The WFD is the fruit of a complete rethink of EU water policy. It does not simply lay down standards of water protection, but also sets out the organisational and procedural aspects of water management. At its heart lies the concept of integrated river basin management, which is intended to bring about a holistic and co-ordinated framework for the sustainable management of water resources.

The core environmental objectives are to prevent deterioration of aquatic ecosystems and to restore polluted waters including groundwater, rivers, lakes, estuaries and coastal waters to "good status" in chemical and ecological terms within a specified timescale. Economic considerations must be taken into account to ensure that planned improvements are not disproportionately expensive or technically infeasible.

Following three years of intensive consultation, consultancy studies and pilot testing, the UK Government, its agencies and the devolved administrations are now beginning to deliver the on-the-ground work necessary to meet the new requirements.

It is still early days in the implementation programme achieving good status is not required until 2015, and there is provision for delays beyond then but the work done so far provides some pointers as to how the competent authorities will handle this monumental task and what some of the major difficulties and issues might be.

Laying the foundations

By the end of 2003, nine river basin districts had been proposed for England and Wales, a further three in Scotland (including two cross-border systems) and two in Northern Ireland. In England and Wales, the Environment Agency will be responsible for developing a river basin management plan (RBMP) for each river basin district.

Consultants at WRc are currently assisting the Agency in developing a national strategy for public participation in the river basin planning process. WRc has also provided support for the Ribble river basin, which the Agency is using as a pilot project to fast-track a river basin management plan, and in particular to try out river basin characterisation guidance and test methods for engaging stakeholders.

The Ribble catchment is located in the Agencys north west river basin district and is home to over a million people. It is one of 15 pilot river basins across Europe testing different aspects of the common implementation strategy (CIS), which was established by the European Commission to promote consistent understanding and practical application of the WFD across the EU.

The Ribble pilot has been up and running since the middle of last year, and the Agency will report back to the CIS working group on public participation in mid-2004. A draft summary report covering the river basin characterisation requirements of the Directive has already been completed with assistance from consultancy Entec, based on a template jointly devised by the Agency and the Scottish Environmental Protection Agency (SEPA).

The Ribble pilot forms one of several strands of the national WFD programme that is being managed centrally within the Agency. Other major projects within the programme include: river basin characterisation; environmental monitoring, classification and reporting; programme of measures; groundwater daughter Directive; river basin planning; and priority and other specific polluting substances.

Given the multidisciplinary nature of the Directive, one of the biggest challenges facing the Environment Agency and its equivalents elsewhere is the assembly of an appropriate tool box of essential skills and technical capabilities.

The WFD programme team currently consists of almost 40 staff mainly from within the Agency, along with a handful of specialists seconded from water environment consultancies such Atkins and Entec. The technical pool includes ecologists, economists, hydogeologists, data and information systems experts, fisheries advisors, GIS advisors, risk assessors and catchment abstraction management strategies (CAMS) advisors.

How the requirements of the WFD compare to the requirements of existing legislation and planning initiatives such as CAMS, RSAP (restoring sustainable abstraction) and SEA (strategic environmental assessment) has been another important strategic focus for the competent authorities over the last year. Atkins was recently commissioned to assist in a project to help examine the scope for better integration and convergence of existing Agency water planning frameworks the results of which are expected imminently.

On a similar note, Entec has been engaged by SEPA and Scottish National Heritage to identify the potential impacts and pressures on Scottish water bodies as a consequence of land use proposals within the current suite of national development plans.

Scotland does not have an official pilot river basin district, but during 2001 and 2002 the Scottish Executive funded some research to help inform national river basin planning. In this exercise, consultants at Babtie were charged with producing a "shadow" RBMP for SEPAs south west area, based on existing information and guidance from steering and advisory groups specially set up for the job.

Babtie was also asked to produce a plan preparation report to outline the positive and negative aspects of the whole process, and provide recommendations to assist in the future planning process. Some important conclusions emerged from this study, highlighting the potential pitfalls of relying on existing data and monitoring techniques.

The data collection process entailed heavy involvement from local authorities, which each use different systems of recording and monitoring water bodies in their areas. "We realised then that a lot of evidence was either not immediately available or not directly comparable and it was a steep learning curve to record the data in a usable and comparable fashion," says Babtie director Alex Macdonald.

As a result, he believes that one of the most important issues currently facing regulators and one which could have a major bearing on the resulting programmes of measures further down the line is data quality assurance. "The WFD is going to result in improvements to water quality as a result of capital investments to control both point source and diffuse pollution. To make sure this happens equitably, we need to establish a baseline standard right across the country for which we need the correct monitoring tools and systems in place."

However, the agencies are generally taking a "fit for purpose" approach to the initial stages of river basin planning, using the best available knowledge, data and techniques.

Cost uncertainties

In spite of the significant amount of preparatory work and pilot testing that has already taken place, many important decisions on how to implement the Directive and what measures and legal instruments will be required have yet to be made. This uncertainty and lack of information is reflected in the wide range of values for the associated costs and benefits contained in a final regulatory impact assessment published by the Department for Environment, Food and Rural Affairs (DEFRA) at the end of last year (ENDS Report 347, pp 54-55).

It puts the total value of environmental, amenity and community benefits associated with improved water quality and recreational "attractiveness" at £1-1.4 billion. Meanwhile, the total cost of implementing the Directive is estimated at between £450-630 million per year a downward revision on previous RIAs because the Government believes that the gap between current river quality and the standards set by the Directive is significantly smaller than its previous estimates.

Costs to the water industry are estimated at £420 million per year. Annual costs to agriculture are put at anywhere between £30 million and £210 million. The range is so wide partly because DEFRA has postponed the introduction of controls on diffuse pollution from agriculture, leaving its intentions unclear. Originally due at the end of 2003, the controls will instead be the subject of a consultation during 2004.

Most of the uncertainty about costs will not be resolved until RBMPs are drawn up and programmes of measures are established in 2009. No significant expenditure driven by the Directive seems likely to be incurred by industry or agriculture until this point.

However, some of the implications for dischargers and abstractors should become clearer well before then starting at the end of this year when two important milestones of the WFD fall due. These are the characterisation of water bodies and economic analysis of water use in each river basin district, which must be completed and submitted to the European Commission by December 2004.

Importantly for those likely to be affected, these outputs will identify areas at risk of failing the Directives environmental objectives and the causes, paving the way to the programmes of measures and any "derogations" the application of less demanding objectives which may be permitted in specific circumstances. Essentially, the work due this year will set the baseline and inform the outcomes and requirements from the river basin planning process.

Characterisation

The gathering of data to inform river basin characterisation is described as the "highest priority WFD work" for the Environment Agency at present. According to WFD programme manager Martin Griffiths, this part of the programme is "advancing rapidly" using GIS mapping techniques and other existing Agency databases, and is "on track" to be submitted to DEFRA in late summer.

The main purpose of characterisation is to identify the different types of water bodies in each basin and provide a snapshot of their current condition. Crucially, this exercise will indicate which bodies are likely to achieve "good ecological status" or "ecological potential" in the case of artificial or heavily modified water bodies as well as those not likely to do so.

However, the criteria against which to assess ecological status have yet to be fully defined and they remain one of the most controversial and hotly debated aspects of the Directive. National regulators have until the end of 2006 to develop and apply the appropriate water quality standards, and Member States are currently working together on a pan-European intercalibration exercise to ensure that the methods chosen to measure impacts are robust and comparable (ENDS Report 347, pp 22-25).

Despite the uncertainty surrounding the ecological classification system, the current condition of the UKs river basin districts and the work required to bring them up to standard will certainly be much clearer on completion of the characterisation exercise by the end of this year.

Moreover, the risk assessment of human impacts and pressures will indicate which activities are the most likely to jeopardise the achievement of environmental objectives and hence where the programmes of measures should be targeted to restore good status by 2015.

Sara Bagshawe of WRc comments: "Diffuse pollution is widely recognised as being a key factor in determining whether or not WFD objectives are met. It is therefore likely that if politically acceptable agriculture will be identified at this stage as a key sector causing failure."

River basin characterisation will also present challenges to some abstractors and dischargers, particularly in areas where water resources are scarcer and there is heavy demand, such as the Thames Valley and south-east England.

The characterisation process will be iterative and ongoing. The baseline studies carried out during 2004 will be used to help define future surveillence and operational monitoring to confirm the initial classifications and measure the changing pressures and risks. "Some of the initial classifications will inevitably change as monitoring programmes improve the information available for making decisions, especially in estuaries and coasts," says Keith Hamill of WRc.

Characterisation is being handled centrally by the Agencys WFD programme team, with support on some technical aspects from external consultants. The Agencys operational staff will start to play a major role when new monitoring programmes become effective during 2006.

The results of river basin characterisation are due to be posted on the Agencys website towards the middle of the year. "Although public consultation is not formally required at this stage, we feel this constitutes good practice and may help with stakeholder participation during later stages," says Martin Griffiths.

Economic analysis

According to the Directive, the economic analysis of water use should provide enough information to calculate "the economic costs of water services", to forecast the investment needed to achieve its objectives, and to judge the most cost-effective programmes of measures.

It is also likely to influence what water companies charge their customers in future depending on the extent to which the analysis indicates that the costs of the water services (including all financial, environmental and resource costs) are recovered. One of the WFD's key milestones is that "true cost" water pricing policies must be in place by 2010. Where possible, costs must be allocated proportionately and in keeping with the "polluter pays" principle. In principle, this should put an end to the cross subsidy paid by the water companies customers for treatment of water sources polluted by pesticide and nutrient inputs from farms.

This is one of the most sensitive issues arising from the Directive in the near term, and DEFRA is taking a lead on the cost recovery work at national level. However, most of the activities informing the economic analysis will be performed by the Environment Agency at a river basin district level in conjunction with the technical characterisation and risk assessment work.

The starting point will be a baseline scenario, to be used in interpreting projections of key economic drivers likely to influence the main pressures on the river basin and the water usage within it. The focus is likely to be on changes in general socio-economic variables such as population growth, the economic development of the main water user sectors and any planned investments linked to existing water regulations. By interpreting these, a view can be taken of likely future patterns of use and their impact on the water bodies and assess the risk looking forward.

"What it will enable us to do, for instance in the case of the agricultural sector, is superimpose the situation where farming output either decreases or increases in the risk assessment calculation," explains Jonathan Fisher, the Agencys senior water economist. "We will then be able to get an indicator of what chance there is of meeting the environmental objectives, comparing the baseline business-as-usual scenario with a CAP [common agricultural policy] reform scenario in which there are mandatory controls on diffuse pollution from farming."

In the same way, the economic analysis will be used to inform judgements as to what the most cost-effective combination of measures might be. It will also assist in justifying any derogations. The WFD allows for less stringent environmental objectives to be met if human activities or natural conditions make it unfeasible or disproportionately expensive to achieve good status by 2015, providing all practicable steps are taken to prevent further deterioration of the status of the water.

There are also allowances for not achieving good status due to new modifications to the physical characteristics of the surface waters or to changes in the level of groundwater that are of overriding public interest or have human safety benefits. Prime candidates for derogations include flood controls, engineering works and hydro-power schemes.

"How this plays out in practice and the criteria for assessing potential derogations will not become apparent until the Agency publishes its guidance for developing river basin management plans, due in early 2005," says Keith Hamill.

Another important unknown is how to assess the costs and economic impacts of different measures even-handedly and equitably across the two main sectors a monopoly water industry and an agricultural industry heavily dependent on subsidies. The Agency is now embarking on a major research project to help clarify this issue.

According to the project proposal, "we will need to link in discussions on impacts, and the way forward, for agriculture...and engage in productive dialogue with all the major stakeholders." Another major objective is to "enhance valuations of environmental benefits, about which there are currently considerable uncertainties, such as impacts on natural habitats, aquatic ecosystems and impacts on amenity and property prices." The Agency is aiming to build on the lessons learned in costing environmental benefits during the water industrys current price review process, AMP4.

The project will run until March 2007 and will be handled by a mixture of Agency staff and external consultants, with various contracts currently out to tender.

Business pressures

Although much progress will have been made on the potential impacts and costs of the WFD by the end of this year as a result of the river basin characterisation and economic analysis outputs, the Directive is unlikely to have any direct effect on water companies and other water users for at least another five years or so.

Entecs Simon Clarke says: "The impact on business will begin to really bite once the programmes of measures have kicked in. River basin management plans have to be finalised by 2009 and become operational by 2012 so the three years inbetween will undoubtedly be a very intensive period."

"Anyone who abstracts, discharges and uses water will be affected in some way," he adds. "Those likely to come under the most significant pressure will be the largest consumptive abstractors, including water companies and food and drink manufacturers, especially in areas where groundwater abstraction is identified as the primary cause of low flow and poor ecology. These firms are almost certain to be affected in the [abstraction] licensing process."

However, the uncertainties surrounding the Directives requirements have made it difficult for industry to plan its response. "The timing raises a particular problem where the water utilities and their periodic financial planning cycle are concerned," notes WRcs Sara Bagshawe, who has worked with the industry on several projects to help assess the implications of the WFD.

The industry is currently in the midst of finalising its AMP4 business plans for 2005-10, but has not been able to build in any costs associated with implementing the WFD. The water companies were advised by industry regulator Ofwat that if any costs are to be incurred before 2010 these should be dealt with as "special cases"

As a result, Ms Bagshawe believes, "there is a danger that the water industry may not have the resources it needs to meet the WFD requirementsThere is also the added concern that capital schemes submitted under AMP4 may not be appropriate and optimised for meeting the final WFD requirements, with the consequent purchase and installation of unsuitable plant and equipment."

Another key issue facing the water industry and other dischargers is a possible increase in effluent treatment costs. This will depend on the final water quality standards, how "good status" is defined and the identification of new priority hazardous substances for control. "If the Environment Agency includes small water bodies in the river basin management plans, then sewage treatment works discharging into small rivers will be particularly vulnerable," says Sara Bagshawe.

Measures may also include the prohibition of some current practices, such as sewage effluent discharges to groundwater, unless it can be demonstrated that they will not contravene WFD requirements. And this is all likely to come on top of new regulations to control diffuse pollution.

"The agricultural community has not got to grips with the water framework Directive at all, although much of the improvement in diffuse pollution will have to come from the chemical products and technologies serving the industry," comments Babties Alex Macdonald.

"Water companies are just beginning to wake up to potential impacts, while other areas of industry are clearly lagging," says Simon Clarke. "Many will choose to do nothing until there is more certainty, but industry needs to look ahead a bit more to assess the continued viability of its processes. It might be prudent to make changes to reduce discharges now rather than wait, but it is definitely worth looking at the long-term sustainability of processes in terms of meeting the new standards."