Environment, Food and Rural Affairs CommitteeWritten evidence submitted by The Environment Agency

Introduction

In December 2011 the Environment Agency published two documents, one jointly with Ofwat, which provide supporting evidence to the Water White Paper, Water for Life. These documents set out the reasons why the measures in Water for Life, particularly those around reform of the abstraction management system, are needed now.

The case for change: current and future water availability1 sets out the Environment Agency’s work to quantify water availability in the 2050s.

The case for change: reforming water abstraction management in England and Wales2 (produced jointly with Ofwat) sets out the limitations of the current system.

What Will the Future Look Like for Water Resources?

Water is a precious resource that faces increasingly severe and often conflicting pressures. Clean, thriving water bodies are an integral part of the natural environment and the economy. Water is abstracted for many purposes, including public water supply, agriculture, industry and electricity generation. Water resources in England and Wales are already under pressure. Reliable supplies of additional water for abstraction are not available across much of England and Wales and, in some places, water bodies are already being damaged by abstraction.

In the future, climate change and population growth will increase the pressure on water availability. Current climate change projections for the UK suggest that by the 2050s, under the medium emissions scenario, summer temperatures may increase and summer rainfall may decrease. Short duration droughts (12–18 months) are likely to become more frequent, so that droughts like 1976 could be more common. Although society is better placed to deal with such events, due to increased resilience of public water supply and more winter storage, more frequent events would likely cause substantial difficulties.

The population is forecast to increase by 9.6 million people by the 2030s (9.2 million people in England and 0.4 million people in Wales). Population growth means that total demand for water is likely to increase even if per capita consumption goes down over time. Impacts will vary from place to place. However those areas already experiencing water stress will have a potentially increased population of over 40% (Thames and South East England) which will make the problem worse.

In The case for change: current and future water availability, the Environment Agency presents work to quantify water availability in the 2050s. The ground breaking research considers a number of scenarios that include a range of projected futures, taking climate change, population growth, demand changes and environmental requirements into account. The conclusions that can be drawn from this work are:

Water resource availability in the future is uncertain.

The water environment will be different from that of today. Some species will be better suited to future conditions than others. We will need to reconsider the requirements for future water ecosystems and the implications on the water available for abstraction.

The combined impacts of climate change and increases in population show there could be less water available for people, businesses, agriculture and the environment than today.

Future water resource availability pressures will not be limited to the south and east of England. Under many of the scenarios Wales, south west and northern England are likely to see significant unmet demand in the future.

Over the longer term climate change could have a bigger impact on water resource availability than population growth. Unmet demand is more closely linked to the climate change scenarios than the demand scenarios.

Demand management will have an important role in the future but increased demand and climate change could result in the need for significant new resources to be developed.

The scale of the problem needs to be considered at a strategic and local level. Solutions also need to be considered at both scales. For example, trading would need to be assessed at a local level whereas the development of new resources would be more appropriate at a strategic level.

The Current System for Managing Abstraction

The current abstraction management system has been in place since the 1960s. It was designed for an England and Wales with a perceived surplus of water in most areas, with a considerably smaller population and with a very different attitude to environmental protection.

In The case for change: reforming water abstraction management in England and Wales, the Environment Agency, jointly with Ofwat, set out the limitations of the current system now and in the future. It highlights what needs to change and welcomes the Government’s commitment to change the abstraction management system.

Under the current system, the way water abstraction is managed is not responsive or flexible enough to create market or regulatory signals. This means the system does not encourage or signal the need for actions to address the future challenges as set out above. The most obvious issues include:

Many licences have a fixed water allocation. The volume of water permitted for abstraction is not dynamically linked to the actual volume of water available. Most licences have been issued without a time limit, making it difficult to review them. To change these licences, the Environment Agency has to follow a lengthy regulatory process. Where licences have a condition to reduce or stop abstraction, this condition is not flexible to a changing environment.

Licences issued more recently have more restrictions compared with older historic licences, because of our improved understanding of the impact abstractions have on the environment. However there are still no mechanisms built in to licences to ensure that users respond to relative scarcity or abundance, and we still rely on regulatory intervention.

There is no dynamic water abstraction market, with little trading or sharing of licences to abstract. This is because of real and perceived barriers, such as poor information about trading opportunities, a lengthy administrative process and uncertainty about trading outcomes. So abstractors who do not need to take their full water allocation do not hand back or sell-on licences as their needs change.

Charges for licences are not linked to the volumes abstracted (with the exception of spray irrigators) so they do not reflect the availability of water or the competing demands and value that users place on it. Once water is allocated, there is no financial incentive to use it efficiently, or to consider its scarcity and other environmental impacts.

The Need for Change

The combination of future pressures on water resources and the shortcomings of the existing system mean that the current system cannot just be left as it is.

The Environment Agency is working closely with Defra to further develop options for reform. The options clearly need to meet the criteria set out in Water for Life. The Government has committed to engaging with stakeholders throughout the process to ensure the implications of these options on abstractors are properly understood.

The two case for change documents outlined here were written to support Water for Life and in particular the abstraction reform elements, but they also have a more far reaching effect. Future pressures on the water environment will affect water quality, biodiversity and other aspects of environmental protection. We believe this supports the need for a broader approach to managing catchments, the need for efficient use of water and for sensible long term planning to ensure secure supplies across a range of sectors. We are pleased that such commitments are included in Water for Life and will work closely with Defra to deliver them.

May 2012