Memorandum submitted by the Department
for Environment, Food and Rural Affairs (J23)
EXECUTIVE SUMMARY
1. This memorandum covers the Government's
approach to transposition and implementation of this major Directive.
On existing assessments, implementation will deliver substantial
environmental benefits and also entail substantial costs. Both
Government cost and benefit assessments of the Directive will
be revised. Integrating water quality planning with other key
policy areas, based on river basins, is an explicit requirement
of the Directive. The Environment Agency will play a central role
in implementation. Co-operative work at Community level is helping
develop guidance to assist this process. The Government intends
to publish a second consultation paper soon.
INTRODUCTION
2. This Directive is the most substantial
piece of EC water legislation to date. It requires all inland
surface and coastal waters and groundwaters to reach "good
status" by 2015. Water quality in England has been improving
steadily and this Directive will set demanding environmental objectives,
including ecological targets, to be met by 2015. The Directive
therefore sets a framework which should provide substantial benefits
for the long term sustainable management of water.
3. The Government published the first of
three consultation papers in March 2001 on implementation of the
Directive and copies are included with this Memorandum. It is
also available on the DEFRA website at www.defra.gov.uk/environment/consult/waterframe/index.htm
4. A second consultation is planned for
publication soon which will explain the Government's proposed
approach to transposition of the Directive into national legislation.
A third consultation paper is planned for 2003 which will contain
draft transposing regulations.
5. This memorandum includes consideration
of the main stakeholder interests. Member States, including the
UK, candidate countries, stakeholders and the Commission are involved
in a collaborative process (Common Implementation Strategy (CIS))
to develop guidance on implementation of the Directive.
DEVOLUTION
6. The Scottish Executive and the Department
of the Environment for Northern Ireland are consulting separately
on transposition and implementation of the Directive in Scotland
and Northern Ireland respectively. DEFRA and the Welsh Assembly
Government are working jointly on transposition in England and
Wales, though in practice implementation is devolved in Wales
for most purposes.
7. This memorandum therefore refers to DEFRA's
responsibility to carry forward implementation of the Directive
in England. The Directive requires water to be managed on a river
basin basis, so this will require some aspects of transposition
and implementation in England to be carried out jointly with the
National Assembly and the Scottish Executive where rivers cross
the borders with Scotland and Wales.
INTEGRATION ACROSS
POLICY AREAS
8. The Directive requires river basin plans
to integrate the management of water quality and water resources
and surface and groundwater management in order to meet environmental
objectives. It also integrates water quality requirements of "protected
areas" such as Natura 2000 sites and requires consideration
to be given to the water needs of wetlands. In addition, the Directive
includes important provisions which will contribute to achieving
the objectives of international agreements which aim to prevent
or eliminate pollution of the marine environment such as OSPAR.
Encouraging the active involvement of all interested parties in
the implementation of the Directive is another key aspect.
9. Preparing for implementation of the Directive
provides a good opportunity to ensure that management of water
quality is carried out in a well thought out strategic policy
framework. Links with marine and coastal issues were included
in "Safeguarding Our Seas" published earlier this year.
We will be publishing in the Autumn a policy document setting
out our strategic priorities for water over the longer term and
links with other policy areas, including flood protection. In
addition, we will also be publishing in the Autumn a strategy
for sustainable food and farming which will include consideration
of water quality issues. Finally, the England Biodiversity Strategy,
which we will publish in the Autumn, will consider how action
to improve water quality and management can provide benefits for
biodiversity.
10. This memorandum has been prepared in
consultation with the Welsh Assembly Government, Scottish Executive,
the Environment Agency and English Nature and Ofwat.
I. BY WHAT
MEANS, AND
OVER WHAT
TIMETABLE, THE
GOVERNMENT INTENDS
TO IMPLEMENT
THE DIRECTIVE
IN THE
UNITED KINGDOM
Means
Legal instruments for transposition
11. The Water Framework Directive has to
be transposed into national law by December 2003, although different
parts of the Directive, once transposed, are to be given practical
effect to a variety of other timetables. The working assumption
is that transposition will be achieved through secondary legislation,
under existing regulation-making powers. This is likely to involve
a mix of enabling powers, largely drawing on the powers in section
2(2) of the European Communities Act 1972, and other more specific
powers in other primary legislation. Directions, particularly
to the Environment Agency under section 40 of the Environment
Act 1995, may also be needed. Current plans are also to provide
for some transposition elements in the Water Bill.
12. For those river basin districts (districts
are referred to in section IV of this memorandum) which cross
the England/Wales border, it is expected that the National Assembly
and the Secretary of State will act jointly in transposing the
Directive's requirements in relation to designation and river
basin management. DEFRA and the Scottish Executive are considering
options for the legal process for designating cross border river
basin districts and related requirements of the Directive.
Measures
13. Article 11 requires a series of measures
to be in place to meet the environmental objectives in article
4. Generally we already have many of the statutory measures in
place that are necessary to deliver what the Directive requires.
This includes the current discharge consent system. The more demanding
and wide-ranging water quality objectives in the Directive mean,
however, that many existing consents will need to be reviewed.
Some changes will be needed to the current arrangements for licensing
abstraction of water, in addition to proposed measures contained
in the Water Bill.
14. As part of implementation, the Government
also proposes to introduce a new power to control sources of diffuse
pollution, to the extent that controls are needed to meet the
river basin water quality objectives of the Directive. The proposed
enabling power would provide a mechanism for implementing the
relevant provisions of the Directive without determining in advance
what policy measures to apply in particular circumstances. Final
decisions about the likely use of the power would not need to
be taken until River Basin Management Plans are prepared (these
must be published in draft by the end of 2008).
Domestic consultation with stakeholders on transposition
15. The Government's three consultation
papers will lay the groundwork for formulating transposition measures.
The Environment Agency is separately consulting with a wide range
of stakeholders on technical aspects of annexes II and V of the
Directive. These annexes set out how the condition of the water
environment will be assessed, monitored and classified.
Co-operation within Europe
16. Guidance to help implement the Directive
is also being developed at Community level. The UK plays an active
role in the Community Implementation Strategy on the Water Framework
Directive. The Strategy has two main aims:
— to ensure that Member States all
have a common understanding of the Directive;
— to share the wealth of experience
and expertise that Member States have at their disposal so that
the Directive can be implemented in the way best suited to the
huge variety of local circumstances in Member States.
17. Under the Strategy, a number of working
groups are developing informal and non legally binding guidance
on how to action the technical parts of the Directive. These groups
are largely led by one or more Member States, with most other
Member States participating together with stakeholders and (more
recently) candidate countries. The Commission is co-ordinating
the overall work programme. The working groups cover issues such
as developing common understanding on significant human pressures
and guidance on economic aspects of the Directive. Work has also
begun recently on a wetlands paper. The UK is leading, or co-leading
three projects.
Timetable for implementation
18. The Directive has a series of implementation
deadlines (summarised in the attached annex) which stretch to
2015 (the date by which environmental objectives must be met).
The Government will want to ensure that it meets the deadlines
for phasing in the obligations, but it has no plans to phase them
in earlier than is required by the Directive. Implementation tasks
which specifically fall to the Government to carry out are explained
below.
Transposition
19. The first objective, clearly, is to
transpose the Directive into national legislation in England by
the end of 2003. The third consultation paper, planned for 2003,
will contain draft transposing regulations.
Identifying a competent authority and river basin
districts
20. Member States must identify a competent
authority (or authorities) by December 2003. The Government proposes
to identify the Environment Agency as competent authority because
of its existing functions and key environmental regulatory role.
21. Identification of river basin districts
is discussed further in section IV. Provision will also need to
be made for cross-border basins with Scotland and Wales.
Preparation of river basin plans and programmes
of measures
22. This is a key implementation area which
the Government will consider carefully in its second consultation
paper. This will also cover the role of the Secretary of State
and the potential need in some cases for binding guidance to accompany
implementing regulations, including arrangements for bodies other
than the Agency to be involved, such as English Nature and OFWAT.
The general approach to delegation of implementation work to the
Environment Agency is discussed in section III.
Negotiating future directives
23. New directives on priority substances
and on groundwater (article 16 and 17) will follow from the Water
Framework Directive. These are not yet proposed by the Commission
and will not form part of implementation of this Directive, other
than the default requirements in articles 16 and 17 if new Directives
are not agreed. As such they have not been dealt with in this
memorandum.
II. WHAT WILL
BE THE
COSTS OF
IMPLEMENTING THE
DIRECTIVE, HOW
THE COSTS
WILL BE
MET, HOW
THEY WILL
BE APPORTIONED,
AND THE
IMPLICATIONS FOR
WATER PRICING
POLICY.
The costs
24. The Government's first consultation
paper included a partial Regulatory Impact Assessment (RIA). The
total additional costs of complying with the Directive in England
(and Wales) were estimated to be in the range £2.0 billion
to £9.2 billion.
25. These costs were taken from a cost and
benefits study carried out by consultants between late 1997 and
early 1999 whilst the Directive was still being negotiated.
26. Comments received on the first consultation
paper included concerns that the RIA overestimated costs and underestimated
benefits and that it was misleading to assume that the Directive
generated more costs than benefits. Work planned to revise the
RIA is described later on in this part of the memorandum. Assessment
of benefits is considered later as well.
Apportionment of costs
27. The estimated overall costs in the RIA
were dominated by the cost of making improvements to water status
(£1.9-9.0 billion), which were broken down into: improvements
to point source discharges by sewerage undertakers (£0.9-4.2
billion); improvements to point source discharges by industry
(£0.3-1.2 billion); reductions in pollution from diffuse
sources, particularly agriculture (£0.6-2.9 billion); improvements
to river habitats (£90-440 million); and, alleviation of
low flows (up to £240 million).
28. The administrative, planning and monitoring
costs were assumed to fall principally on central government,
the devolved administrations and Government agencies, with small
administration costs falling on local authorities and the water
companies. The estimated costs of administrative arrangements
were £3 million, for the river basin management planning
process £13-20 million, and for additional monitoring and
assessment approximately £94 million. (It is Government policy
to encourage the Agency to recover such costs and expenses that
it incurs in carrying out its functions from those it regulates,
for example discharge consent and abstraction licence holders,
to the extent that costs can be attributed to particular groups.)
29. Inevitably, there was (and still is)
a high degree of uncertainty about these cost estimates because
of some of the assumptions on which they were based and the extent
to which Directive related investment would be needed in addition
to investment or measures already planned (including the water
and sewerage industry's environmental investment programme for
the period 2000-2005). In addition, the RIA could not take account
of recent decisions about the designation of additional eutrophic
sensitive areas under the Urban Waste Water Treatment Directive
(91/271/EEC), and additional Nitrate Vulnerable Zones under the
Nitrates Directive (91/676/EEC).
30. Some decisions will need to be taken
in the next periodic review on the new capital investment or preparatory
work that will be needed in the latter part of the next quinquennium
(2005-10). Completed works must be operational by 2012 (the deadline
specified by the Directive for making programmes of measures operational)
in order that the environmental objectives set for specific water
bodies can be achieved by 2015. The current expectation therefore
is that water industry related costs will need to be planned for
and built into the next two review periods. The capital costs
for other sectors affected can also be expected to be largely
incurred in the years preceding 2012.
Revising the RIA
31. DEFRA intends to provide revised cost
estimates in the RIA for its planned third consultation paper
on implementation of the Directive, due in 2003. This will be
based on research to be carried out this year.
32. An unavoidable difficulty in refining
cost estimates of the Directive now is that the actual water industry
investment and other measures necessary to meet environmental
objectives do not have to be firmly identified until 2009. Therefore,
as with the previous costing study, it will be important to make
explicit the assumptions on which the revised costings are based.
This is particularly relevant in relation to the use of proposed
powers to control diffuse pollution in order to meet environmental
objectives.
33. This power will need to be created by
December 2003 as that is the transposition deadline. However,
it will not be until later that we will be in a position to identify
how widely we will need to use this power in practice, and what
the specific regulatory impact will be and the consequent costs.
34. These will depend on two main factors—firstly
the technical implications of the good status requirement in the
Directive and what action is required to improve the quality of
waters as a result; and secondly, how far improvements are achieved
through alternatives to regulation, or through other regulation.
For example, DEFRA's current review of diffuse pollution of water
by agriculture is considering a range of options for preventing
and controlling such pollution, including economic instruments
and voluntary measures, as well as regulation.
Implications for water pricing policy
35. In accordance with the polluter pays
principle, the components of the estimated overall costs in the
RIA would be met by different parties by different routes. For
point sources, water and sewerage undertakers would be directly
responsible for meeting the costs of improvements to their point
source discharges (£0.9-4.2 billion) and would also be likely
to contribute a large share of the measures to improve river habitats
(£90-440 million) and to alleviate low flows (up to £240
million). The costs of improving other point source discharges
would be the responsibility of the industries concerned; but they
might meet some of this cost by paying increased trade effluent
charges to undertakers (where discharges were to the public sewer
and thence treated by the undertaker) and some by arranging and
paying for the treatment of the discharge themselves. For diffuse
sources, including agriculture, further consideration will be
necessary on how the costs of measures to reduce diffuse pollution
should be met.
36. The costs falling on water and sewerage
undertakers are, therefore, an as yet unsettled portion of the
total ranges estimated in the RIA, but, using the same figures,
would be not less than £0.9 billion and not more than £4.9
billion. These costs would be met by the undertakers, whose revenue
comes from charges to their customers. However, there is uncertainty
about their effects on customer charges. Additional costs, both
capital and revenue, would fall on companies at the same time
as other new obligations and other changes in their cost and revenue
bases. Undertakers' average charges are within the price limits
set by Ofwat at periodic reviews. The price limits are the outcome
of calculations that take into account not only capital and operating
expenditure, but also many other variables, for example how each
company might best finance its functions, what will be its cost
of capital and assumed efficiencies. The information needed for
these calculations will only be known as further periodic reviews
become due.
37. It may be helpful nevertheless to register
that, in the 1999 price review, Ofwat delivered a 12% reduction
in average household water and sewerage bills, followed by four
years of broadly stable price limits in real terms. The price
limits set allowed water and sewerage undertakers to finance capital
expenditure of £7.380 billion and average annual operating
expenditure of £189 million for the five year period 2000-05
(May 1999 prices) to deliver enhancements to improve drinking
water quality and the environment. This contributed £29 to
the average household bill. This scale of expenditure may be compared
with the RIA estimated costs of £0.9 to £4.9 billion
for improving point source discharges and a proportion of the
costs of improving river habitats and alleviating low flows. These
costs would be incurred over two periodic review periods.
III. THE ROLE
THAT THE
ENVIRONMENT AGENCY
WILL TAKE
IN IMPLEMENTING
THE DIRECTIVE
38. The memorandum to be submitted by the
Environment Agency will include information on the corporate and
project planning being carried out to prepare for implementation.
DEFRA and the Agency are currently discussing the additional resources
required to ensure implementation deadlines are met.
39. We are already well placed in England
to implement the Directive. The Environment Agency's existing
powers to regulate discharges to water and abstractions, the production
of non-statutory Local Environment Agency Plans (LEAPS), estuarial
management plans and the development of Catchment Abstraction
Management Strategies (CAMS) will provide a solid foundation of
techniques and experience for delivery of much of the action required
by the Directive.
40. Most of the tasks which will contribute
to full implementation will be carried out by the Environment
Agency through a series of duties and powers which the Government
proposes to place on the Agency as competent authority. They will
relate to key implementation duties such as:
— identification of river basins and
assigning them to districts (the Agency has already completed
the task of identifying river basin district boundaries);
— characterisation of surface water
(ie identification of water bodies and defining them into "types")
and groundwaters (eg location, boundaries, pressures and catchment
strata), assisting with economic analysis;
— review of human activity on water
bodies and assessing the impacts of those pressures;
— production of River Basin Management
Plans;
— production of basin plans;
— maintaining the register of protected
areas;
— co-ordination of the programme of
measures, including consultation on possible measures;
— establishment and maintenance of
monitoring programmes.
41. Agency staff are also involved with
the projects in the Directive Common Implementation Strategy described
in the introductory section to this memorandum.
IV. WHETHER THE
DEFINITIONS OF,
FOR EXAMPLE,
WHAT CONSTITUTES
A RIVER
BASIN AND
SIGNIFICANT HUMAN
ACTIVITY HAVE
BEEN CLARIFIED
SUFFICIENTLY TO
ALLOW MANAGEMENT
PLANS TO
BE FORMED?
River basins
42. The Directive (article 2(13)) provides
a definition of "river basin" which is
". . . the area of land from which all surface
run-off flows through a series of streams, rivers and, possibly,
lakes into the sea at a single river mouth, estuary or delta."
43. This definition is the equivalent of
what is sometimes called a "catchment". The Directive
requires river basin plans to be drawn up for river basin districts.
These districts can comprise one of more basins.
44. The definition of "basin"
is clearcut and the Government consulted in its first consultation
paper on a proposed river basin district structure based on a
basin (eg the Thames) or aggregations of basins (eg smaller river
basins in the south east). The Government therefore believes that
the basin structure identified provides a good basis to underpin
the development of river basin management plans.
45. One issue which the Government will
wish to seek views in its second consultation paper relates to
the seaward limit of river basin districts. Article 2.7 of the
Directive defines coastal waters as extending for a nautical mile
from the territorial baseline. In responses to the first consultation,
it was suggested that the definition of the seaward limit of coastal
waters might be extended to three nautical miles from the territorial
baseline. The Scottish Executive has already decided to make provision
for this in its draft Bill which is intended to transpose the
Directive. In the second consultation paper, the Government will
want to seek the views of those who might be affected by such
an extension of the seaward limit in England as well as the views
of all consultees on costs and benefits. This will enable DEFRA
to develop a partial Regulatory Impact Assessment in order to
take this issue further.
Plan preparation/significant human activity
46. The Directive requires a review of the
environmental impact of human activity on the status of surface
and groundwater to be completed for each river basin district
by December 2004. The review must be carried out in accordance
with the technical specification set out in annex II of the Directive.
47. For both surface and groundwaters, although
the requirements are phrased slightly differently, the approach
is essentially the same. That is, to gather available information
about pressures on water bodies and to assess the impact of those
pressures on water bodies and the risk of them failing to meet
the environmental status objectives set for those bodies.
48. Annex II of the Directive is detailed
in content and prescriptive about the types of anthropogenic pressures/human
activity that must be considered. This will require consideration
of pressures on water quality from both point and diffuse sources.
However, before this part of annex II is implemented, further
technical consideration of its requirements is needed, particularly
in respect of the need (in section 1.5 of annex II) to assess
the susceptibility of water bodies to be at risk of failing to
meet environmental objectives.
49. In order to develop technical guidance
to support this work, the UK is jointly managing with Germany
the EU WFD Common Implementation Strategy working group which
will provide "guidance on the analysis of pressures and impacts"
(IMPRESS) by the end of 2002. This non legally binding guidance
will set out the general approach in performing this analysis,
including a suggested checklist of pressures to be considered,
and advice on information requirements and tools needed to do
so.
50. This guidance will therefore be available
in time to assist the formal analysis required by the Directive
on impacts of human activity which has to be completed by December
2004. This completed analysis will then feed into the preparation
of river basin management plans, which have to be published in
draft form by 2008.
V. WHAT THE
TANGIBLE BENEFITS
OF THE
DIRECTIVE ARE
LIKELY TO
BE AND
WHETHER ITS
OBJECTIVES CAN
BE ACHIEVED
IN A
COST EFFECTIVE
WAY.
Tangible benefits
51. The Directive should have substantial
benefits both in terms of improved and protected water ecology
and sustainable management of water. The Government set out what
it considered to be the principal benefits in its first consultation
paper, which are as follows:
— An improvement in the quality of
raw water, and greater availability of water as a resource.
— Protection and enhancement of aquatic
wildlife. The Directive aims to ensure that native aquatic life
such as plants and fish can survive and reproduce. This in turn
will support animals and birds higher up the food chain. Physical
improvements in certain water habitats may also be required where
this is necessary for the native biology to survive and reproduce.
Giving effect to these requirements will in some cases assist
current action to implement the Government's conservation objectives
stemming from international, Community and national commitments,
including national and local biodiversity action plans, as well
as increasing the amenity value of watercourses.
— It introduces a new definition of
water status which is concerned with the ecological health of
water bodies as well as chemical standards, and reflects the interactions
between groundwater and surface water and the relationship between
physical elements such as the structure and flows in the watercourse
and the chemical and biological quality.
— More coherent Community water legislation
gathering together all of the measures that are necessary to manage
river catchments and groundwaters and removing unnecessary and
outdated requirements.
— More coherent management of river
basins, enabling more cost effective strategies to be developed.
The Directive requires Member States for the first time to put
in place a system of river basin management, with co-ordinated
river basin management plans, recognising the links between all
waters in a river basin, including groundwaters.
— Better targeting of water protection
measures. The analyses of each river basin will provide better
information, allowing better planning and targeting of measures
to areas where there are clear environmental benefits.
— Transparency and accountability.
The Directive will require transparency in the river basin management
planning process. This will benefit water users as well as government
and competent authorities. Moreover, this greater degree of transparency
has allowed accountability at member state level to take the place
of prescription at EC level.
— Detailed objective-setting and monitoring
strategies can therefore be decided at Member State level, enabling
a more targeted use of resources and allowing measures to be set
at a level appropriate to the circumstances at national and local
level.
52. The study referred to in section II
on costs attempted to make an assessment of the value of some
of the tangible benefits the Directive will bring in informal
recreation, angling, general amenity, non use values and low flow
alleviation. On this basis, the overall findings of the benefits
evaluation for England (and Wales) were in the range £1.6-£6.2
billion.
53. The first consultation paper explained
that the attempt to quantify the Directive's benefits was both
sophisticated and ambitious, employing as far as possible the
methodology for valuing environmental benefits set out in the
Foundation for Water Research's Assessing the Benefits of Surface
Water Quality Improvements: Manual (1996). It did however require
the consultants to make a number of fairly heroic assumptions
and to use the manual, designed for local project appraisal with
local level data, to perform a top-down assessment using aggregate
data. Unavoidably, this had the potential for wide margins of
error.
54. Some benefits which are theoretically
tangible but for which we do not have sufficient information were
identified in the study. For example, the consultants could not
quantify benefits associated with cleaner groundwater, although
they recognised that for groundwaters used for abstraction there
would be direct economic benefits from increases in quality, through
reduced treatment costs or possible increased agricultural yield.
55. Other tangible benefits that could not
be valued include those deriving from better planning and management
including greater consultation, which should allow better targeting
of measures and therefore avoid unnecessary costs. Less tangible
benefits, which clearly cannot be valued at present, include those
that stem from having a sustainable water policy framework.
Updating the benefits assessment
56. DEFRA intends to undertake research
on economic valuation of the environmental and other benefits
of WFD. The aim of the research will be to update estimates of
benefits and if possible to reflect better the "non-use"
benefits of enhancements to ecological status. Pilot research
has already been completed. This tested out the use of the choice
experiments technique of economic valuation to assess peoples'
willingness to pay (WTP) for improvements in the ecological status
of water bodies. The next step is to commission a project to produce
such estimates and revise the benefits assessment in the original
costing study.
Whether benefits can be achieved in a cost-effective
way
57. The Directive includes express provisions
to ensure that cost-effectiveness issues are considered. The Directive
builds in a requirement (article 5 and annex III(b)) to ensure
that information is collected in order to make judgements about
the most cost-effective combination of measures to be included
in programmes of measures based on estimates of the potential
costs of such measures. The arrangements for collecting this information
is one of the issues on which the Government will wish to consult
in its second consultation paper.
58. The context of this requirement is that
the central obligation of the Directive (article 4) is to make
operational programmes of measures with the aim of achieving good
status for water bodies.
59. Article 11 requires measures listed
in it to be used to ensure that environmental objectives are met.
This might involve the application of one measure, such as a tightened
discharge consent, or a combination of more than one, such as
additional restrictions on abstraction. The programmes of measures
(one for each river basin district) have to be published in draft
form by 2008.
60. The information collection requirement
for annex III(b) has to be completed by December 2004 and will
therefore inform the preparation of programmes of measures and
decisions about actual selection of measures in each programme
of measures. This is therefore a crucial piece of analysis which
will influence the development of all programmes of measures and
therefore the costs that stakeholders will incur, while ensuring
that resources are allocated in the most cost-effective way.
61. There may be cases where the benefits
of a water body reaching good status are not justified by the
costs or where it would be disproportionately expensive to meet
objectives by 2015. To the extent that it could be shown that
the benefits of achieving objectives could not be justified against
the costs involved then article 4 allows less stringent environmental
objectives with lower associated costs to be set, or for the good
status objective to be met on a longer timescale. The use of derogations
in this way would be subject to conditions set out in the Directive
(article 4(4) and (5)). It is however far too soon to say whether
and to what extent derogations will be required in practice.
DEFRA
24 September 2002
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