Robert van Cleef, watereconoom bij Sterk Consulting

Financiële prikkels essentieel in watermanagement

Water is goedkoop. Goedkoop om te drinken, om op te varen, om de wc mee door te spoelen, om industriële installaties mee te koelen en goedkoop voor de land- en tuinbouw om gewassen mee te telen. Waar blijven de financiële prikkels om te besparen? In dit artikel, uit onze aanstaande Engelstalige Aquatech special van Waterbranche, gaat watereconoom Robert van Cleef in op de vraag hoe we bedrijven en consumenten kunnen bewegen om water te besparen. Water komt niet vanzelf uit de kraan, vaargeulen blijven niet als vanzelf op diepte en ook de industrie lijkt oneindig koelwater te kunnen tappen.



Economic incentives are key in water management

The Dutch water financing system is solid, and almost future proof. However, this system incorporates hardly any economic incentives to save water. Corporate economist and owner of Sterk Consulting Robert van Cleef explains why this should change.

The UK and other European regions that are prone to flooding could learn greatly from the Dutch experience in planning and design of effective water systems for their contribution to agriculture, transport, and defence against flooding. The Netherlands has developed a sophisticated water management system of almost 3,800 kilometres of flood defences, including earthen levees along the rivers, sand dunes, coastal dikes, and storm surge barriers. Good water management requires a great deal of money and a solid financing system.

“It is my job to advise in particular national, regional and local authorities on the financial and economic aspects of governance in water management. How should they use the incentives generated by the financing system to achieve their desired goals? Worldwide that is a hot topic, in which we play a very active role”, says Robert van Cleef, director/senior consultant at Sterk Consulting, a relatively small Dutch company specialised in legal and economic advice. “Last year, I focused mainly on soil subsidence, which has a strong relation with water management.”

Extremely cheap

In co-operation with Deltares, an independent institute for applied research in the field of water and soil subsidence, Mr Van Cleef still analyses the financial aspects of soil subsidence. “What happens if the Rijnland Water board’s decision to lower the water level causes the soil underneath houses and other buildings to decline? Who is responsible for the high cost of repairing the damage? These are the questions I deal with, but I would like to point out that the way we are solving issues like these, and funding water management in general, is totally different compared with other (developing) countries.”

Mr Van Cleef explains: “Water management in the Netherlands is almost entirely funded by different levies and general taxes. These have almost no relation with water withdrawal or have extremely low tariffs. In many parts of the country water is pumped from the river, treated and transported to consumers. They pay levies for using the water system, sewerage and wastewater treatment to water boards and municipalities respectively. Companies that need large quantities of withdrawn groundwater pay an extremely low tariff. The tab for the remainder of the costs is picked up by the state or local government funds. I dare say that our system works very well, but there hardly is an incentive to save water at home or work. There is no tangible connection between the withdrawal, and the daily use of water. Because the Dutch pay collectively for the water they use, it doesn’t make any difference whether they flush their toilets many times or just a few times a day. The same applies to most businesses.”

“As an economist, I think there should be financial and economic incentives to stimulate general awareness about the way we deal with water”

“The Organisation for Economic Co-operation and Development (OECD) asked the Dutch government to put more emphasis on the principle that the polluter pays, so wouldn’t it be fair to ask companies that discharge more polluted water than others to pay more? Industries use water as cooling water, billions of cubic metres at a time, but pay nothing, not even for extra services needed to facilitate this practice. The shipping industry makes use of the water infrastructure. For free. As an economist, I think there should be financial and economic incentives to change this, to stimulate general awareness about the way we deal with water.”

Also most of the agricultural use of surface and groundwater is not paid for or tariffs are extremely low. All in all the same is true for water quality. There are hardly any incentives for users to reduce water pollution.

‘Our greatest strength’

The Dutch finance model has been designed to include management costs, and future replacements of for example a water supply network, to prevent things from happening. According to Mr Van Cleef the Dutch system is solid, “which is our greatest strength.”

“Levies and taxes ensure the money keeps coming in, therefore we are able to guarantee continuity.” Historically the Dutch believe that cooperation and collective funding are efficient, and money will be spent the right way. On the other hand, there are countries that ignore the fact that sewerage systems and supply networks have to be replaced eventually.”

“Kenya represents the other side of the spectrum. Sometimes there is plenty of money available to start projects. They do it with great enthusiasm, but quite often within a few years there’s nothing left and you will find for instance a half finished, state-of-the-art water treatment plant or an unfinished dike. It all comes back to the funding system I spoke about earlier. Reliability is key to keeping it efficient over the years. Dutch people pay a euro per day to cover all water-related costs, including drinking water, sewage, and water safety. Kenyans spend a euro per day to buy bottled water, the only source of safe drinking water. They just won’t believe you when you tell them that all it takes to guarantee continuity, is investing one euro per day in a collective system that is profitable to all.”

The future

Clients of Sterk Consulting frequently ask Mr Van Cleef and his colleagues how they can incorporate incentives into the Dutch water management system. Water board chairpersons, who formed a committee recently, are looking at ways to change the existing water financing system, including the introduction of incentives. Changing tax systems is a hyper sensitive matter, and indeed a political challenge. The outcome of the committee’s investigation is unclear yet.

“It is obviously a complicated matter”, says Mr Van Cleef. “Agriculture contributes significantly to the enrichment of water bodies with nutrients (eutrophication or hypertrophication), and is therefore one of the greatest water polluting industries in the Netherlands. Thus far all efforts to introduce for example a fertilizer levy have failed. In the future farmers might be required to pay a levy per hectare, a so-called pollution unit, possibly in addition to the introduction of positive incentives. Farmers who comply with all the rules would then have to pay less than others. That might speed things up.”

Climate adaption

Climate adaption is another issue that should be addressed in regard to future water management. “It holds a significant financial and economic component, and many of our clients want to know what to expect. Our present finance or funding systems are not well-suited to deal with issues like that. And more importantly, there are no pots of gold to fund future-proof financial packages. Are we allowed to use revenues of sewage, water systems, and other levies to counter climate adaption challenges?”

“Together with our clients we try to find the right answers.” According to Mr Van Cleef, we should not underestimate the developments needed to be ready in time for the future, whether it is about climate change or preventing existing wooden foundation poles to rot because of soil structure decline. “The government agency for entrepreneurship in the Netherlands has asked us to assess innovations for the European Water Framework Directive. People could come up with all kinds of ideas about improving water quality in the Netherlands. One of the criteria was cost effectiveness. We had to dismiss eight out of ten, two were worth researching, but not assessable because they were too new. Anyway, there was a high revenue expectancy. Economic tools are and will be more emphatically part of strategies than before, but sometimes it is hard to convince legislators and politicians. Adjusting the system and levies is constantly proving to be very complicated, although it often would be in the best interest of all, including local and national governments.” 

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