Discussion and conclusions

The main objective of the socio-economic work package (WP5) in BRIDGE, of which the case study presented here is part of, is to apply and test economic methods and tools for the identification of economically efficient groundwater threshold values. The objective is not to derive threshold values for specific groundwater pollutants for which no threshold values are available yet, but to demonstrate the use and usefulness of the applied economic methods and tools in sustainable groundwater policy and management. The role of economics in informing policy and decision-makers about groundwater threshold values in BRIDGE is comparable to the role of the economic analysis in the implementation of the European WFD. Environmental objectives can be lowered or delayed in time if the costs of reaching the objectives are

considered disproportional (WFD article 4).

In order to be able to assess whether the economic costs of reaching environmental

groundwater threshold values are disproportional, an important step is to evaluate the cost and effectiveness of possible practical management measures to reach these threshold values and compare the calculated costs with the corresponding environmental, social and economic benefits. Researcher and policy-maker confidence in the estimated costs and benefits associated with different groundwater threshold values is an important criterion in this decision. Estimating the benefits of sustainable groundwater resources management implies that the economic value of groundwater has to be analyzed. This includes the so-called

‘existence’ value of groundwater, i.e. the value attached to groundwater protection and preservation for the sake of the resource itself as one of the ‘receptors’ in the BRIDGE methodology.

The socio-economic welfare implications of establishing different groundwater threshold values, including natural background levels, are addressed in this case study through cost-effectiveness analysis using a combination of qualitative expert judgment and a more formal quantitative groundwater-surface water model, and a public survey. Assessing the

environmental impact of programs of measures with some degree of confidence is one of the most important problems in the actual implementation of the WFD. The effects of most measures are currently evaluated in terms of their emission reduction potential, not their impact on water quality measured through the change in pollutant concentration levels basin-wide. Also in the case study presented here, the relationship between pressure reduction

(emission of a pollutant) and actual impact on groundwater quality is weak and surrounded by uncertainty. A scientific model was used to better understand the relationship in time and space. Although common practice in the actual implementation of the WFD in many if not most European Member States including the Netherlands, the use of qualitative expert judgment in the selection of cost-effective programs of measures is considered a second-best alternative to more quantitative basin-wide modeling of the impacts of different measures on surface and groundwater quality. Experiences in this specific case study show that depending on their background and economic interest, different experts, including local and regional stakeholders, hold different opinions about the impact of certain measures on groundwater quality and connected surface water bodies. The model exercise presented here does not solve all these problems. The results are still surrounded by many and in some cases large

uncertainties, but the modeling approach applied here provides a more structured and systematic approach to deal with these uncertainties. Existing expert knowledge is captured and made explicit in more formal linear and non-linear relationships. Presenting these relationships in a transparent and systematic way and formalizing them in a model as presented in this case study opens up the opportunity to discuss and debate them in a more structured way than currently is the case, and modify these relationships based on progress in scientific understanding.

In the public survey local residents in the case study area are asked for their knowledge, awareness, perception, attitudes, preferences and valuation of different groundwater threshold values. For this purpose a ‘groundwater quality ladder’ was developed and applied, reflecting different use and non-use related economic values. A stated preference method was

subsequently used to estimate the economic value of the non-market benefits of different groundwater threshold values in terms of public willingness to pay for these groundwater threshold values. This was done in such a way that the estimated costs related to different groundwater threshold values are comparable with the estimated economic values for the same groundwater threshold values in a cost-benefit analysis. It is this combination of

assessing both cost and benefit estimates for different groundwater threshold values, which is a key characteristic of this case study.

Tests of public understanding of the presented groundwater quality classes are positive, mainly due to the extensive pre-test procedure of the questionnaire through more than 150 face-to-face interviews with lay public preceding the survey implementation. Methodological

tests show that the results are conform economic theory. For example, public willingness to pay is determined by capacity to pay (disposable household income) and better groundwater quality has, all other things being equal, a higher economic value. We find some degree of

‘warm glow’, that is a ‘feel good’ factor that influences stated willingness to pay (people state a positive WTP because it makes them feel good about themselves to give to a good cause), but we are able to correct for this. Although use values dominate the economic value found for different groundwater threshold values (drinking water quality being the most preferred quality level), we also find a substantial economic non-use or existence value for groundwater bodies. That is, taxpayers are willing to pay a substantial amount of money extra for

groundwater quality that is close to its natural background level, providing support from an economic point of view for the receptor based approach advocated in BRIDGE.

The work in WP5 differs substantially from the other BRIDGE work packages in that it focuses explicitly on practical and feasible groundwater management to reach possible groundwater threshold values. Corresponding with the way environmental objectives are set in the WFD, i.e. based on ecological reference situations, the BRIDGE methodology to establish groundwater threshold values excludes any a priori economic considerations or criteria. Economic criteria start playing a role after the threshold values have been set, namely in the design of practical groundwater management measures. For example, measures have to be cost-effective according to the WFD, meaning that the environmental threshold values have to be reached at their lowest cost. Although not explicitly part of the overall BRIDGE methodology of establishing groundwater threshold values, we believe that these economic criteria and considerations play an important role in the actual implementation of sustainable groundwater management based on threshold values now and in the future, also for the development and design of alternative groundwater quality monitoring systems to inform policy makers and groundwater managers about the appropriate course of action. In the case of setting up new monitoring systems or modifying existing monitoring networks, the economic value of additional information plays an important role, where the economic costs of extra monitoring will (have to) be weighed against the perceived additional benefits of better and more sustainable groundwater management. In other words, economic criteria are expected to remain an integral part of the actual adoption and implementation of any

groundwater monitoring and management plan.

Also in this case study cost-effective strategies were identified to reach possible threshold values based on existing and possible foreseen threshold values for the most important

groundwater contaminant in the case study area. Nitrate originating from agriculture is used in this specific case study as an example to illustrate the economic methodology in assessing the costs and benefits of different groundwater threshold values. The same methodology can be used for the economic underpinning of other relevant pollutants for which threshold values have to be established in the near future following the adoption and implementation of the European Groundwater Directive.

Hence, the work in WP5 starts where the other work packages in BRIDGE stop, i.e. with the practical implementation of the groundwater quality objectives through concrete groundwater management actions and measures, and in particularly their economic implications in terms of costs and benefits and the distribution of these costs and benefits across various stakeholders, i.e. direct and indirect users and non-users of groundwater resources. This economic impact assessment provides the basis for the evaluation of possible disproportionate costs, and consequently possible objective or time derogation as in the WFD, i.e. lowering

environmental objectives (i.c. groundwater threshold values) or delaying them in time. This economic analysis is one important input in the decision-making procedure about

disproportionate costs, but obviously not the sole decision-making criterion. The definition of economic ‘threshold values’ or benchmarks for the assessment of disproportionate costs is subjective and political. In practice they will not be derived on the basis of an economic cost-benefit analysis only. Currently, concrete national or European benchmarks do not exist, also not in comparable directives such as the IPPC Directive where the concept of best available techniques not entailing excessive costs (BATNEC) is introduced or the Habitats Directive which talks about ‘imperative reasons of overriding public interests, including those of a social or economic nature’ to justify exemptions.

Also in the case study presented here, we as analysts are unable to judge whether the

estimated total costs are disproportional compared to their economic benefits. In the economic analysis we only observe that some courses of action are economically beneficial, while others are not. For example, we conclude that setting the groundwater threshold value at either 50 or 25 milligrams per litre is economically speaking justified based on the

optimization of current fertilizer application practices. The benefit-cost ratio, the economic threshold value to justify a policy or project investment from an economic point of view, is

always higher than one for this policy measure. A threshold value of 50 milligrams is also justified based on the second-best alternative of growing after-crop, but a threshold value of 25 milligrams is not. In the latter case the investment costs in this public decision-making context can be as high as 10 times the estimated benefits to reach a threshold value of maximum 25 milligrams nitrate per litre. Extensification of the existing livestock, the third-best policy alternative, results in a benefit-cost ratio equal to one (i.e. break-even point) for a threshold value of 50 milligrams. However, fixing the threshold value at 25 milligrams results in a total annual cost, which is fifteen times the estimated benefits.

The question whether a higher threshold value of 25 milligrams for the whole basin compared to the current threshold value of 50 milligrams results in disproportional costs depends on policy maker assessment of disproportionality. Different policymakers may hold different views depending on the available alternatives and their perceived viability, that is the political support they perceive to receive for the implementation of these measures from the affected sector and actors. Asking the taxpayer as one of the actors expected to be affected by future groundwater policy to inform policy makers about the importance and value they attach to groundwater protection as we did in this case study, the cost of a more stringent groundwater threshold value up to 25 milligrams per litre for the whole basin should definitely not exceed 30 euro per household per year over and above what they currently pay for water in their basin. Here the taxpayer’s maximum willingness to pay is used as one of the possible indicators or economic threshold values for disproportional costs, accounting for the taxpayer’s ability to pay.

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Annex

Predicted changes in nitrate concentration levels in groundwater and connected surface waters in the Dutch Scheldt basin per policy scenario

Shallow groundwater Surface water Legend

A

B

104

Shallow groundwater Surface water Legend

C

D

Shallow groundwater Surface water Legend E