WATER FRAMEWORK DIRECTIVE

The WFD sees water pricing as an economic instrument of environmental protection, just as if an eco-tax was levied on the supply of water to consumers. In doing so, it does not require a strict internalisation of external environmental costs linked to the use of water, but instead leaves a margin of discretion to the Member States by providing that they “take account of the principle of recovery of the costs of water services” (Article 9(1)) . This implies a “user-pays” principle, and thus an economic instrument and, for determining the appropriate level of pricing, the WFD requires that an economic analysis of water use is undertaken in each river basin so as to provide the necessary information in order to ascertain its full economic costs (Article 9(1)).
Member States were immediately bound to ensure that “by 2010” water-pricing policies got close to internalisation of external environmental costs in two respects. Firstly, those policies “provide adequate incentives for users to use water resources efficiently”, which is indeed the purpose of an economic instrument, albeit not necessarily while deploying its rigidness since such enticement may be achieved by a simple signal given to users and taking the form of a partial internalisation. Secondly, several economic sectors must contribute adequately to the costs of services linked to water use, and this at least with respect to the industry, households and agriculture sectors . Again, that contribution must be “adequate”, which leaves the Member States with a margin of discretion inconsistent with a true economic instrument that would be implemented in a rigorous way.
The softening of the mandatory character of the internalisation of external environmental costs linked to water use is unquestionable: while the polluter-pays principle – somewhat extended or reoriented – thus enjoys undeniable explicit recognition as a matter of principle, its application is flexible.
As underlined by the Court, article 9 “does not specify the context in which Member States must take account of the principle of recovery of the costs of water services, it follows that that provision seeks the establishment by Member States, of a general policy of recovery of costs” .
Jurisdictional review will not be able to require rigor from the Member States in the establishment of water-pricing, rather only that they justify the effective impact of relevant parameters on such pricing. In addition, the Court highlights that “it is only in the light of all the relevant national rules implementing programmes of measures governing water services that it could be ascertained whether a Member State has taken into account the principle of recovery of the costs of those services. It follows that compliance with article 9 (1) cannot be assessed by reference to a national measure, taken in isolation, which applies to the users of water resources” .
The water services to be taken into account do not only include the supply of water and the treatment of waste-water strictly speaking. The definition of those services encompasses other activities such as navigation, hydroelectric power generation and flood protection including, as expressly provided for, the abstraction, impoundment, storage, treatment and distribution of water (Article 2(38)).
The Court of Justice decided that the directive’s provisions, which define the notion of “water services” but not that of “services”, do not make it immediately clear whether the EU legislature intended to make any service relating to each of the activities contemplated subject to the principle of recovery of costs, or only those services associated with the supply of water at all stages of that activity, as well as those associated with waste-water treatment. As a result, while the various activities in question, such as abstraction or impoundment, “may have an impact on the state of bodies of water and are therefore liable to undermine the achievement of the objectives pursued by that Directive, it cannot be inferred from that, that in any event the absence of pricing for such activities will necessarily jeopardise the attainment of those objectives.” Nor that, as a result, all of these activities must necessarily be subject to the principle of cost recovery . This finding of the Court reveals in a quite strong manner the flexible character of the internalisation principle with respect to the costs of water services in current EU water legislation. Indeed, measures pertaining to recovery of the cost of water services are in some way akin to soft law obligations since the Court explains that they “are one of the instruments available to the Member States for qualitative management of water in order to achieve rational water use” . The reason for this is that the existing conditions and requirements pertaining to water in the EU “call for specific solutions” so that the EU legislature intended “that diversity of solutions be taken into account in the planning and implementation of measures aimed at ecologically variable protection and use of water in river basins and that decisions be taken at the level as close as possible to the place of use or degradation of water”. Thus, without prejudice to the importance of water-pricing policies and the polluter-pays principle, “priority must be given to actions coming within the jurisdiction of the Member States, in drawing-up action programmes adapted to local and regional conditions”. In the same way, while water-pricing policies provide adequate incentives for users to use water resources efficiently, the methods to reach that objective are left to the discretion of the Member States and it is common practice in the Member States that the price of water services is composed of a fixed component and a variable component, as this “irrespective of their actual consumption of that water” . As additional flexibility, Member States may depart from that “principle” of price fixing of water use by taking account of the social, environmental and economic effects of the recovery as well as the geographic and climatic conditions of the region or regions affected. However, such a variation is not required and the directive states this expressly (Article 9(4)), thus avoiding that the question of a breach in the user's equality be raised, a question that might prove difficult to deal with in certain Member States.