Innovation: Evaluating Economic Policy Instruments for Sustainable Water Management in Europe

Last update: 29.06.2013
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Keywords: 
environmental economics, sustainable development, ecology, ecosystems, water resources and management, water resources, environmental protection, economic aspects
Economic policy instruments (EPI) have received widespread attention over the last three decades, and have increasingly been implemented to achieve environmental policy objectives. However, whereas EPI have been successfully applied in some policy domains (such as climate, energy and air quality), their application to tackle water management issues (drought/water scarcity, floods, water quality control) are beset by many practical difficulties. EPI-Water sets to assess the effectiveness and the efficiency of Economic Policy Instruments in achieving water policy goals, and to identify the preconditions under which they complement or perform better than alternative (e.g. regulatory or voluntary) policy instruments.

Using a common multi-dimensional assessment framework, the project will compare the performance of single economic instruments or their apposite combinations with the performance otherwise achievable with regulatory (command & control) interventions (such as water restriction/rationing, licensing or permitting), persuasive instruments or voluntary commitments. Furthermore the project will identify remaining research and methodological issues that need to be addressed, in particular with regards to the further development and use of national accounting, for supporting the design, implementation and evaluation of EPI in the field of water management.

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Project context and objectives:

At the latest, since the 1992 Earth Summit and its action plan Agenda 21, the European Union (EU) realised the benefits of price signals and economic incentives or disincentives to reduce the environmental costs of the consumption of energy, materials and natural resources. Yet, despite the repeated pledges such as the call for adequate water pricing under the Directive 2000/60/EC and the Communication COM(2007) 414, the implementation of the economic policy instruments (EPIs) for a sustainable, economically efficient and equitable water resources management has not been straightforward. In the midst of persistent economic and financial crisis, and the gloomy outlooks of human-made climate change, efficient water use is more indispensable than any time before.

EPI-WATER embarked in assessing the effectiveness and the efficiency of EPIs in meeting water policy goals, and to identify the preconditions under which EPIs complement or outperform regulatory policy instruments, persuasive instruments or voluntary commitments. Furthermore, the project explores use of national accounts for supporting the design, implementation and evaluation of EPI in the field of water management.

The project involves 11 institutions from among the most experienced in Europe in the field of water economics. It started on 1 January 2011 and will last until 31 December 2013. The key outcomes of the project include a comprehensive (ex-post) review of many existing EPIs in the water field, and a design of innovative policy instruments to tackle current and future water management changes experimentally analysed in several case river basins across Europe. 18 months into the project, the consortium made a quantum leap towards achieving these goals.

Work performed since the beginning of the project and the main results achieved so far:

(1) The deliverable D2.1 laid down a policy assessment framework (AF) specifically designed for the purpose of the EPI-WATER project but drawn upon existing most up-to-date assessment framework. The AF addressed institutional background, environmental outcomes, economic outcomes, transaction costs, distribution effects, uncertainty, and the prospects of policy implementation. Each of these criteria the AF describes in terms of one or more indicators appropriate to the EPI under consideration. The AF is accompanied by a toolbox (TX, deliverable 2.2) comprising a number of analytical and qualitative, narrative-based or interpretative methods and tools to choose from. Both the AF and TX have been revised (deliverable D2.3) from the point of view of experience gained from their application.
(2) The more than a thousand pages-long joint deliverable D3.1 and 6.1 comprises ex-post assessment reports of some thirty economic policy instruments in Europe and in the overseas. The scope of the review was to explore the performance of existing EPIs. Out of these 30 review instances, 10 have been commissioned to non-EU researchers and experts from the Inspiration beyond the EU group, coming from the EU neighbourhood countries and oversees (United States (US), Australia, Israel, Chile, China). The report analysed many different instruments including voluntary agreements, charges and taxes, water pricing schemes, subsidies, tradable permits and certificates. The assessment has been conducted using the AF and TX (D2.1 and D2.2). Several of the case study reports have been quoted by the recent report of the European Environmental Agency (EEA) Towards efficient use of water resources in Europe (EEA Report 1/2012).
(3) The first EPI-WATER conference Understanding the application of economic policy instruments - EPIs - in water management: Review of empirical evidence, experiences and lessons learned from Europe and elsewhere took place in Berlin, on 26-27 January 2012. The conference brought together European and international experts and researchers from academia, governments and research institutions. Members of the EPI-WATER consortium, along with experts of the Inspiration beyond the EU group and the Policy think tank (PTT) - both established under, and for the purposes of, the EPI-WATER project - discussed the project achievements and their applicability for advancing water policies in Europe.
(4) The project has been represented at a number of academic and science-policy events, notably the World Water Forum (Marseille, 12-17 March 2012), European Green Week (in 2012 dedicated to water, Brussels, 22-25 May 2012), the Global Platform for Disaster Risk Reduction (Geneve, 8-13 May 2011).

Expected final results and their potential impacts and use:

The EPI-WATER research project is contributing directly and indirectly to a greater use of economic instruments for supporting the sustainable management of water resources in Europe by:
1) a systematic analysis of the EPIs potential and actual performance;
2) designing innovative instruments for floods / excess water management, drought / water scarcity management, ecosystem services and biodiversity conservation, and water quality control;
3) fostering transfer of knowledge and experiences yielded from the application of the innovative EPIs in non-EU countries that hold a good promise for meeting EU water policy objectives.

The project responds to the policy challenges of the Water Framework Directive (2000/60/EC), the Floods Directive (2007/60/EC), and the Resource-Efficient Europe flagship initiative of the Europe 2020 Strategy, and the EU climate adaptation strategy to name but a few policy contexts. The project pays attention to how potential economic instruments perform vis-a-vis risk and uncertainty, in particular in light of the global environmental changes.

List of websites: http://www.feem-project.net/epiwater/

Collaboration sought: N/A

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This innovation is the result of the project

Title: Evaluating Economic Policy Instruments For Sustainable Water Management In Europe

Acronym: 
EPI-WATER

Runtime: 
01.01.2011 to 31.12.2013

Status: 
completed project

Organisations and people involved in this eco-innovation.

Please click on an entry to view all contact details.

FONDAZIONE ENI ENRICO MATTEI

(Italy)

Role in project: Project Coordination

Contact person: Ms. EBERLE Monica

Website: http://www.feem.it

Phone: +39-0412700437

Contact

AARHUS UNIVERSITET

(Denmark)

Contact person: Ms. LARSEN Karina

Website: http://www.au.dk

Phone: +45-46301365

Contact

ACTEON SARL

(France)

Contact person: Ms. RUF Ute

Website: http://www.acteon-environment.eu/

Phone: +33-389473941

Contact

ALMA MATER STUDIORUM-UNIVERSITA DI BOLOGNA

(Italy)

Contact person: Dr. TORRESAN Diego

Website: http://www.unibo.it

Phone: +39-0512099373

Contact

BUDAPESTI CORVINUS EGYETEM

(Hungary)

Contact person: Dr. KADERJÁK Péter

Website: http://www.uni-corvinus.hu

Phone: +36-14827070

Contact

ECOLOGIC INSTITUT GEMEINNÜTZIGE GMBH

(Germany)

Contact person: Mrs. TINGS Daniela

Website: http://www.ecologic.eu

Phone: +49-30-868800

Contact

FUNDACION IMDEA AGUA

(Spain)

Contact person: Dr. GÓMEZ Carlos Mario

Website: http://www.water.imdea.org

Phone: +34-918854284

Contact

MIDDLESEX UNIVERSITY HIGHER EDUCATION CORPORATION

(United Kingdom)

Contact person: Ms. MACHIN Nuria

Website: http://www.mdx.ac.uk

Phone: +44-2084116803

Contact

NATIONAL TECHNICAL UNIVERSITY OF ATHENS

(Greece)

Contact person: Prof. MIMIKOU Maria

Website: http://www.ntua.gr

Phone: +30-2107722880

Contact

UNIVERSITAT DE VALENCIA

(Spain)

Contact person: Ms. SANCHIS Angeles

Website: http://www.uv.es

Phone: +34-963983621

Contact

WAGENINGEN UNIVERSITEIT

(Netherlands)

Contact person: Ms. VAN DRIEL Ineke

Website: http://www.wageningenuniversiteit.nl/uk/

Phone: +31-317-485656

Contact