Households Industry
Country Supply Sewage Supply Sewage
Albania 0.11-0.2 - 0.52-0.64
-BiH 0.1-0.61 Inc. in water price 0.26-1.53 Inc. in water price
Bulgariaa 0.18-0.87 Inc. in water price 0.27-0.92 Inc. in water price Croatia 0.32-1.1 Inc. in water price 0.64-1.6 Inc. in water price Czech Republicb 0.92 Inc. in water price 0.92 Inc. in water price
Estonia 0.26-0.53 0.24-1.06 0.26-1.02 0.22-1.8
Hungary 0.1-1.01 0.09-1.52 0.24-1.03 0.18-3.46
Latviac 0.14-0.52 0.2-0.52 0.14-1.79 0.43-2.04
Lithuania 0.24-0.75 0.24-1.22 0.24-1.05 0.36-2.16
Macedoniad 0.24 Inc. in water price n.a. n.a.
Polande 0.43 0.35 0.55 0.5
Romaniaf 0.11 0.015 0.028 0.015
Slovakia 0.23 0.14 0.47 0.28
Sloveniag 0.13-0.87 0.024-1.63 0.22-1.47 0.041-2.52
Yugoslaviah 0.04-0.19 0.008-0.086 0.32-0.59 0.063-0.36
EU MEMBER STATES
Austria (1997) 1.8 2.7
Denmark (1997) 0.47 1.57
Germany (1998) 1.62 2.23
Sources: Annex 1; EC 2000a; EC 2001c Symbols: – = no charge; n.a. = data not available Notes:
a) Sewage charge accounts for 18 percent of the water consumption charge.
b) Average across the country and across different users.
c) Prices valid in 1999.
d) Price valid for the capital Skopje in 2000 (Ivanova 2001); average sewage charge in 1999 was 0.08 EUR/m3. e) Weighted average from 10 largest cities in Poland.
f) Average charges across the country; under water supply, rates refer to potable and industrial water respectively. Charge for sewage is an average across users.
g) In Slovenia, two charges are levied on wastewater: wastewater treatment charge and sewage charge. Wastewater treatment charges are only paid by the users that discharge wastewater into the sewage system connected to wastewater treatment plants (direct dis-chargers). The above range is a sum of the two charges. Sewage charges are alone in the range of 0.01-0.99 EUR/m3for households, and 0.017-1.59 EUR/m3for industry.
h) Data from 1998 available in USD; exchange rate EUR 1 = USD 1.12109
sidised from sources other then user charges, and it is a common assumption that these investments in the accession countries will take place with high involvement of public resources and international assistance (EC 2000c).
Table 7.4 shows that the user charges (prices paid for water and sewerage by house-holds) are lower than in the Western European countries listed. But it should be noted that the comparative charges are based on using the market exchange rates between national currencies and the euro. As discussed in Section 4.2, the use of exchange rates is biased and the actual financial burden is higher. To get a better picture of the actual financial situation the population faces in the region regarding the water bill, an analysis of the amount house-holds have to pay for these services expressed in the share of total income has to be carried out. For example, low-income households are paying up to nine percent of their monthly income for water services in Tallinn, Estonia (Kraav 2000). Furthermore, Kraav reports that the application of full cost recovery principle would lead to a dramatic increase in the month-ly costs for water suppmonth-ly and sewerage with the result that an average household would have to pay 8.3 percent of monthly income instead of the current 2.2 percent (Kraav 2000).
However, compensation/mitigation strategies could be established in CEECs based on experiences drawn from EU member states. Schemes similar to the setting of water tariffs in Southern European countries, where the tariff increases proportionally to the amount of water consumed29could be implemented (OECD 1999d and 1999e), or a tax-free supply of a given quantity of water could be established.30
7.5 CONCLUSIONS
Demand for water has decreased quite dramatically in several CEECs over the last decade.
A recent study reports an annual decrease of up to 15 percent in Bulgaria and 20 percent in Lithuania (EC 2001c). At the same time, user charges for water services have increased throughout the region. However, full cost recovery via the user pays principle has not been achieved. Operation and maintenance (O&M) costs are generally covered by the charges paid by households in the 10 accession countries but the coverage of capital costs is either not achieved (for example Bulgaria), or is achieved partially (Hungary and Poland) (EC 2001c).
The cross-subsidisation of households by other water users (industrial sector) is still very common in the region, and the agricultural sector is probably the main beneficiary of cross-subsidisation in several CEECs. A recent study examining the current practice in agricultural water pricing concludes that the price of water for irrigation purposes is supported by as much as 70 percent in Slovakia via the provision of direct subsidies (REC 2001c). The same scheme of direct subsidies is also implemented in Bulgaria. A cross-subsidisation scheme for water usage for irrigation is applied in Romania by “setting the price of irrigation water at a lower level than of water for industrial use” (REC 2001c, p.32).
Water policies in EU member states as well as in CEECs are heavily influenced by the recently adopted Water Framework Directive (COM(2000)60/EC) (REC 2001b). The general purpose of the WFD as stated in Article 1 is “to establish a framework for the protection of inland surface waters, coastal waters and groundwater.” The directive implicitly stresses the need to achieve the environmental objectives in a cost-effective manner by using economic principles, approaches and instruments as key elements. Furthermore, the PPP has to be kept in mind as the underlying principle when this directive is implemented. The adoption of this directive will generally revise the existing scheme of establishing water pricing poli-cies, because an assessment of the full cost recovery principle distinguishing between all water services provided by the main water users (households, industry and agriculture) is required, by taking into account not only financial but also environmental and resource cost aspects. This measure will certainly lead to changes in water policies adopted in many coun-tries because of the objective of correctly defining the water pricing policies by considering social, environmental and economic effects of cost recovery issues.
The reform of water-pricing policies is therefore one of the basic instruments and is a component of the so-called “programme of measures” mentioned in the directive. It is expected that, in particular, the incentive function of economic instruments will be con-sidered during the reform of water policies. Social aspects have to be kept in mind dur-ing the reform process of the revision of water prices, as the above-mentioned Estonian example clearly demonstrates.
8.1 INTRODUCTION
The development and use of economic instruments in waste management are being increasingly influenced by EU legislation, especially in the 10 candidate countries. Waste management policies dealing with specific environmental and natural resource issues are based on a combination of various instruments, such as regulatory measures and economic instruments. A recent study has found that in OECD member countries, “Regulations in place undermine the effectiveness of economic instruments, or at least render them irrelevant. This is particularly notable in the field of waste policy, where quantitative targets for the share of waste to be recycled, incinerated or landfilled, and regulations which embody the concept of extended producer responsibility can prevent households and firms from responding fully to the incentives provided by waste taxes” (O’Brien and Vourc’h 2001, p.47).
Quantitative targets are provided, for example, in the case of the EU Packaging and Packaging Waste Directive, (94/62/EEC) and the EU Landfill Directive (1999/31/EC). Some of the Candidate Countries have already transposed EU legislation in the field of waste man-agement policies into national law (REC 2001d). The problems that may arise form combin-ing regulatory measures with economic instruments are outside the scope of this report, but it is worth pointing out that environmental policy cannot rely exclusively on economic instruments, and that “regulation will always be a necessary component for environmental policy for a wide range of issues” (O’Brien and Vourc’h 2001, p.47).
Various waste management schemes are applied throughout the region, and Table 8.1 gives an overview of economic instruments implemented in the waste sector in CEECs. The following sections of this chapter discuss different instruments in more detail. Chapter 8.2 focuses on waste user and waste disposal charges. Waste related product charges and other economic instruments are analysed in Chapter 8.3 in a more detailed manner, and conclu-sions are drawn in Chapter 8.4.
It is noteworthy that nuclear waste charges are levied in a number of countries, such as Bulgaria, the Czech Republic, Hungary, Latvia and Slovakia, normally in the form of sur-charges on electricity produced in nuclear power plants. Such a measure can also be found in the EU, for example in Finland. The revenues are channelled into special funds for the decommissioning of nuclear power plants and for nuclear waste management. A further interesting issue relating to Table 8.1 is the fact that several countries implemented a charge on ozone depleting substances (ODS), which shows some similarities to the situation in Denmark (EC 2000a).
8.2 WASTE USER AND WASTE DISPOSAL CHARGES
Waste charging schemes implemented in the CEECs vary, but are in principle implemented through waste user charges, and waste disposal charges or taxes. In some countries, waste user charges are set as flat annual/monthly rates (per household, inhabitant or surface of the build-ing), while in others they are linked to the quantity of waste generated (see Table 8.2 below).
The number of private companies in the waste management sector is increasing, but waste col-lection and disposal predominantly remains the competence of municipal/local authorities.
Waste charges are therefore set and collected by either municipalities or service providers.
Several CEECs have introduced differentiated disposal rates for municipal, industrial and hazardous wastes, but the collection and separation of wastes still remains problematic, espe-cially when considered in relation to the EU standards and targets. Recovery, reuse, and recy-cling are further areas in waste management where economic instruments are being