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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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2 Theoretical considerations on cost-recovery and pricing of water services 61

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61 2 Theoretical considerations on cost-recovery and pricing of water services The virtue of economics is not that it brings some better answers but some more useful questions. Green (2000) The second chapter first provides an overview on how the perception of water in its different good dimensions may influence the organisation of the provision and the financing structure of water services. It investigates different interpre- tations of the concept of cost-recovery, both from a theoretical perspective as well as with a view to present practices in EU Member States, and evaluates these in light of the requirements of Article 9. Relevant cost categories for water services provision to households and agriculture are examined, and possible cost drivers and framework conditions, which may influence the magnitude of these costs both across regions as well as over time, are dis- cussed. Subsequently, the chapter investigates different water pricing schemes as potential financing mechanisms and discusses these in view of the require- ments and objectives of Article 9. Finally, it outlines present difficulties linked to European comparisons of cost-recovery and water pricing. 2.1 Water and its dimensions: implications for water services provision Water, considered here to be a renewable resource46, has a number of distinct features that make it fundamentally different from other resources and prevent a simplistic approach towards its management. It has long been acknowledged in the literature that water has different dimensions (ROGERS ET AL. 2002, 1998, SAVENIJE 2000, SMETS 2000, HOEKSTRA 1998, PERRY ET AL. 1997). First, water...

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