German Contribution on Methodology

Präsentation zum Thema: "German Contribution on Methodology"—  Präsentation transkript:

1 German Contribution on Methodology
Assessment of Affordability (CS 1) and Alternatives to classical CBA (CS 2) Bernd Klauer (UFZ) and Britta Pielen (Leipzig University) Research team: Ingo Bräuer, Max Grünig, Katja Sigel, Melanie Mewes, Robert Holländer

2 What is meant by “disproportional”?
Checking disproportionality requires balancing costs with something else – a standard of comparison. Costs ?

3 Possible standards of comparison
1. Positive effects of the measures  economic cost-benefit analysis (CBA)  cost-effectiveness analysis  multi-criteria analysis 2. Ability to pay of those who bear the costs of the measures  of private actors  of the state (member states, federal states, municipalities) Case Study 2 Case Study 1

4 Restrictions for ability-to-pay-criteria
In the long run the financial burden of private actors and the state can be eased by reallocating costs  Ability-to-pay-criteria may thus justify extension of deadlines – less stringent objectives require further substantiation! Das staatliche Unvermögen, bestimmte Ziele zu erreichen kann durchaus zur Zielabsenkung führen, und zwar über eine Kosten-Nutzen Analyse, die sich nicht auf den Wasserkörper beschränkt, sondern den Nutzen des Einsatzes staatliche Mittel vergleicht, die Aussage ist daher so nicht haltbar und ich finde auch, sie muss an der Stelle nicht gemacht werden, das gehört nicht zum Projekt,

5 Data availability A sound justification of exemptions requires reliable data on (financial) costs of the measures and the standard of comparison: positive effects (and other non-financial negative effects) or the burdens of those bearing the costs

6 Process 1. Identify cost-effective programme of measures for each water body 2. Check of technical feasibility and natural conditions: Are measures technical feasible? Do natural conditions allow timely improvement of water status? 3. Screening for disproportionalities 4. Check for disproportionality of costs for each water body (group) 5. Check for disproportionality of costs for member state/federal state

7 Assessing Affordability
Case Study 1 Assessing Affordability

8 Some criteria for limited ability to pay
Definition Valuation Costs according to polluter-pay-principle Costs for actor x% above his share of the causation.  Relation of costs and average business profits of a branch The costs for a company exceed x % the average business profits of its branch.  Share of costs for water protection in the average revenue of the branch Costs for water protection of a company (including additional costs for WFD measures) > x % average revenue of the branch.  Share of average costs for private households in average household income Average costs of measures borne by households exceed x % of average household income. Share of costs of measures in household income Average share of costs of measures borne by households in their income exceed by x % the countries average. Costs for those responsible for maintenance of rivers compared to previous expenditures Costs for those responsible for maintenance of rivers exceed x % their previous average expenditures for maintenance.

9 Some criteria for limited ability to pay
Definition Valuation Costs according to polluter-pay-principle Costs for actor x% above his share of the causation.  Relation of costs and average business profits of a branch The costs for a company exceed x % the average business profits of its branch.  Share of costs for water protection in the average revenue of the branch Costs for water protection of a company (including additional costs for WFD measures) > x % average revenue of the branch.  Share of average costs for private households in average household income Average costs of measures borne by households exceed x % of average household income. Share of costs of measures in household income Average share of costs of measures borne by households in their income exceed by x % the countries average. Costs for those responsible for maintenance of rivers compared to previous expenditures Costs for those responsible for maintenance of rivers exceed x % their previous average expenditures for maintenance.

10 Case study No. 1: Charges for water
Case: A densely populated German federal state Focus: Charges for water supply and sewage disposal for private households Status quo: Already a high level of environmental investments in water supply and sewage disposal has been reached  Assumption: Environmental objectives of WFD require additional measures The increase of charges is 1.6 %. This does not indicate disproportionality. Außerdem,: Bitte schreiben, dass die Annahme getroffen wird, dass zusätzliche Maßnahmen durch die Umweltziele verlangt sind und das fiktive Kosten angenommen werden, man weiß in NRW, woher die Studie kommt, Average charges [€/(year x household)] Status quo 485 Implementation of measures until 20151 493 1 based on fictional costs

11 Environmental Protection Agency (USA)
Case study No. 1: Charges for water Reasonable charges for private households Thresholds for the expenditures of private households for water supply and sewage disposal (share of water charges in average household income) Organisation Threshold [%] Environmental Protection Agency (USA) 2.5 World Bank 3.0–5.0 OECD 2.0

12 Case study No. 1: Charges for water Share of water charges by income classes
Share for water charges in household income of different income classes in status quo Income class Share of water charges in household income Share income class in total population [€/year] [%] less than 12,771 more than 3.80 6.38 12,771 to 27,366 3.80 to 1.77 31.69 27,366 to 47,435 1.77 to 1.02 34.44 47,435 to 72,977 1.02 to 0.66 18.40 72,977 to 109,465 0.66 to 0.44 6.46 more than 109,465 less than 0.44 2.18

13 Case study No. 1: Charges for water Share of water charges by income classes
Share for water charges in household income of different income classes in status quo Income class Share of water charges in household income Share income class in total population [€/year] [%] less than 12,771 more than 3.80 6.38 12,771 to 27,366 3.80 to 1.77 31.69 27,366 to 47,435 1.77 to 1.02 34.44 47,435 to 72,977 1.02 to 0.66 18.40 72,977 to 109,465 0.66 to 0.44 6.46 more than 109,465 less than 0.44 2.18 5.4 Mio people (out of 18 Mio) are above the 2% threshold. ca. 30% of households need more than 2% of household income for water.

14 Case study No. 1: Charges for water Where will deadlines be extended?
Considerable share of households are already overburdened by charges for water supply and sewage disposal .  no additional water charges 1. Identify municipalities where WFD measures would lead to relevant increases of water charges. 2. Extensions of deadlines will be claimed in the corresponding water bodies. Ich würde es begrüßen, wenn der Entwicklungsaspekt einbezogen wird, das sich das Problem verschärft - und die Aussage, dass die Finanzierung der Kosten anders organisiert werden_ muss,_ kann so nicht getroffen werden, das ist eine politische Entscheidung, nicht eine der Umweltökonomie

15 Case study No. 1 Summary Ability to pay is a theoretically and legally valid criterion for disproportionality. Share of water charges in household income is a practical criterion for disproportionality. Ich würde es begrüßen, wenn der Entwicklungsaspekt einbezogen wird, das sich das Problem verschärft - und die Aussage, dass die Finanzierung der Kosten anders organisiert werden_ muss,_ kann so nicht getroffen werden, das ist eine politische Entscheidung, nicht eine der Umweltökonomie

16 Cost-Benefit Assessments
Case Study 2 Alternative Cost-Benefit Assessments

17 Alternative cost-benefit assessment Why to explore alternative procedures?
Monetary valuation of benefits hindered by Methodological issues: monetisation of WFD related benefits linked with important difficulties Capacity constraints: budget, time, expertise of policy makers and academics (Partly) lack of acceptance – also concerns about results of cost-benefit comparison What is required? … switching to the problem perspective A transparent and even-handed process for weighing costs and benefits of measures against each other An integrative and holistic perspective on costs and benefits, given current information, data and capacity constraints Übergang Affordability Weswegen gehen wir auf eine andere Schiene!  WAS VERLANGT DIE WRRL Verfahren entwerfen, das die Gesamtheit der Kosten und Nutzen erfasst und in die Entscheidungsfindung einbezieht Objektivität der Entscheidungsfindung erhöhen – Aber: Expertenmeinung bleibt i.d.R. Auslöser Prozess systematisieren & Transparenz erhöhen Verwaltungsaufwand senken Handbuch für den Entscheidungs- & Abwägungsprozess: typische Entscheidungssituationen exemplarisch analysieren Prozessablauf darstellen Informations- / Kriterienblätter erarbeiten

18 Alternative cost-benefit assessment When to apply it?
In principle: same application scope as a classical CBA  May serve for justifying time and quality exemptions Aim of the project: a methodology that allows for Addressing all benefit categories Including available information & data, irrespective of their format Obtaining increased transparency in decision making  Providing implementation guidance (“handbook”)

19 Alternative cost-benefit assessment Definitions and prerequisites
Definition of „benefits“ applied in the project Testing starts, where an imbalance is suspected Total Benefits Non-water related benefits Water related benefits Total Benefits

20 Alternative cost-benefit assessment How to apply it
Alternative cost-benefit assessment How to apply it? Overview on the procedure Starting point: Cost-effective programme of measures, imbalance suspected Step 1: Confirming the suspicion on disproportionality by Step 1a: Comparing costs to average costs at (group of) WB level or Step 1b: Evaluating cost-effectiveness of measures with a predefined (problem and area specific) threshold value Step 2: Rough investigation of the (potential) relevance of additional (above-average) benefits Step 3: Detailed assessment of additional (above-average) benefits ( Millennium Ecosystem Assessment) Step 4: Comparison of above-average costs with assessed benefits ( decision-making guidance) Hier werde ich mir noch eine ansprechende graphische Darstellung überlegen. Ziel der Folie: die Grundpfeiler des Prozesses darstellen, damit der nachfolgende Ablauf nur noch in Auszügen erläutert werden muss.

21 Alternative cost-benefit assessment How to apply it
Alternative cost-benefit assessment How to apply it? The decision making process Only DC pathway for justifying exemptions considered. Hier nur alternative CBA considered – technically, all three procedures as introduced in the beginning could be applied.

22 Detailed benefit assessment required
Alternative cost-benefit assessment How to apply it? The decision making process based on five criteria LESS STRINGENT OBJECTIVES further confirmation required  continue with STEP 3 Detailed benefit assessment required

23 Alternative cost-benefit assessment How to apply it
Alternative cost-benefit assessment How to apply it? The decision making process Selected WFD-relevant ecosystem services based on Millenium Ecosystem Assessment Basic assumption:  benefits =  costs  Above average costs can be justified by “special” benefits

24 Alternative cost-benefit assessment How to apply it
Alternative cost-benefit assessment How to apply it? The decision making process Present work focus within the project Vieles hat nur mit einer politischen Wertung zu tun. Welchen Wert hat Trinkwasser / Tourismus in einem Land. Gesellschaftliche Wertung.  Developed in cooperation with responsible administrations

25 Summary Justifying exemptions based on affordability criteria
Alternative cost benefit assessment When to apply? Time exemptions When to apply? Time exemptions Quality exemptions Diese Folie wird noch erweitert und zudem um eine „concluding remarks“ Folie ergänzt. Intended as an independent procedure as well as a complementary approach to the assessment of affordability

26 Thank you for listening. For further information, please contact
Dr. Bernd Klauer  Britta Pielen  Dr. Ingo Bräuer  26