50 43,58 50 42,02 50

Ammonia 1,09 0,2 1,07 0,2 1,37 0,2

Sulfate 61,23 250 88,08 250 140,05 250

Chloride 111,67 250 42,54 250 106,75 250

STRETCH I STRETCH II STRETCH III

EXAMPLE 1 ANALYSIS OF MEASURES

Actions to reduce the GAP

WATER QUANTITY

(pressures; rate of flow)

Demand managementIncreased efficiency Increased supply

TreatmentControlRecycling

WATER QUALITY(phys-chem)

River bank restoration

RIVER ECOSYSTEM

SERVICES(Habitat,

biological potential)

Economic Incentives

Economic costs: Capital Operation and maintenance External environmental costs Resource costs

TECHNICAL EFFECTIVENESS

[Rate of flow, M3, mg Part/L]

COVERAGE[Has; % losses; km of net]

ANNUAL EQUIVALENT COST

[t =30; r =0.02]

COST EFFECTIVENESS INDICATOR[€/m3, €/Lts/sec, €/Km]

GAPBaseline vs GEQ

Technical Effectiveness Opportunity Cost

Quality Parameters

Cost-Effectiveness Indicator

Catalogue of Actions

Water QuantityWater Quality

River Ecosystem

MAX. COVE-RAGE

AECMAX.

WATER SAVINGS

MAX. WATER FLOW

INCREASE

(Has) € (m3) (lit/sec) €/m3 €/lts/sec

IRRIGATION ASSISTANCE

More than 10,000 m3/Ha 21 411 16.938 0,54 0,02 766

7,000-10,000 m3/Ha 1 20 586 0,02 0,03 1.077

5.000-7.000 m3/Ha 3 60 1.561 0,05 0,04 1.212

1.000-5,000 m3/Ha 19 384 1620 0,05 0,24 7.475Less than 1,000 m3/Ha 1 20 81. 0,003 0,25 7.755

More than 10,000 m3/Ha 21 1234 16.938 0,54 0,07 2.297

7,000-10,000 m3/Ha 1 60 586 0,02 0,1 3.231

5.000-7.000 m3/Ha 3 180 1.561 0,05 0,12 3.635

1.000-5,000 m3/Ha 19 1152 1620 0.05 0,71 23.266 Less than 1,000 m3/Ha 1 60 81 0,003 0,74 22.425

EFFICIENCY IN CHANNELS 45 7.704 53.189 1,69 0,14 4.568

CHANGE OF DISTRIBUTION 45 10.859 66.062 2,09 0,16 5.184

CHANGE IN IRRIGATIONTECHNOLOGY

26 5.141 66.062 2,09 0,08 2.454

CHANGE OF DISTRIBUTION+IRRIG.TECHN.

26 11.342 110.720 3,51 0,1 3.230

MEASURE

COST-EFFECTIVENESS

INDICATORS

WSP (WATER SAVINGS PROGRAM)

Cost-Effectiveness Indicators of measures in Rural Areas to increase water flow

Example of Measure AppraisalWater Body: Stretch I

Measure: Efficiency in Urban Distribution Networks

Actual Efficiency: 70%Maximum Attainable Efficiency 85%Maximum Water Saved (m3) 695.258Cost Eff. Indicator 1: €/m3 0,26Maximum Flow Increase (l/s) 11,1Cost Eff. Indicator 2: €/l.p.s. 5.232

Measure Maximum Water Saving

AEC € AEC/M3

MaximumFlow

Increase lt/sec

AEC/Lt/s

1. New abstractions 1.000.000 100.000 0,100 31,7

6.307

2. Water imports 0,224 Unlimited 7.560

3. Efficiency in distrib. network 695.258 58.072 0,260 11,1 5.232

4. Instalation of meters 88.989 25.376 0,280 2,8 8.993

5. Saving campaign consumers 103.820 17.744 0,170 3,3 5.390

7. Saving program households 136.330 20.805 0,150 4,3

4.813

8. Saving program firms 48.589 5.201 0,110 1,5

3.376

9. Saving program institutions 27.822 5.300 0,190 0,9 5.896

10. Water recycling 350.000 92.855 0,260 11,1 8.367

Cost-Effectiveness Indicators of measures in Urban Areas to increase water flow

Example 2: Cost-effectiveness analysis in linked water bodies

“improving quality in one stretch reduces total compliance costs”

Q

MgC

QGEQ

Desired Standard

AA

MgC GEQ

€

Stretch I

Optimal Program with three

independent water bodies

Δ l/s

€

Δ l/s

€

Δ l/s

A

20 80 100

B C

Stretch II Stretch III

Overall cost: A+B+C

€

Δ l/s

€

Δ l/s

A

20 80 100

B* C*

Stretch II Stretch III

Δ l/sOverall Cost: A+B*+C*

20 20 80

Stretch I

Avoided cost

Optimal Programme with strict compliance of minimum standards

€

€

Δ l/s

€

Δ l/s

A

20 80 100

Stretch II Stretch III

Δ l/s

Overall Cost: A+Addit.Cost 1+B+Addit. Cost 2 +C

20 20

80

Stretch I

Avoided cost

40

Additional

Cost 1

€ Standard

40 90

Standard

Additional

Cost 2

90

Standard

Avoided cost

B C

Least Cost Programme

EXAMPLE 3 INTERACTIONS QUALITY

AND QUANTITY “Quantity measures reduce the

quality target reaching cost”

Incremental Cost of Reducing Nitrates Strecht III

0

10000

20000

30000

40000

50000

60000

0 2 4 6 8 10 12

Nitrate reductions [mg/l]

Marg

inal C

ost

[€

/Year]

GEQ-River Basin Management Plan

Quantity and Ecology MeasuresStrech I Strech II Strech III

Measures Cost Measures Cost Measures Cost

Irrigation Assistance Irrigation Assistance River Bank Restoration 138868

>10.000 m3/Ha 411 >10.000 m3/Ha 1660 7.000-10.000 m3/Ha 20 5.000-10.000 m3/Ha 740 5.000-7.000 m3/Ha 60 1.600-5.000 m3/Ha 420 1.000-5.000 m3/Ha 384 1.200-1.600 m3/Ha 24340 < 1.000 m3/Ha 20 1.000-1.200 m3/Ha 2320

WSP (Water Saving Program) WSP

>10.000 m3/Ha 1234 >10.000 m3/Ha 4980 7.000-10.000 m3/Ha 60 5.000-10.000 m3/Ha 2220

5.000-7.000 m3/Ha 180 Irrigation Technology 72809

Channel Substitution+ Irrigation Technology 11342 River Bank Restoration 111094

12-13. Técnica de Riego 0

New abstractions 100000

Water Imports 78400

Efficiency in distribution networks 58072

Instalation of meters 25376

Saving campaign consumers 17744

Saving Program households 20806

Saving Program firms 5201

Saving Program Instituion 5201

River Bank Restoration 64805

MgC before increasing flow

mg of NH4 /l 

MgC after increasing flow

01.371.2

2

MgC

‘Good Ecological Status’ Objective 

0.2 mg/l

An

nu

al

eq

uiv

ale

nt

cost

[€]

Avoided costs

1.08

MgC after implementing water treatment measures in upper strectches

Avoided costs in water treatment due to flow increasesAvoided costs in water treatment, due to the implementation of water treatment measures in upper strectches

     

 

Control 4380

New Treatment Plants 20813

Advanced Water Treatment 205167

Control of livestock effluents 24040Control of composition on the sites of livestock effluents 6010

Treatment of livestock effluents 16826

Increase in Water Use Price-Agriculture (€/m3) 0,04

Increase in Water Use Price-Urban (€/m3) 0,28

Effluent Treatment Price-Livestock (€/m3) 0,48

Effluent Treatment Price-Households (€/m3) 0,17

Effluent Treatment Price-Firms (€/m3) 0,01

Canon de saneamiento Agrícola (euros/m3) 0,00

Cost Recovery Index-WUP Agriculture (€/m3) 99%

Cost Recovery Index-WUP Urban (€/m3) 100%

Cost Recovery Index-ETP Livestocks (€/m3) 100%

Cost Recovery Index-WUP Urban(€/m3) 100%

Cost Recovery Index-WUP Firms (€/m3) 99%

QUALITY MEASURES

ECONOMIC INSTRUMENTS

GEQ-RIVER BASIN MANAGEMENT PLAN (cont..)

EXAMPLE 4: SENSITIVITY ANALYSIS-

INCORPORATION OF ENVIRONMENTAL COSTS

Three hypothetical policy options to save water[Long term marginal “financial” costs]

Water savings [m3]0.03

0.30

Water savings [m3] Water savings [m3]

€ € €

Leak reductions Water importsWater recycling

(a) (b) (c)

Water savings [m3]

Leak reduction Water imports

Marginal CostMarginal Cost

0.23 0.23

40.000

Least cost plan when resource and environmental costs are not considered

RBMP to increase flow by saving 200,000 m3

0.23

Hypothetical least cost planwhen environmental and resource costs are

considered

Water savings [m3]

Recycling

Water imports

Marginal CostMarginal Cost

0.23

60,000 140,000 200,000

Leak reductions

Deciding with limited informationDeciding with limited information regarding external regarding external environmental costs of some policy measuresenvironmental costs of some policy measures

Cost Effectiveness Appraisal

Least Cost Policy Package

Estimate threshold values

Sensitivity Analysis

Information from secondary sources

Benefit transfer

Avoided Costs

Full cost of water services

May the cost value change the RBMP?May the cost value change the RBMP?

RBMP

Is the potential cost saved in the RBMP Is the potential cost saved in the RBMP high enough?high enough?

Conduct a Conduct a valuationvaluation studystudy

RBMP

[Not]

[Not]

If there is no reliable monetary information:describe the environmental impact and temporarily ignore the environmental cost

The Role of Sensityvity Analysis and Feedback:

Both are useful tools to improve the RBMP by:

• Determine the potential value of missing information.

• Identify Critical Assumptions.

• Updating Parameters and Assumptions.

• Updating the RBMP after the effects of Economic Incentives is taking into account.

Type Relevant for Valuation best at

AAExternal costs or benefits External costs or benefits associated to the ecological associated to the ecological statusstatus of the river basin of the river basin..

Consultation and agreement on RBMP.

- CBA

- Derogation analysis

- Stakeholder analysis

BBExternal costs or benefits External costs or benefits associated to implementedassociated to implemented measures measures to achieve the to achieve the ecological status of the river ecological status of the river basin.basin.

Measure appraisal - Estimation of cost effectiveness indicators [CEI];

- Order different measures according to CEI.

CCEnvironmental costs and Environmental costs and benefits benefits internalised within internalised within the river management planthe river management plan..

Evaluating costs of alternative RBMP.

- CEA decisions at the basin level

Key Concepts:Environmental Impacts and

their relevance in the decision-making process