Table of contents
2. Supporting Information
2.1 Indicator definition
The indicator is split into two elements: a) Financial cost recovery of water services for public water supply; and b) Affordability of water services. The former is a simple plot of the average price level for water supply and sanitation services in European RBDs against their respective financial cost recovery levels, both as reported by the Member States. The latter is a ratio of household expenditure on ‘water supply and miscellaneous services relating to the dwelling’ to household income, compared to an ‘affordability threshold’ set at 5% for indicative purposes. It is presented along with ratios of expenditure on other household needs to consider the third dimension of water affordability.
2.2 Unit of measure
a) average price level in Euros per m3;
b) recovery rate of financial costs in %;
c) ratio of household expenditure on various products and services against total household income
Policy/environmental relevance
Improved reporting on water service prices and financial cost recovery is increasingly pertinent in light of the large investments needed to meet the objectives of the WFD, to comply with Urban Wastewater Treatment Directive (UWWTD) and Drinking Water Directive (DWD) requirements, and to ensure adequate infrastructure renewal.
Affordability of water supply and sanitation services is largely missing from national and global monitoring initiatives and there is currently no universal agreement as to the concept’s definition, appropriate assessment methodologies or monitoring schemes (UNICEF-WHO, 2021). There is thus a need to find suitable approaches that allow us to use regularly reported data to help policy and decision makers identify segments of society that might be disproportionately affected by increases in the prices of basic household needs, like water supply and sanitation. This is directly related to the ‘Leave no one behind’ principle of the 2030 Agenda for Sustainable Development, its Sustainable Development Goals (SDGs) and the EU 2030 target on poverty and social exclusion.
EEA topics - https://www.eea.europa.eu/themes
- Nature - European freshwater
- Resource efficiency and waste – Resource efficiency
Methodology
Given the known operational challenges with Article 9 of the WFD, referring to the lack of concrete harmonised methodologies and large contextual differences that restrict comparative analyses, the element on water pricing and financial cost recovery of this indicator has been kept limited to a visualisation of reported data without further computation. The WFD 2016 tables containing data on average price levels and financial cost recovery for public water supply services were reviewed, the data sorted and arranged according to service types and used to produce the charts and conduct the analysis. The following types of water services, mentioned in the WISE WFD database, have been considered:
- “Drinking water abstraction (surface and/or groundwater), treatment and distribution” (available reporting on average price levels from 47 RBDs and on financial cost recovery from 54 RBDs)
- “Sewage collection and wastewater treatment” (available reporting on average price levels from 43 RBDs and on financial cost recovery from 45 RBDs)
- “Drinking water abstraction (surface and/or groundwater), treatment and distribution AND sewage collection and wastewater treatment (when considered together)” (available reporting on average price levels from 71 RBDs and on financial cost recovery from 82 RBDs)
Reported levels of financial cost recovery for each of the above services are plotted for illustrative purposes only, as their calculation can vary greatly across RBDs and localities, and detailed information is largely unavailable from official and regular reporting.
The affordability of water supply services is often indicatively measured by calculating a ratio of household expenditure on such services against household income, and comparing it to an ‘affordability threshold’. Following recent recommendations by UNICEF and the WHO, this indicator incorporates a third dimension for the assessment of affordability which accounts for expenditure on other households needs such as health, food, housing, electricity, education, transport and communication. This puts the level of household expenditure on water services into perspective and it can indicate the magnitude of disposable income left after a defined set of household needs have been covered. For the affordability element of the indicator, household expenditure and income data were fully sourced from Eurostat [NAMA_10_CO3_P3__custom_1306597] and [lfst_hhnhtych]. National level data on final consumption expenditure of households by consumption purpose were extracted for the selected goods and services, adjusted for inflation using an available implicit deflator, and disaggregated to household level data using a dataset on the number of private households [ilc_di04]. EU-SILC and ECHP survey data on mean equivalised net income for all household types, income distribution by quantiles [ilc_lvph01], and average household size [ilc_di01], were collected and combined to compute total income levels per average household. Ratios were then computed for the disaggregated consumption purposes at the household level for medium income households (using mean income data) and low income households (using fifth percentile income data). A 5% affordability threshold reference was used for indicative purposes based on the most recent review work by UNICEF and the WHO, which refers to the UNDP, the World Bank, the European Commission and the OECD using thresholds that range from 3-5% (UNICEF-WHO, 2021). The threshold intends to provide a reference point above which affordability concerns would be likely.
Data sources & providers
European Environment Agency - WISE Water Framework Directive Database
WISE Water Framework Directive Database — European Environment Agency (europa.eu)
Eurostat
- Final consumption expenditure of households by consumption purpose (COICOP 3 digit) - [nama_10_co3_p3]
https://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=nama_10_co3_p3&lang=en
- Number of private households by household composition, number of children and age of youngest child (1 000) - [lfst_hhnhtych]
https://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=lfst_hhnhtych&lang=en
- Mean and median income by household type - EU-SILC and ECHP surveys- [ilc_di04]
https://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=ilc_di04
- Average household size - EU-SILC survey - [ilc_lvph01]
https://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=ilc_lvph01&lang=en
- Distribution of income by quantiles - EU-SILC and ECHP surveys- [ilc_di01]
https://appsso.eurostat.ec.europa.eu/nui/show.do?dataset=ilc_di01&lang=en
Geographic coverage
EIONET Member countries: Belgium, Bulgaria, Czechia, Denmark, Germany, Estonia, Ireland, Greece, Spain, France, Croatia, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Hungary, Malta, Netherlands, Austria, Poland, Portugal, Romania, Slovenia, Slovakia, Finland, North Macedonia, Serbia.
Time coverage
Water pricing and Financial cost recovery element – 2016
Affordability element – Period of analysis is 2005-2019; length of monitoring data series varies with minimum length of 7 years.
Frequency of dissemination
Water pricing and Financial Cost Recovery element – every 6 years
Affordability element – every 2 years
References
UNICEF-WHO (2021) The measurement and monitoring of water supply, sanitation and hygiene (WASH) affordability: a missing element of monitoring of Sustainable Development Goal (SDG) Targets 6.1 and 6.2. https://apps.who.int/iris/bitstream/handle/10665/341067/9789240023284-eng.pdf
Strosser, P., Delacamara, G., van Duinen, R., De Paoli, G., Kirhensteine, I. (2021) Economic data related to the implementation of the WFD and the FD and the financing of measures. Final report to the European Commission Directorate-General for Environment.
OECD (2020), Financing Water Supply, Sanitation and Flood Protection: Challenges in EU Member States and Policy Options, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/6893cdac-en.
Accuracy and uncertainties
Data uncertainties
Affordability calculations are dependent on country survey data. While data capacity for the databases consulted was sufficient, the surveys themselves may carry errors and/or inconsistencies that emerged during data gathering and reporting. These data are also aggregated at country level and in most cases average data is used for the computations.
Further, the data used to illustrate household expenditure on water supply and sanitation services is classified under the Harmonized Indices of Consumer Prices (HICP) data category “Water Supply and Miscellaneous Services related to the Dwelling”. This aggregates the subcategories “Water Supply”, “Refuse Collection”, “Sewerage Collection”, and “Other Services Relating to the Dwelling, Not Elsewhere Classified” and thus carries an associated error.
Lastly, for the calculations of the expenditure to income ratio for low income households, the expenditure data used were that of average income households (as these data for low income households is not available), while income data was that for the 5th income quintile. This results in the values for the ratio being (consistently) skewed upwards.
Methodological uncertainties
In the EU, the Water Framework Directive requires that the costs of water services provided to households are sufficiently recovered through water tariffs. Notably though, both water tariffs and their contribution to financial cost recovery are subject to a combination of intrinsic factors that often vary across, or even within, countries. Among others, such factors may range from disparities in the quality of the service itself to conceptual inconsistencies in the calculation of cost recovery levels, and from differences among management models and institutional frameworks to varying levels of dependency on public and EU funding. Thus, direct comparisons between countries are deemed unfeasible, and comparisons between national subdivisions (e.g. municipalities, RBDs) should carefully account for intrinsic differences (e.g. what services and other items, like asset depreciation, are included in the price and considered in the cost recovery calculations). Further, it should be noted that a higher rate of recovery of financial costs does not necessarily hold correlation with a higher average price for the water service. This responds to the fact that the weight of water tariffs in the mix of the service providers’ total revenue, and/or in the calculation of financial cost recovery levels, varies. For instance, reported average prices between 0.58 and 4.18 Euros per cubic metre all result in more than 100% recovery of financial cost in different RBDs.
Regarding the selection of an affordability threshold, there is no consensus as to what an adequate threshold level is or how to determine it, and while past studies by UNDP, the World Bank, the European Commission and the OECD have used thresholds ranging from 3-5, this remains a challenging aspect of affordability assessments.