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Assessing Cost Recovery

A New Comparative Framework in Line with WFD Article 9

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Britta Ammermüller

This study proposes a comparative accounting framework for assessing cost recovery of water supply and sewerage services for households and agriculture in line with the requirements of Article 9 of the EU Water Framework Directive (WFD). It provides an integrative analysis of the partly contradictory objectives of Article 9 and the Directive’s approach to cost recovery. The book defines cost categories and accounting guidelines in line with the specific requirements of WFD Article 9. On this basis, an integrative framework for analysing different financing schemes for water services provision and their compliance with the objectives of Article 9 is developed, along with a pragmatic approach for the incorporation of environmental and resource costs in the overall cost recovery analysis.

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List of Tables .................................................................................................. 11 List of Figures ................................................................................................. 13 List of Fact Sheets .......................................................................................... 15 List of Boxes ................................................................................................... 17 1 Introduction ........................................................................................... 19 1.1 European water policy: from regulation to integration ......................... 22 1.2 The European Water Framework Directive ........................................... 24 1.2.1 Novelties and building blocks of the Water Framework Directive ...................................................................................... 25 1.2.2 The Common Implementation Strategy Process: harmonising procedures .................................................................................. 29 1.2.3 The implementation schedule for the Water Framework Directive ...................................................................................... 32 1.3 The role of economics in the WFD ......................................................... 33 1.3.1 Explicit functions of economics in the WFD ................................ 34 1.3.2 Implicit functions of economics in the WFD ............................... 38 1.3.3 Guidance from the CIS process on implementing the economic aspects ......................................................................................... 40 1.4 Article 9 and its multiple objectives ....................................................... 42 1.4.1 Recovering financial and environmental and resource costs of water services ............................................................................. 46 1.4.2 Setting incentives for efficient water resource use .................... 48 1.4.3 Making the polluter pay and ensuring adequate contributions by sectors .................................................................................... 50 1.4.4 Establishing transparency of financial flows in the European water sector and guaranteeing the sustainability of infrastructural systems ................................................................ 51 1.4.5 Putting the objectives of Article 9 into perspective .................... 53 1.5 Research questions ................................................................................ 54 8 1.6 Methodology and scope of the thesis .................................................... 56 1.7 Plan of the thesis .................................................................................... 58 2 Theoretical considerations on cost-recovery and pricing of water services .................................................................................................. 61 2.1 Water and its dimensions: implications for water services provision ... 61 2.1.1 Water as an environmental good ................................................ 63 2.1.2 Water as a social good ................................................................ 64 2.1.3 Water as an economic good ........................................................ 66 2.1.4 The market structure for the provision of a multi-faceted good 69 2.2...

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