Time to Invest in Europe’s Water Infrastructure
THE WATER AND SANITATION sector is an important part of the European economy. It represents more than 500,000 people directly employed in water and sewerage companies, operating thousands of facilities and several million kilometres of networks.
Investment in the water and sanitation sector is estimated at 30 billio euros per year, with an annual turnover of 70 billion. Investment needs of thesector are and will be high, as it results from the specificity of this sector. Water and waste-water services are based on capital-intensive infrastructure In many countries it is difficult to maintain the infrastructure only from tariffs and as a result, the infrastructure is ageing rapidly.
The Organization for Economic Cooperation and Development (OECD), proposes a 3T solution to facilitate the water and sanitation industry’s capital management. 3T represents Taxes, Tariffs, Transfers as a source of financing for the water and sewerage sector. Overall, 3T is the method for determining, increasing and balancing finances in three forms, and the most important challenge is to understand and strike the right balance between the three sources.
The functioning of the sector according to this methodology is not based solely on tariffs. However, it seems that the most transparent way would be to rely solely on tariffs, in line with the principle of cost recovery for water services set out in the Water Framework Directive.
That is why EurEau - the federation of water and waste water sector (http://www.eureau.org) highlights in one of its position papers that “the WFD, lays down the principle of cost recovery for water services in Article 9, including environmental and resource costs. The water supply and waste water infrastructure in many parts of Europe is ageing. In some countries, the charges collected from the users are not sufficient to maintain and renew the systems in due time: tariffs should be set on the basis of the investment needs of the water infrastructure”.
In addition to infrastructure maintenance, companies must respond in thefuture to further civilizational challenges. These include climate change and the need to systematically build resilience to violent weather events, water scarcity, droughts and floods, as well as the need to develop research and innovation. In the context of all these challenges, the lack of adequate financing for the sector is very dangerous. Taking care of low tariffs, regardless of current and emerging needs is very short-sighted. For the sake of future generations, companies should be able to finance their investments adequately. Moreover, the lack of appropriate depreciation contributes to limiting investment opportunities and closes the vicious circle of underfunding. The situation is often aggravated by a decline in consumption, which, with a fairly significant part of the variable tariff, results in a decrease in infrastructure funds.
Chair of the EurEau Committee on Economics and Legal Affairs, expert at IGWP, the Polish Waterworks Chamber of Commerce.
The energy strategies of many countries and economies will see a switch from fossil fuels to renewable energy sources in the decades to come. Dramatic developments in the situation in Eastern Europe will have fundamental consequences for energy supplies and prices.