EurActiv - Letters to the Editor

Sir,

I am writing in response to the letter ‘Water needs politics, not techno-fixes‘ by Martin Pigeon of Corporate Europe Observatory, dated 4 May 2009.

Commenting on Veolia Water’s calls for a ” low-water economy “, Mr. Pigeon suggests that Veolia’s views are driven only by commercial and short-term profit optimisation purposes, and that their aim is to maintain water consumption levels at the highest possible level at the expense of sound water management.

Aside from the fact that totally misrepresents Veolia Water’s positions, Mr. Pigeon’s remarks basically deny the ability or legitimacy of a private operator of a service of general economic interest to participate in the public policy debate, or to help clarify important issues of sound water management and shape policy options related to water.

Moreover, his letter is misleading for readers who are not familiar with water management and water services, because he confuses two key, high-stakes issues: on the one hand, the consequences of decreasing water consumption in developed countries, especially its impact on the long-term economic balance of water and wastewater services (be they privately or publicly run); on the other hand, the solutions to address the challenge of water scarcity in European areas that are affected by tensions over water availability ( cf. the article by Antoine Frérot , ‘The European Union and the challenge of water scarcity’ – European issues n°126 – Foundation Robert Schuman – 2nd February 2009).

In a context of declining water consumption, we need to bridge the gap between sustainable management of water resources, financial sustainability of water services and affordability of water for customers. Both public-owned and private operators who promote water savings and water efficiency still depend on variable revenues related to water consumption to cover their fixed operating costs, which amount to almost 80% of their overall expenditures.

The water business model was driven in the XIXth century by the combination of higher water consumption and higher standards of public health. Today, a new issue of general concern has emerged on policymakers’ and local authorities’ agendas alongside the traditional concern for public health and hygiene: water service operators are now also being asked to protect water resources and manage them in sustainable ways. As Antoine Frérot explains in his recent book ‘Water: Towards a culture of responsibility’, there is therefore a need to rethink the traditional model for at least two reasons: first, to achieve the sustainable cost recovery of water services and therefore prevent under – investment in water infrastructure; secondly, to pave the way for a new water business model that is consistent with this newer mission of sustainable management of water resources.

There is no easy or ‘one- size-fits-all’ solution to this issue. Veolia Water’s ambition is to inject some ‘food for thought’ into the debate , with ideas that could be discussed and explored by decision-makers and other stakeholders, including public-owned operators and NGOs.

This contribution also means that there is no ‘hidden agenda’ whereby Veolia allegedly would recommend that citizens, companies and farmers alike consume as much water as they used to.

In developed countries, such a stance would be nonsense , given that an operator, even the biggest one, cannot alter the trend of declining water consumption.

In developing countries , where access to water and sanitation has yet to be secured, the situation is or course different. There, Veolia Water does indeed advocate the extension of water services to meet the Millennium Development Goals set by the international community.

It is obvious that such a move would result in increasing water consumption. For instance, in Tangiers, Morocco , water consumption per capita and per day has increased from 25 litres to 120 litres since the population has been connected to water services. But it is hard to dispute that this is a positive trend, unless you consider that these populations have no right to water and the related improvements in public health that Western countries experienced in the 19th century.

Regarding water scarcity , Veolia Water’s commitment to a low-water economy calls for a two-pronged approach , combining the fight against water wastage and increasing efficiency in water use.

We fully support combating wastage. This includes improvements in network efficiency and potential savings related to irrigation in agriculture. Veolia Water has clearly embraced the cause of reducing wastage and excessive water abstraction.

We also want to help use available water resources more efficiently. This necessarily includes a greater capacity for sustainable utilisation of alternative water resources, such as seawater desalination and water reuse, if and when appropriate and required by the local context. That is why technologies such as seawater desalination and water reuse have been implemented in areas suffering from water stress. The purpose is to secure access to water and limit water abstractions in areas prone to water scarcity, not to maintain the level of water consumption per capita.

As Veolia Water has often stated, the future growth of desalination will depend on the capacity of operators in the sector to desalinate brackish water and seawater at a competitive price while meeting sustainable development objectives, such as reducing the energy intensity and carbon footprint of desalination plants.

Water is a political challenge for all. As a stakeholder, our ambition is to help distinguish the real problems, and the real solutions, from the phony polemics.

Regards,

Dinah Louda
Director of Communications
Veolia Water
Paris, France

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Comments

  1. — Veolia’s “policy options” simply reflect its commercial ambitions —

    Dear Madam Louda,

    Far from wanting to deny Veolia’s involvement in the policy debate, can I reassure you that my letter was intended to open up that debate and highlight some of the issues involved at the EU level, as highlighted in Corporate Europe Observatory’s report published last year (http://www.corporateeurope.org/water-justice/content/2009/01/veolia-turning-taps-brussels).

    This analysis clearly showed that commercial imperatives play a major role in defining Veolia Water’s position – hardly surprising given that Veolia Water is a private company rated on its ability to generate profits. The research also found that Veolia Water’s CSR message was at odds with its lobbying demands.

    You say that I am confusing two important issues, the economic consequences of decreasing water consumption for European utilities and the challenge of water availability in some parts of Europe, mostly Southern. I do not separate these two issues as you do because I observe that they can both be addressed by a cross-sectoral approach to water management that includes saving water, the co-management of water by users (“water democracy”), agriculture and forestry policies… In other words, there is a need to broaden water policies beyond water utilities and technicians, be they public or private, because these cannot take into account the interests of and be accountable to all water users. The EU legislation has clearly taken this direction, although implementation remains difficult.

    The issue of accountability is crucial where services are delegated to private operators. Evidence shows that all too often private water companies tend to under-invest in the service, extracting too much profit while not adequately investing revenue in maintenance of the system. France is a good example, where your company lost control of funds designated for infrastructure maintenance (about €4.5 billions) in the aftermath of the Vivendi collapse (1).

    The water scarcity issue you mention is actually a good example of a market-based solution failure: Southern Europe will indeed very soon face a full scale water crisis if it doesn’t massively reduce its water withdrawals, and will be tempted to impose costly emergency measures such as the desalination plants and water re-use technologies which Veolia Water Solutions & Technologies happen to sell. Indeed these were the main source of your profits in the first quarter of 2009. The Chinese ideogram for “crisis” combines the signs “danger” and “opportunity”, some people in the business community obviously understand this very well – the consequences are not their remit.

    While Veolia Water may have “clearly embraced the cause of reducing wastage and excessive water abstraction,” it is simultaneously adding to the problem using water supply technologies which increase energy consumption, so increasing the climate damage. As the European Commission’s White Paper on “Adapting to Climate Change” (COM(2009) 147 final) makes clear :

    “Some individuals or businesses (in sectors such as agriculture and tourism) may be able to respond to market signals or environmental changes brought about by climate change (‘autonomous adaptation’). However, this autonomous adaptation is unlikely to be optimal because of uncertainty, imperfect information or indeed financial constraints. This means that we cannot leave adaptation efforts to individuals or businesses.
    In addition, some adaptation actions that are taken may increase vulnerability rather than reduce it. Some examples of this “mal-adaptation” are sea level rise or flood protection infrastructure that may disturb the natural dynamic nature of coastal and river systems, or cooling or water supply technologies that may increase energy consumption.”

    I hope this will contribute to distinguish real problems and solutions from “phony polemics”, as you say.

    Thanks for this discussion, and kind regards

    Martin Pigeon
    Corporate Europe Observatory

    (1) “L’eau des multinationales : Les vérités inavouables”, Roger Lenglet et Jean-Luc Touly, Fayard, 2005

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