The concept of disproportionate cost is one of the key economic elements of the EC Water Framework Directive. The practical implementation of this concept by the Member States offers a range of possible interpretations that are more or less in line with environmental economic theory. In a contribution to the envecon 2007 Applied Environmental Economics conference in London, Benjamin Görlach and Britta Pielen provided an introduction to the concept, its role in the Water Framework Directive, and provided an overview of the current discussion in some EU Member States.

The EC Water Framework Directive (WFD) introduced several innovations into European water policy, including the integration of economic approaches. Throughout its implementation, economic instruments (e.g. water pricing), methods (e.g. cost-effectiveness analysis) and principles (e.g. the polluter-pays-principle) are used to reach the Directive’s objectives. Economic considerations can also play a role to justify exemptions from the overarching aim of the Directive, i.e. to achieve good status of all water bodies by 2015. If reaching this objective in time should be disproportionately costly, either the 2015 deadline may be extended, or the objective may be relaxed. However, the practical interpretation of the terms “disproportionately costly” remains disputed: in proportion to what are costs considered as disproportionate, and what is the threshold value for disproportionality? The WFD itself does not provide any guidance on this, but leaves it to the Member States to substantiate the concept.

Ultimately, the judgement on the disproportionality of costs will be a political decision. Accordingly, objective criteria will have to be developed to ensure a transparent decision making process. By now, discussions on how to deal with disproportionate costs in an even-handed, transparent and pragmatic way have started in most Member States. Against this background, the lecture by Benjamin Görlach and Britta Pielen first investigated the concept of disproportionate costs from an economic and a political perspective and clarified its scope of application in the WFD. Subsequently, it reviewed some approaches that had been suggested in selected Member States (D, F, NL and UK) with regard to their economic foundations, scope of application, practicability and effectiveness. In this context, they also elaborated on the possible contribution of the EU-funded AquaMoney research project. Finally, the contribution investigates in how far the ability-to-pay of affected parties can serve to justify an exemption, incorporating results of the research project "Disproportionate Costs in the Water Framework Directive" funded by the German Länderarbeitsgemeinschaft Wasser (LAWA).

The envecon 2007: Applied Environmental Economics Conference, organised by the UK Network of Environmental Economists (UKNEE) took place on 23 March 2007, at The Royal Society in London. This one-day conference brings together environmental economists from public and private sectors, academia and consultancy to share results of recent research and to discuss issues relevant to the practical application of environmental economics in the UK and elsewhere. By creating a mutual platform for those who commission work and those who undertake it, the conference aims to contribute to the effective use of environmental economics for environmental policy and management, as well as influence the research agenda.

The presentation [pdf, 461 KB, English] and the conference paper [pdf, 117 KB, English] by Benjamin Görlach and Britta Pielen are available for download.