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The European Case of Water – Quo Vadis Water Resilience?

The European Case of Water – Quo Vadis Water Resilience?

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“Water resilience” is joining AI, competitiveness and sovereignty, as a new buzzword in Brussels’ policy-making conversations. But while the latter three concepts are rather intangible, water resilience is a more concrete concept, and is also a life-threatening problem.

But buzzwords tend to be empty shells and are often used for political purposes such as the upcoming EU and national elections in Europe. Debates related to water are almost exclusively focused on extreme weather events, water scarcity, sea level rise, wildfires, draught, and nature restoration. Hardly anybody addresses the acute issue of underfinanced and outdated water supply networks in Europe and the documented wasteful water usage across economic sectors and end-consumers in the region. Water utilities are increasingly unprofitable – in 2021/22, South West Water was the only water company in the UK to report profit after tax. In France, the credit rating of one of the country largest water service providers has recently been lowered to BBB minus. In Hungary, almost all water companies are in the red, largely due to outdated and underperforming networks and a price freeze which has existed since 2013. The 2023 year-end homogenization of water price for industrial consumers in Hungary has proved to be little in the way of a cure for the overarching illness. Economic difficulties persist. The water sector has failed to implement a change of tactics. The Zeitgeist of free water provision and questionable irrigation practices continue to dominate.

Yet, the good news is that things are starting to happen in the EU and in the member states. For example, Italy’s Tuscan region, together with the national regulatory authority (ARERA), the European University Institute and the European Water Regulators, has recently organized a panel discussion on water resilience and related investments. A discussion that, one can suppose, had a strong focus on Tuscany and Italian aspects of the issue. Danish water sector stakeholders have also been active and have organized the Grand Danish Water Day which will take place on the 15th of May in Copenhagen and will aim “to shine a spotlight on water in Europe”. The Friends of Europe is assembling an event to take place on the 24th of May in Brussels which will focus on the impact of climate change on health, water availability and water management. At this event, the European Environment Agency is expected to present its new report “Responding to climate change impacts on human health in Europe: focus on floods, droughts and water quality”. The Commission’s Green Week at the end of May, baptized “Toward a water resilient Europe”, will unmistakably act as a catalyst for additional partner events and policy discussions.

The question of investment in water resources and water distribution networks is not simply one part of the “big picture” of climate resilience. Rather it is in and of itself a time-sensitive matter. Water supply and drainage infrastructure is wholly outdated. Networks’ leakage is a constant 20-80% of total water passing through the pipes, on average in Europe. The prices paid for water usage are not able to cover the costs of production, transport, infrastructure and services. Artificially low prices are the subject of heated political debates at the national and European levels.

Real solutions are complex and far from imminent. Without placing a true high value and importance on water usage and disposal, without internalizing the environmental costs at both the upstream and downstream levels, and without coherent and long-term water policy planning, a mere patchwork of reactive rather than proactive steps will only lead to further and greater problems with the likely result of an unprecedented tragedy of the commons. While we do indeed need to update water related EU regulations and directives, national authorities must also enforce the existing laws based on the polluter-pays principle, they must urgently introduce behavioral incentives for users, and they must uncompromisingly enact laws enabling market-based dynamics to help generate income, e.g., by creating local, regional and national water trading markets. Avoiding the exploitation of the decreasing amount of water in Europe will not happen without the proper financing and renovation of existing pipelines and a significant overarching behavioral change of water consumers. We at Dentons have a holistic approach and see water as a precious natural resource that has an economic value. We advise our clients in this spirit.

By Pai Belenyesi, Of Counsel, Dentons 

Hungary Knowledge Partner

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