CLIMATE CHANGE – WATER SECTOR

HIGH-LEVEL CONFERENCE ON WATER, CLIMATE AND HEALTH

First International Forum on Development, Environment and Health

Arezzo, Italy, November 20-23, 2012

Roberto Zocchi – Chair EU3

EUREAU is the European Federation of National Associations of Water and Wastewater Services. EUREAU gather 10.000 water & waste water utilities & operators across Europe that provide sustainable water services to around 405 million European citizens.

EUREAU – WHO WE ARE

VISIONEUREAU aims for a provision of reliable and high quality water supply and waste water services which:• Protect public health;• Fully respect the natural

environment;• Support economic

development;• Socially acceptable

Climate change stress the water sector operational activity but

mostly……the infrastructural needFINANCING ISSUE!

Climate change

Application of the 3Ts Framework:

Action plan and way forward, beyond Marseille

Roberto ZocchiEU3 Chair13 March 2012, Marseille

Developed by OECD – applied by

EUREAU, The 3Ts (Tariffs Taxes Transfers) framework

represents a powerful tool in unlocking our

understanding of the sources of the funds

which underpin a sustainable future

3Ts Framework

WATER AGENCY

WATER SUPPLY OPERATOR

LOCAL GOVERNMENT

SEWER OPERATORS

SANITATION OPERATOR

BULK WATER OPERATOR

3Ts concept into practice in order to promote:− A source contribution increasing transparency of the

financing of water services and to facilitate the reporting obligations on the costs recovery principle (article 9 of European Water Framework Directive)

− A useful diagnosis and decision-making tool

− A means of informing on water services related investment targets

− A tool to raise general awareness of sectorial financing issues

TAXES/Transf

(Cap.Ex.) Tariff(Op.Ex.)

TAXES/Transf.

Tariff(Op.Ex.Cap.Ex.)

Time…..

3Ts Framework

An appropriate mix of Tariffs, Taxes and Transfers:

to finance capital and recurrent costs in the long run, and

leverage other forms of finance (equity, loans, bonds)

Tariff policies that :

are affordable to all users, including the poorest

ensure the financial sustainability of service providers

provide appropriate incentives (consumption, efficiency)

Subsidy policies that :

are predictable and reliable to facilitate investment planning

meet social and environmental objectives

are affordable to national/local governments(message: if the local government or the public authorities want to make water services affordable for the poorest, the funds could be targeted to this specific population through social mechanisms, with financial resources not coming from water)

Relying on public funds or donors aids on a permanent basis is not consistent with the

principle of sustainability of water services, and price policies and tariff

structures have to incorporate a return on capital, consistent with the principle of

“full cost recovery”, to cover the financing needs of the sector.

Tariff structures should also ideally reflect the long-term fixed nature of investment.Rising efficiency

• Effective regulation• Economic leverage

Sustainable Future - Recommendations (1)

TAXES/Transf

(Cap.Ex.)Tariff

(Op.Ex.)TAXES/Transf.

Tariff(Op.Ex.Cap.Ex.)

Time…..

Sustainable Future - Recommendations (2)maintenance holiday is an expensive short term

thinking!

ARE WE PROPERLY MANTAINIG WATER SERVICES ASSETS FOR THE

FUTURE GENERATIONS?Water Inflow

Distribution Network

Mains

Aqueducts

Storage Tanks Capacity

Piezometers

……

479,8 Mm3/yr

5.482 km

878 km

208 km

480.388 m3

n. 6

…

ASSET RENEWAL (extimated value)

15 – 20 Billion Euros

PLANNED GLOBAL INVESTMENT (5 Yrs): 100/150 M€/YearRising Standards (ww new

infrastructures):50/100 M€/Year

Maintenance (Ord/Extra; w/ww):45/50 M€/Year

(0,25%!.....400 Years!)NOT ENOUGTH!! WE HAVE TO DO MORE!!WE ARE LEAVING PROBLEMS TO NEXT

GENERATIONS!