Field: Sustainable water cycle
Global Technical function: Managing
Technical Function Unit: Benchmarking
Geographic Area: Italy


Establishing incentives and disincentives constitute a conventional way for achieving policy objectives. Thus, their use has been demonstrated to be highly effective for managing environmental issues, such as climate change or air quality. Nevertheless, the effectiveness of conventional Economic Policy Instruments (EPI)-water tariffs, environmental taxes, etc.- for a sustainable water cycle achievement is somehow questionable. 

In addition, the efficiency of EPIs can differ from one to other, depending of the involved stakeholder. For example, in some cases the general public may be interested in the improvement of water quality, but if the measure affects the final price of domestic water, additional social and economic impacts should be taken into account, and effectiveness of the applied EPI would be lower.

EPI-WATER project was conceived for assessing the efficiency of EPIs in achieving water policy goals. To do that, the project aims to carry out ex-post evaluations of existing European EPIs, and to evaluate ex-ante potential EPIs that could be implemented in Europe. The project was launched in January 2011 and is expected to finish in December 2013. It was funded by the European Commission under the Seventh Framework Programme (FP7_ENV). 11 Universities, Research Institutes and consultancy organisations from Spain, Denmark, Italy, Greece, Netherlands, Hungary and France are involved, and work under the coordination of the Fondazione Eni Enrico Mattei (FEEM). Additionally, two advisory bodies have been created along the project for helping the research: the “Policy Think Tank”, composed of European high-level policy officers and experienced professionals, and the “Inspiration Beyond Europe (IBE)” group, constituted by experts from overseas. These experts are asked for inputs regularly, and are invited to project conferences.

Before starting benchmarking activities, a policy assessment framework was developed. This framework collected outcome-oriented criteria which could describe the performance, costs and consequences of the EPI, such as the intended and unintended outcomes, the costs associated to the implantation of policies, and the effect of the measure on different social groups. Additionally, certain criteria related to the existing context were collected, for example the legislative conditions that affect the performance of the EPIs. The robustness of EPIs against uncertainty and the implementation processes were also taken into account.

Once the framework was defined, an assessment of thirty economic policy instruments was carried out. The selected policies included water-pricing schemes (tariffs, environmental taxes, environmental charges or fees, subsidies on products and practices), trading schemes (tradable permits for abstraction and pollution), cooperation mechanisms and liability instruments. Some examples are the voluntary water transfer in Tagus river basin in Spain, the effluent tax in Germany, the financial compensation for environmental services in France or the green energy certificates and compliance market in Italy. In order to cover a broad geographical area, not only EPIs from European countries but also from third countries (Australia, Chile, China, Israel, and USA) were studied. Moreover, a synthesis report was prepared in January 2012. In this report, the 30
ex-post case study reviews  were synthesized and cross-compared to extract a first set of common features from and formulate hypotheses about the conditions under which EPIs contribute to sustainable water management.

This assessment is complemented with a proof ex-ante valuation  of novel and promising EPIs that are applied in selected river basins: Tisza (Hungary) for floods and water logging, Segura and Tagus (Spain) for water droughts and scarcity, Seine-Normandie (France) for ecosystem services and conservation, Odense (Denmark) for water pollution and quality and Pinios (Greece) for water quantity. The aim of these case studies, which will end by June 2013, is to increase the economic and environmental benefits of these EPIs, and to analyse their interaction with existing EPIs. Collaboration of local stakeholders constitutes a support for the choice and assessment of these innovative measures.

Although the project is still running, its outcomes impact the water policy already. Thus, a recent report from the European Environmental Agency (EEA) on resource efficiency used case studies from the project as reference. The project has also been presented in the 6th World Water Forum, organised by OECD and held in Marseille (France). Moreover, the project has been a major contribution to the 'Blueprint to Safeguard European Waters'. Since the project is still running, a level 5 can be assigned to the project in the TRL scale, considering that some components have already been validated.