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Recommendations on the Implementation of Water Fees in the Light of
Art 9 Water Framework Directive
Summary of legal partial study
a. Which activities are covered by the definition of water services is the decisive criterion for the scope of application of Article 9 Water Framework Directive. Although Article 2 para. 38 contains a definition of "water services", the views of the Commission and the Member States diverge considerably at times as to its scope. While the Commission advocates a
very broad interpretation of the concept of water services, Germany and Austria, among others, interpret the concept very narrowly so as to cover only water supply and sewerage by companies or by the users themselves. The Commission viewed this prevailing restrictive interpretation as a violation of the cost recovery principle of Article 9 Water Framework Directive and thus brought proceedings against Germany before the ECJ for infringement of the Treaty in May 2012. Following the Advocate General's Opinion, the Court of Justice dismissed the action as unfounded. According to the ECJ, the framework nature of the Water Framework Directive and the regulatory instrument "programme of measures" "does not per se impose a generalised pricing obligation in respect of all activities relating to water use". Though the ECJ left it open as to which activities are covered by the water services concept, we believe its explanations allow the conclusion that it can very well be necessary to subject certain activities listed in Article 2 para. 38 (a) Water Framework Directive to the principle of cost recovery, that is, when the other regulatory measures under national law are not capable of effectively removing significant adverse effects on the water status.
b. Since the decision of the ECJ leaves open the question of the (potential) material scope of Article 9 Water Framework Directive, Section 55e Austrian Water Act should be based
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on a broad definition of water services. Therefore, the bracketed statement in the said provision should either be deleted and the Water Act should clearly describe how the term "water services" must be interpreted, or the list/explanation in the brackets ought to be expanded accordingly to describe all water services. Moreover, Section 55e para. 1(1a) and (1b) Water Act contain several abstract legal terms. No detailed explanation is provided therein as to what exactly "adequate" or "efficient" means and when these requirements are met. Moreover, no further specification of the individual exemptions is provided therein. The provision also fails to establish an obligatory fair allocation of costs. Further adjustment and specification are required in this respect.
c. A model based on the Coase theorem is not suitable for providing a fair allocation of water prices to cover the costs, since the outcome of negotiations between the parties depends on many factors, and the agreed amount to be paid must not necessarily reflect the environmental and resource costs actually incurred. Moreover, this theory revokes the polluter-pays principle considered so important in connection with Article 9 Water Framework Directive. The introduction of a Pigovian levy would require a comprehensive data collection and analysis. In addition, it is often difficult to fully identify the polluters and achieve an exact attribution of damages. The price-standard approach represents a good possibility, since it points in the right direction. However, it is not perfectly suitable for a completely correct implementation of the provisions of Article 9 Water Framework Directive, since it does not use the actually incurred environmental and resource costs as an assessment basis, but a politically and/or economically defined water standard instead. Despite its high complexity, a solution along the lines of a Pigovian levy would probably be the most suitable solution for the introduction of cost-covering water prices according to Article 9 Water Framework Directive.
d. The term „levies“ is primarily used to define financial contributions prescribed by an act
of state to be paid by the citizens, the revenue of which is directly allocated to a local authority and serves to finance functions of the state. Any financial contributions that do not meet one of these requirements are not levies and are therefore not covered by the scope of application of the Fiscal Constitutional Act. The way that revenue is used is irrelevant for the allocation of a payment as a public levy. Its appropriation by law is
admissible. The generic term „levies” further distinguishes between taxes, charges, and contributions. Taxes mean levies to be paid by the citizens to the Federal Government, the Provinces or municipalities, without directly receiving a corresponding specific benefit
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in return. Charges are payments for which the citizen receives a corresponding benefit in return. The amount of the charges to be paid is calculated in accordance with the equivalence principle. Contributions are expense reimbursements in cash imposed to a certain group of persons who have a particular interest in the establishment and/or maintenance of a public institution.
e. The Austrian Fiscal Equalisation Act determines who may collect levies and which. The Act governs the actual allocation of taxation rights. The simple legislator is not entitled to establish a type of levy that is not contained in Section 6 para. 1 Fiscal Constitutional Act. Subject to the provisions of Section 6 para. 1 Fiscal Constitutional Act, the Federal Government is given a comprehensive right to invent levies. The competencies of the Federal Provinces to create chargeable events are not laid down in the Fiscal Constitutional Act, but the Federal legislator can determine in the Fiscal Equalisation Act what it does in Section 14 of the cited Act. The local authorities are entitled to establish chargeable events even in those affairs in which the responsibility for the substantive regulation of a certain matter lies with a different local authority. Environmental taxes aiming at completely forbidding certain behaviours or consumption habits are violating the Fiscal Constitution. The Federal Provinces are allowed to create new chargeable events not yet included in the list of Section § 14 para. 1 2008 Fiscal Equalisation Act. The right of the Federal Provinces to invent levies is restricted by the ban on similarity to existing Federal levies. There are obviously no similar Federal levies that would prevent the justification of levies under Article 9 Water Framework Directive on a Provincial level.
f. The provision of Section 15 para. 3(4) 2008 Fiscal Equalisation Act is inconsistent
with the guidelines of Article 9 Water Framework Directive since, although it is not that much opposed to a basic consideration of the polluter pays principle, it does rule out the introduction of cost-covering water prices that also include the environmental and resource costs. Accordingly, Section 15 para. 3(4) 2008 Fiscal Equalisation Act should be adjusted to explicitly exclude water supply and sewage disposal from the double annual requirement. In addition, we believe the municipal codes must ensure that the calculation of the charges for water supply and sewage disposal not only take into account the business costs but also the environmental and resource costs actually incurred.
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g. With the exception of Tyrol, all Federal Provinces apply special provisions or guidelines for charging in connection with communal water supply and sewage disposal. The individual Provincial laws sometimes differ significantly from Province to Province. A positive element that should be noted here is that many of these national guidelines provide for an assessment of the current charges on the basis of the actual water consumption, and thus at least to some extent take into account the costs linked to the use of the resource. The external costs incurred by the use, however, are not specifically taken into account in any way. Only the internal costs are used for the calculation of the charges. The environmental and resource costs do not constitute criteria of these laws. Moreover, neither the own water supply and sewage disposal, nor the direct abstraction without the use of the communal water supply facilities are covered and priced.
h. Only a few provisions of the Water Act contain cost-related rules. Section 34 para. 4 Water Act, for instance, includes a resource-related approach. It provides for a financial compensation for the withdrawal of other possibilities for the use of resources. Section 34 para. 1 in conjunction with para. 4 Water Act and Article 9 Water Framework Directive, however, follow two different resource approaches that do not coincide with each other. Section 34 Water Act establishes a monetary disgorgement, but environmental and resource costs do not play any role, so it fails to comply with the guidelines of Article 9 Water Framework Directive. Even in the case of Sections 78 and 95 Water Act, the monetary disgorgement is established on the basis of the facilities, yet the above do not contain any obligation to reimburse the environmental and resource costs caused by the abstraction.
i. Particularly noteworthy are Section 19 para. 1 and 3(d) and (e) of the Tyrolean Nature Conservation Act. Section 19 para. 3(d) and (e) of the Tyrolean Nature Conservation Act refers to the abstraction for snow-producing facilities and the draining or abstraction of water for the operation of power generation facilities, and establishes a levy amounting to 30 euros per thousand cubic meters of annual water abstraction or a levy of 1 euro for each secondary litre of annual water abstraction. With the exception of this provision in the Tyrolean Nature Conservation Act, however, the Austrian legal system does not feature any "prices" (in terms of charges or the like) for water services having a significant impact on waters.
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j. 14 out of a total of 16 Laender in Germany charge for abstraction. The relevant provisions do not refer to water use charges but to abstraction charges. The provisions governing these charges differ as to their assessment basis, the rates, and the exceptions. There are great differences between the Laender with regard to the actual amount of water abstraction charges. Abstraction for the purposes of hydroelectric power generation is often exempted from charges. Switzerland has been levying charges from power plant operators for the use of water as a natural resource, the so-called Wasserzins, since 1916. Water charges are not levied on the actual amount of water used, but on the amount that can be abstracted from the water course on the basis of the licence.
k. The use of fertilisers in agriculture is often the cause of significant pollution of waters. The excessive amount of nutrients present puts a severe strain on water. Due to its significant impact on the status of water, the use of fertilizers and plant protection products in agriculture must be regarded as water use pursuant to Article 2 para. 39 Water Framework Directive. To the extent that this results in water use costs, a fair price must be charged to cover the costs of water services pursuant to Article 9 Water Framework Directive for this pollution, based on the realized higher cleanup costs and not on the environmental and resource costs. The present study, however, goes beyond the guidelines of Article 9 Water Framework Directive and favours the adjustment of the costs not only on the basis of the cleaning costs but also on the realized environmental and resource costs. We propose the establishment of a levy on the use of mineral fertilizers and plant protection products in agriculture as an instrument for the internalisation of the costs. This levy should be established as an earmarked levy at the level of the Provinces, designed as a tax. The calculation and collection shall be carried out by Provincial authorities, and the pollution determined will subsequently be allocated to the farmers in proportion to the respective fertilizer and plant protection product surpluses. The amounts due should be paid into a dependent Provincial fund.
l. We propose the introduction of a separate law on the internalisation of the costs incurred by sewage disposal. The sewage disposal levy will be established as a Federal community levy and designed as a charge. This levy will be calculated and collected via indirect Federal administration. The assessment basis will be the amount of sewage introduced and the environmental and resource costs incurred as a result of the pollution associated therewith. The levy must be paid by those discharging the sewage into the public sewer system, the so-called indirect dischargers. The specific amount of sewage
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determined will be classified on the basis of defined sewage characteristics. The individual disposal of sewage into cesspits and the direct discharge of industrial sewage must be foreseen as chargeable events as part of the sewage levy. It will be necessary to carry out random controls of the discharged sewage to determine the actual concentration of pollutants and the resulting environmental and resource costs. The samples taken as part of the analysis in accordance with the Indirect Discharger Ordinance (IEV) and the Waste Water Emission Ordinance (AAEV) can also be examined as to the environmental and resource costs linked to the concentration of pollutants. The fees thus levied will be
earmarked for specific use. An administrative management fund will be established, financed from the money collected from the sewage levy.
As an alternative to the introduction of a dedicated sewage levy act, it is also possible to adjust the existing chargeable events. This will require the corresponding classification of sewage in the Provincial laws, the assessment of pollutants based on units, and the adjustment of the provisions on the calculation of the fees.
m. In addition, we propose the introduction of laws on water abstraction and impoundment levies at the level of the Provinces in the form of fees. The amount of the levy shall be linked directly to the amount of water abstracted. All those abstracting or impounding water shall be obliged to use water meters, so as to be able to measure the actual amount of water or flow rate and attribute it to the user. Data on own supply from private wells, impoundment at small hydroelectric power plants, or the direct abstraction without subsequent discharge into the municipalities' sewer system must be collected using water meters. Although the ECJ judgment does not necessarily require the environmental and resource costs to be included in every water abstraction, except when the regulatory framework cannot prevent a significant adverse impact on the water status, the present study favours an adjustment of water abstraction and impoundment charges
based on the environmental and resource costs actually realized as a result of the abstraction or impoundment. Provincial authorities should be in charge of the assessment and collection of the levy. The introduction of this levy by the Provinces does not in any way undermine the current distribution of competencies.
As an alternative to the proposed introduction of dedicated water abstraction and impoundment levies at the level of the Provinces, it is also possible to adjust the existing provisions on such fees. This will require an amendment of the Provincial provisions for
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the calculation of water supply fees and the introduction of chargeable events for water abstraction and impoundment in the Provincial laws on nature conservation.
