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14 | 14Th - 20Th NovEmbEr 2014 | UTILITY WEEK Policy & Regulation Market view O n 10 October the Environment Agency launched a consultation, Water for Life and Livelihoods, on the Water Framework Directive. There is nothing new about that, you may say – it is the third in two years – and surely there is little in any consultation about the implementation of a European directive to quicken the pulse? What's more, it comprises several thousand pages spread across dozens of documents, so one would have to be very enthusiastic to read it, let alone decide how to respond. But any organisation that has an impact on the water environment ignores the consultation at its financial and reputational peril. For each of the eight river basin districts across England, the Environment Agency has set out the state of the water environ- ment, the pressures upon it, and the sectors responsible for creating those pressures. In a mammoth economic appraisal exer- cise, the agency has bravely attempted to describe the measures that are technically feasible and economically viable. The eco- nomic analysis has been designed to inform stakeholders and promote debate about the environmental objectives and associated "programmes of measures" (that is, who needs to do what by when). The responses to the consultation will help to inform the proposals put to minis- ters in autumn 2015. They will then have to decide whether, for some water bodies, it is disproportionately costly to get them to good status by the next milestone of 2021. Over the past five years the Environment Agency has made a significant and sustained investment in monitoring and investigat- ing the water environment, complemented by water companies' investment. This work has gone a long way to reducing uncertainty over the state of the environment and in bet- ter understanding cause and effect in terms of the impact of different sectors. It is now even clearer from all that work that the over- whelming majority of the problems with the water environment are a result of agriculture and the water industry – hence the majority of the costs could potentially fall on those sectors, as the scenarios described below demonstrate. The Environment Agency has used five scenarios to describe the costs and benefits of achieving the environmental objectives. Scenario 1 looks at what would happen if no additional actions were taken: the envi- ronment would deteriorate as a result of population and climate change pressures, and the spread of invasive non-native spe- cies. Scenario 2 aims to prevent that dete- rioration and to protect the most important environments for nature conservation, rec- reational waters (bathing waters), shellfish waters, areas sensitive to nutrients (Urban Waste water Treatment Directive) and drink- ing waters. These are, essentially, a given in terms of a minimum level of investment. Scenario 3 will catalyse debate, which will be ill-informed and potentially hysteri- cal if consultees do not read further. It builds on Scenario 2 by including all the measures that the Environment Agency believes to be technically feasible, with nothing ruled out on the basis of cost, affordability constraints or available funding. The total costs are esti- mated at £25.8 billion, of which £14.2 billion would fall to the water industry and £6.8 bil- lion to rural land management. But technical feasibility does not necessarily mean that something is worth doing. Having presented consultees with a vision of what could be done in theory, the agency's Scenario 4 then excludes all those actions where the benefits do not justify the costs. Here, the total costs could be £16.4 billion, of which £5.9 billion would be for the water industry, and £6.5 billion to land managers (the remaining sectors include other indus- tries and services, and government). This is a critical assessment, because the assump- tions used essentially propose the long-term objectives (2027 and potentially beyond) for the water environment. Scenario 5 However, it is Scenario 5 that is the critical one for consultees to ponder upon: it sets out an illustrative level of funding and what that might deliver in terms of environmental improvements. It is not a prediction of what funding will be available, but uses available information (for example, potential PR14 spend on the environment, based on Decem- ber 2013 business plan submissions), as well as assumptions about levels of voluntary action. It assumes about £2.4 billion for the water industry, compared with £90 million from rural land management. It does not have to be one-sided in terms of where any investment comes from. The consultation talks about the "catchment- based approach", which underpins the gov- ernment's and the Environment Agency's philosophy for managing the water environ- Have your say on the WFD The government's consultation on the WFD is detailed and important, and water companies should take the time and effort to make sure the sector's voice is heard, says Ian Barker. All water bodies at good status Current status Scenario 1 Scenario 3 Scenario 4 Scenario 5 Predicted deterioration Protected area improvements Benefits justify costs, but limited by affordability (2015 to 2021) Additional benefits to not justify extra cost Improvements limited by natural conditions or technical infeasibility Scenario 2