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Fighting micropollutants: comparing the Leipzig and the Swiss model of funding quarternary wastewater treatment.

The Challenge of Micropollutants

The worldwide increase in contamination of aquatic and freshwater systems with a very large number of man-made chemical compounds is considered one of the most pressing environmental problems facing society today (Schwarzenbach et al. 2006). Although most of these compounds are present at extremely low concentrations in the nanogram or microgram range (hence the term micropollutants, MPs (1)), many ofthem, e.g., those contained in pharmaceuticals and cosmetics, raise considerable toxicological concern regarding their impact on aquatic life and human health. The current state of knowledge provides no definitive proof that micropollutants pose a hazard to human health (Cunningham et al. 2009, Touraud et al. 2011), and the exact impacts on ecosystems are so far largely unknown. However, referring to the precautionary principle, an increasing number of voices are calling for action in the field of water protection (Alliance for the Great Lakes 2010, Emschergenossenschaft 2012).

There are many different sources of origin (ranging from cosmetics, cleaning agents, pharmaceuticals and food additives to industrial and agrochemicals) and pathways by which these pollutants enter surface waters, including industrial wastewater, municipal sewage treatment plants, mining, landfills, agriculture, the atmosphere (figure 1). Most experts recommend a combination of several measures to tackle pollution along the entire causal chain from production, distribution, consumption and disposal right through to water treatment in order to limit the spread of MPs in surface waters (Bernath et al. 2012, Daughton and Ruhoy 2013, Joss et al. 2008, Kummerer 2009, Metz and Ingold 2014, Stuart et al. 2012).

This could be done on the one hand by employing usage and disposal strategies, while at the same time searching for more environmentally benign products and industrial processes that would minimize the introduction of critical pollutants into effluents. Another strategy is to apply remediation and water treatment technologies end-of-pipe. For example, ozonation and powdered activated carbon systems for water treatment plants are technically mature and allow for a significant, though only partial, degree of effluent purification (Abegglen and Siegrist 2012; figure 2, p. 256), thereby also reducing the subsequent risk of contaminants entering drinking water systems. The implementation of quarternary treatment for sewage plants is nevertheless a contentious issue: the investment and operating costs of these treatment processes are substantial, our knowledge of the impacts of MPs still needs to be improved, and other measures to reduce the potential risks of substances entering the water system, e. g., "green chemistry", could be applied. However, if central wastewater treatment plants are considered at least an important building block in a mixed strategy (Metz and Ingold 2014) aimed at reducing these substances in surface waters, they will have to be upgraded with additional wastewater treatment technology ("quarternary treatment", UBA 2015).

In 2016, Switzerland is going to establish a combined model of water law requirements for selected treatment plants along with a new financing charge for all users of wastewater services (BAFU 2014). In Germany however, a comprehensive concept has been lacking up to now. In 2015, a study commissioned by the German Federal Environment Agency led to the development of the "Leipzig model" (Gawel et al. 2015), the results of which will be outlined in this paper.

The Crucial Role of the Precautionary Principle

It must be ultimately assessed on the political level whether the benefits of a quarternary treatment for selected wastewater treatment plants to society exceed its total economic cost. This is due to the lack of accurate quantification of the benefits. Both the Swiss and the Leipzig model are based on the political assumption that quarternary treatment is cost-beneficial. Three main rationales may justify this valuation:

* The precautionary principle demands that the state takes action to safeguard environmental interests, even in the absence of precise scientific evidence demonstrating specific potential hazards or proving particular measures cost-beneficial.

* Financial costs can be limited if measures of quarternary treatment are restricted to selected large-scale wastewater treatment plants. This may ensure economic efficiency since average costs per mitigated MP unit as well as the number of plants that have to be upgraded remain low. Hence, in Germany, e. g., only an upgrade of large "class 5" wastewater treatment plants is discussed, i.e., plants designed for more than 100,000 population equivalents representing 50 percent of the overall wastewater volume but with a share of roughly only three percent of all public plants (247 out of 9,600; status in 2010).

* Neither the polluter pays principle nor the existence of other input pathways (e. g., diffuse water sources) provide a priori arguments against the basic assumption of cost-beneficial quarternary treatment. According to law and economics literature the so-called cheapest cost avoider approach (Schafer and Ott 2005, pp. 221ff.) suggests that, in view of the overall complex structure of pollution sources and entry pathways, mitigation measures should be conducted by those who may contribute "cheaply" to the reduction of the MP load.

The same applies for the wastewater treatment through central end-of-pipe activities in general: without being "responsible" for the production of effluents central treatment plants do their job because they are expected to conduct sewage treatment, compared to others, in the most cost-effective way. Thus, selective targeting of individual large wastewater treatment plants to address the MP problem also appears conceptually appropriate.

Furthermore, there is scientific evidence from willingness-to-pay studies in Switzerland that costs of quarternary treatment may be outweighed by its societal benefits (expressed by individual preferences) concerning water protection (Logar et al. 2014).

The Swiss Model as a Point of Reference

The starting point for the German study was the "Swiss model". Over the next 20 years, Switzerland plans to expand around 100 of its 700 municipal wastewater treatment plants to enable the targeted removal of MPs. Starting in 2016, a newly created Swiss wastewater charge will be collected for a period of 25 years. This charge in the amount of maximum nine CHF per year per connected inhabitant will be levied on wastewater treatment plants (WWTPs) not included in the expansion program, and will be earmarked for the purpose of subsidizing 75 percent of the investment costs (BAFU 2014). Germany, in contrast, already has a wastewater charge which has been levied since 1981 under the Wastewater Charges Act (Abwasserabgabengesetz,AbwAG). However, this is not a financing charge; rather it is based on the noxiousness of the effluent (2) originating from industrial-commercial and municipal direct dischargers (i. e., sewage sources discharging directly to a receiving water). Thus, the German charge has an environmental steering function. Moreover, the revenues raised by the charge in the federal states have long been allocated to water protection purposes as required by law (Article 13 AbwAG) and cannot be further reallocated.

Options for a German Funding Model to Support Quarternary Treatment

Basically, there are different options to support the implementation of quarternary wastewater treatment using the existing German wastewater charge. The charge could either set additional incentives to encourage direct independent MP removal (steering function), support the enforcement of a relevant water law requirement to be introduced (enforcement aid), or make a financial contribution--either in terms of the payment burden (exemption from collection) or in the subsequent allocation of funds.

Instead, a support policy with grants financed through revenues from the wastewater charge demonstrates the best instrumental cost-benefit ratio here (Gawel et al. 2015). The support policy would have to be flanked by a strengthening of the steering function of the wastewater charge (regarding the noxiousness of parameters other than MP) with an increase in revenue to generate the necessary funds. In that way the overall allocation function of the wastewater charge would be strengthened, thus yielding higher revenues which could be used to fund an MP-oriented support scheme. This corresponds exactly with the original top-up model ("Aufstockungsmodell") proposed by the German Advisory Council on the Environment (Sachverstandigenrat fur Umweltfragen, SRU 1974) for the design of the German wastewater charge: charge money should be used to subsidize further efficient measures in favor of water quality in order to augment the initial incentive effect of the charge.

In this respect one can refer to previous recommendations to "strengthen the steering function" of the wastewater charge (Gawel et al. 2014). Thus, a partial funding of measures to implement quarternary treatment through revenues from the German wastewater charge would take both targets (steering and funding) equally into account. At the same time, any inappropriate crowding-out of the other funding targets to be financed through revenues from the charge would be contained. Since inflation has decreased the real revenue from the German wastewater charge to only 40 percent of the value it had 20 years ago (1994), even a doubling of that charge now should not represent an undue burden (Gawel et al. 2014, p. 376). Moreover, the payment burden on municipal direct dischargers accounts fairly consistently over time for a mere two to five percent of the total costs of wastewater disposal (Bellefontaine et al. 2003, p. 3, ATT et al. 2015, p. 26).

A Support Model with Deductibles

On grounds of efficiency and optimal burden distribution a support scheme with deductibles of 25 percent of the investment costs (as in the case of Switzerland) seems to be reasonable (Gawel et al. 2015). That means, affected operators are not exempt from all investment costs of quarternary treatment but feel a relevant burden which encourages them to achieve targets at minimal cost. The need for a deductible can also be derived from the competing funding purposes of the wastewater charge: the more (limited) funds that have to be allocated to MP removal, the less will be available for other important water protection targets, such as the programs of measures required under the EUWater Framework Directive (WFD, Directive 2000/60/EC). Here, too, the principle of efficiency demands that the volume of relief be restricted. A third argument arises from Article 9 of the WFD (principle of cost recovery for wastewater disposal services): any reduction of the refinancing burden through charges represents a tax subsidy, which under European Union law could indeed be justified as an exception to the rule according to Article 9, paragraph 1, subparagraph 3 WFD, but that justification would first be required. For the operating costs, a limited self-financing effect is calculated. This is due to a certain reduction in general noxiousness of the wastewater (and thus in accrued charges) as a consequence of quarternary treatment.

The Burden Distribution in the Leipzig Model

The (highly unequal) distribution effect of an economically efficient partial solution (a small number of wastewater treatment plants purify wastewater at high expense, but in relative terms most cheaply, substituting for many) could give grounds for an exception under Article 9, paragraph 1, subparagraph 3 WFD. It states that the member states may "have regard to the social, environmental and economic effects of the recovery". In the case at hand, a derogation from the principle of cost recovery might be justified by the "economic" and "social effects" as a consequence of full cost recovery through charges. For reasons of economic efficiency MP elimination takes place primarily in the wastewater sector and here again only in selected large wastewater treatment plants. So, for cost reasons the burdens are deliberately allocated selectively (cheapest-cost avoider approach). Those affected consequently make an "efficiency sacrifice" for society at large by contributing "cheaply" to the reduction of the MP load for the common good, but must bear the reduction costs alone. Therefore, those who, for efficiency reasons, remain untouched by the measure but who nevertheless make a causal contribution to the MP-related water quality problem could also be called upon in appropriate form to finance the public good "reduction of the MP load in surface waters". This justifies not refinancing the full cost burden through the users of those wastewater treatment plants that take measures, but reducing their charge by transferring part of the additional burden to other beneficiaries of the measure.

As a result, large municipal wastewater treatment plants, selected for MP-related measures on the grounds of efficiency, would benefit--via grants fed by charge revenues--from partial solidarity financing from all dischargers of wastewater. This is, so to say, a kind of compensation for the "efficiency sacrifice" made by a few to serve the needs of many. This kind of burden sharing allows that the alleged least-cost solution can be a fair one at the same time. Hence, the indisputably significant costs of a quarternary treatment upgrade will be both manageable and acceptable. These considerations would also make it legitimate to moderately increase the burden of the wastewater charge for all dischargers. This would allow financing of the described compensation of the "efficiency sacrifice" without simultaneously compromising the other funding targets of the wastewater charge excessively.

The Leipzig and the Swiss Model Compared

The construction resembles the Swiss model, but also differs from it in certain aspects (see table). While the support component is similar, the procurement-of-funds component differs. Switzerland also applies the principle of "partial solidarity": there, too, economically efficient wastewater treatment is carried out by just a few, but the financial burden is distributed among the many others connected to treatment plants without additional MP-related measures. Similarly, a 25 percent deductible is implemented. The additional funds (additional revenue) mobilized by the strengthening of the German wastewater charge would then correspond to the funding mechanism of the Swiss model. However, at the same time the German wastewater charge--as a combined effect-and-purpose charge--is also consistent with the steering requirement of economically efficient precaution in wastewater treatment charging noxious effluents. Therefore it is not a pure solidarity model of refinancing but rather a combined "top-up model" in the sense of the German Advisory Council on the Environment.

Water Law Requirements Play a Key Role

The functionality of the wastewater charge as a means of fighting MP is crucially dependent on it being linked with regulatory requirements for MP elimination. In Switzerland this will be implemented by an amendment of the Swiss Water Protection Ordinance (Gewasserschutzverordnung, GSchV). In Germany, there is still an ongoing debate on whether or not large treatment plants should be obliged to implement additional measures to reduce MP loads (UBA 2015, Bode 2012). In German water law, respective requirements could be laid down in the Wastewater Ordinance (Abwasserverordnung) as uniform, technology-based emissions standards. They could also be formulated as ambient requirements under the WFD's programs of measures according to local water status, as is currently the case in the state of North Rhine-Westphalia, for example. If one wished to apply the wastewater charge for the purpose of eliminating MPs in the absence of such a basic legal obligation the result would be either the necessity of an inefficient full financing of all projects--or success would otherwise be limited to only a few operators conducting pilot measures and/or federal states also intending to tackle the problem of MPs based on ambient criteria.

Disadvantages of a Support Model

However, the partial financing of MP elimination through funds from the charge has its disadvantages: one has to ask whether the German wastewater charge can raise enough revenue to cover the foreseeable subsidy requirement in the first place. The purpose of supporting quarternary wastewater treatment would hence be in competition with the diverse intended water protection purposes established to date for which, in turn, other funding sources would have to be mobilized. The Leipzig model assumes an annual subsidy requirement in the amount of 100 to 130 million euros for a period of 15 years (Gawel et al. 2015, p. 105), representing approximately 33 to 43 percent of the present revenue from the wastewater charge (some 300 million euros per year).

Furthermore, distorting effects between the German federal states could occur depending on the proportion of large wastewater treatment plants to be expanded: if some federal states have to upgrade numerous class 5 wastewater treatment plants to include quarternary treatment their respective revenue from the wastewater charge would be heavily strained. The amount of funds left over for other purposes that have to date been funded by the charge would be correspondingly low. This could contribute to significant imbalances between the federal states.

Overall Burden Effects for Fee Payers

The partial realization of quarternary treatment will, due to financial costs, undoubtedly result in a significant economic burden. However, depending on the assessment of the benefits to society, this burden might well be more than compensated (see Logar et al. 2014). In the context of the Leipzig model, the burden is distributed within the wastewater sector: this is organized via the 75 percent subsidy rule, the deductible borne by those carrying out the measure, the self-financing effect of a reduced noxiousness of effluents and by increasing the payment burden due to a structural development of the wastewater charge to strengthen the incentive function and to mobilize additional funds. Overall, the additional burden on both charge payers (municipal and industrial direct dischargers) and sewage-service fee payers (private households and industry as indirect dischargers) that results from this solution is likely to be considered acceptable. Quarternary wastewater treatment is currently expected to lead to additional costs of eight to eleven euro-cents per cubic meter for the entire annual wastewater volume, depending on the method (Gawel et al. 2015, pp. 106ff.). This magnitude is confirmed in the literature (Mertsch et al. 2013, Metzger et al. 2013). One should note that this calculation still neglects both possible reductions of the wastewater charge debt through improved treatment efficiency and proposed subsidization of the capital costs. Certainly, the resulting net effects on sewage-service fees are complex and not easy to estimate. Here, e. g., a different volume of wastewater has to be taken into account (volume that can be attributed to charge payers vs. entire volume that has to be treated including infiltration water).With regard to the expected effects of a wastewater treatment plant with a subsidized quarternary treatment, initial estimates predict only an increase of ten to 20 euro-cents per cubic meter of attributable wastewater, which would have to be raised additionally through sewage-service fees (Grunebaum et al. 2014, p. 882).

BOX: Why We Should Consider Quarternary Treatment as a Means of
Meeting the Challenges of Micropollutants

1. Although an accurate and comprehensive quantification of the
societal benefits of quarternary treatment with respect to human
health and aquatic environment is still lacking, there is strong
evidence that refitting of (selected) central wastewater treatment
plants with quarternary treatment for the removal of
micropollutants might, as part of a broad policy mix, be
cost-beneficial.

2. At least for large wastewater treatment plants serving urban
agglomerations and additional plants discharging into vulnerable
water bodies, quarternary treatment might be the most economically
favorable option overall, particularly as all substances are found
together in wastewater streams and these would otherwise have to be
limited individually in diverse spheres of usage, each with high
costs of foregone opportunities (e. g., benefits from
pharmaceuticals). Moreover, addressing so many entry paths would
take too much time compared to mobilizing available treatment
techniques immediately.

3. From an environmental economics viewpoint, central end-of-pipe
solutions to the problem of micropollution of water bodies are
thoroughly consistent with both the origin and the polluter-pays
principle. In particular, this approach is in line with what is
known in legal and economic theory as the cheapest-cost avoider
principle. Treatment plants are expected to be cheapest-cost
avoiders in the sense that they can--compared to
others--contribute "cheaply" to the reduction of the micropollutant
load. This is exactly why they have been established without being
"responsible" for producing effluents in general.

4. The efficiency-oriented selection of those responsible for
action (according to the cheapest-cost avoider rule)does not yet
imply who has to bear the resulting burden at the end of the day.
Both the Leipzig and the Swiss model demonstrate that the burden
could be spread through subsidies, which are provided by charges
(raised by those whose central treatment facility, for cost or
environmentally relevant reasons, does not itself contribute to the
removal of micropollutants). This combines efficiency in action
with solidarity in financing.

5. Thus, the German wastewater charge, in a strengthened form,
could--in a similar way to the Swiss model--make a meaningful
contribution to the selective implementation of quarternary
treatment through support schemes with deductibles. Coupled with
the existing charge, an upgrade with quarternary treatment for
selected plants turns out to be both reasonable and feasible.


Conclusion

The German wastewater charge can--in a similar way to the Swiss model--make a meaningful contribution to the selective implementation of quarternary treatment through support schemes with deductibles. However, its special character as a regulatory charge should be preserved. At the same time the charge needs to be developed further to fulfil the task of raising additional funds. This could be achieved with a reform scenario that proposes a strengthening of the steering function with additional revenue (Gawel et al. 2014). Nevertheless, the overall success of the solution is crucially dependent on being tied to a basic legal obligation to treat MPs--again analogous to the Swiss legal situation--but this has yet to be established for Germany. Furthermore, this end-of-pipe approach should be well embedded into a broader policy mix strategy (Metz and Ingold 2014) taking into account different discharge routes for MP contamination as well as different sources of origin. In any case, a limited quarternary treatment upgrade for municipal treatment plants appears to be, by all means, both feasible and acceptable (see the box on main arguments in favor of quarternary treatment).

http://dx.doi.org/10.14512/gaia.24.4.11

References

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Alliance for the Great Lakes. 2010. Protecting the Great Lakes from pharmaceutical pollution. Chicago: Alliance for the Great Lakes.

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UBA(Umweltbundesamt).2015. Organische Mikroverunreinigungen in Gewassern--Einfuhrung einer vierten Reinigungsstufe als eine Massnahme zur Eintragsreduzierung.Dessau:UBA.www.umweltbundesamt.de/publikationen/organische-mikroverunreinigungen-in-gewaessern (accessed March 21, 2015).

Submitted July 14, 2015; revised version accepted October 22, 2015.

(1) The term micropollutants refers to substances which occur in very low concentrations and are not the result of natural physicochemical or biological processes (DWA 2013, Schluep et al. 2006).

(2) The noxiousness of effluents, based on selected parameters, is assessed in the Appendix of the Abwasserabgabengesetz (AbwAG) and forms the assessment basis of the charge.

Erik Gawel

Born 1963 in Siegen, Germany. Study of economics. Professor of economics since 2001, since 2008 at Leipzig University. Director of the Institute of Infrastructure and Resources Management. Head of the Department of Economics at the Helmholtz Centre for Environmental Research--UFZ, Leipzig. Main research areas: environmental economics, new institutional economics, public economics.

Contact: Prof. Dr. Erik Gawel | Helmholtz Centre for Environmental Research UFZ | Department of Economics | Permoserstr. 15 | 04318 Leipzig | Germany | Tel.: +49 341 2351940 | E-Mail: erik.gawel@ufz.de

TABLE: A comparison of the Swiss and the Leipzig model of
funding micropollutants removal from wastewater.

MODEL ELEMENT       SWISS MODEL          LEIPZIG MODEL
                    (DEFINITIVE)         (SUGGESTION)

basic concept       financial support for additional MP
                    removal in selected large municipal
                    wastewater treatment plants

treatment plants    100 out of a total   e.g., class 5
carrying out the    of 700 public        municipal
measure             wastewater           wastewater
                    treatment plants     treatment plants
                                         (approximately 247
                                         out of a total of
                                         9,500)

funding source      * (Swiss)            * (German)
                    wastewater charge    wastewater charge
                    according to         according to AbwAG
                    [section] 60 b
                    Water Protection     * wastewater fees
                    Act

                    * wastewater fees

type of charge      financing charge     combined
                                         regulatory and
                                         financing charge

duration            limited (until       unlimited
                    2040)

basis of            number of            "noxiousness" of
assessment          inhabitants          industrial-
                    connected to WWTPs   commercial and
                    not included in      municipal
                    the measure          wastewater
                                         according to
                                         [section]3 AbwAG

reason behind the   redistribution of    steering
charge              costs

factors             redistribution       steering impulse
determining the     requirement due to   in relation to
charge amount       the costs of the     reduction of
                    support scheme,      noxiousness/the
                    maximum nine CHF     environmental and
                    per inhabitant       resource costs of
                                         wastewater
                                         discharge

application of      tied to the          tied to water
funds               purpose of           protection
                    removing MPs         purposes according
                                         to [section]13
                                         AbwAG

subsidy quota       75 percent of the investment costs of
                    wastewater treatment plants included
                    in the measure

functional logic    reallocation of      across-the-board
of the support      costs: (partial)     steering incentive
scheme              solidarity           with
                    component through
                    partial              * a top-up effect
                    compensation of      and
                    the "efficiency
                    sacrifice"           * a (partial)
                                         solidarity
                                         component through
                                         partial
                                         compensation of
                                         the "efficiency
                                         sacrifice"

basic legal         expansion of the     * management-
obligations         system is            based under the
                    controlled by the    WFD (practiced in
                    Swiss Water          some federal
                    Protection           states)
                    Ordinance (GSchV)
                                         * emissions
                                         standards
                                         according to
                                         state-of-the-art
                                         technology (to
                                         date this has not
                                         been enshrined in
                                         the German
                                         Wastewater
                                         Ordinance, AbwV)
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