Integrating Environmental and Resource Costs through an ecosystem services approach in water tariffs: a case study for Italy

The economic valuation of ecosystem services is crucial to implement effective policy measures aimed at efficiently manage freshwater resources, which are facing considerable pressures from climate change and human activities in the Mediterranean. The EC Water Framework Directive (n.60/2000) introduced the concept of full recovery cost, based on the “polluter-pays” principle, including the notion of Environmental and Resource Cost (ERC), expressed as the cost of damage caused by water uses over the environment and the ecosystems, as well as to their beneficiaries. In Italy this concept was scarcely integrated into water governance. This research aims to evaluate ERC through an ecosystem services approach for a water catchment in the Emilia-Romagna region, in order to set up water tariffs accounting for this economic value. To this end, our evaluation framework is aimed at valuing the ERC - in the frame of the WFD - on the basis of a benefit based approach, namely based on the evaluation of economic benefits of the improvement of water quality and of the ecosystem services flow. To date, two different steps were combined in a preliminary phase, aimed to clarify the regulatory context and “state of the art” of the ERC evaluation at the European level. Firstly, policy documents referring to ERCs were analyzed in a comprehensive analysis that identified the most relevant documents and their connections (direct and indirect) with the ERC. Moreover, a literature review about the valuation of ERCs, combining peer-reviewed and gray literature was carried out. Keywords and research queries were developed and online databases were consulted. Then, four relevant research projects about ERC and their economic valuation were considered and their representatives were involved in semi-structured interviews. Finally, a list of relevant ecosystem services, their environmental and socio-economic indicators and stressors was developed for the study area, in order to assess the functionality of those ecosystems having direct interconnections with freshwater provisioning and to suggest potential changes in the near future, in the light of global change. These three phases will suggest which combination of price-based and benefit-transfer based approaches could yield the best estimate of ERCs for the study area, accounting for them in water tariffs.