Chapter 4. Water management

Water pricing

There is a strong tradition of subsidiarity in handling water supply and sanitation services, with recognition of the benefits of municipal self-regulation and limited interference by the cantons. A corollary is a cultural perception of a duty to pay one’s own way, applying equally to households and municipalities. As a result, cost recovery levels are high and metering is widespread. User charges are typically around CHF 2/m3 for public water supply and CHF 1.5-2.5/m3 for sanitation. Urban water prices are relatively high by OECD standards (Figure 4.7), amounting to USD 4.36/m3 in Lausanne, USD 4.52/m3 in Geneva, USD 4.65/m3 in Zurich, USD 4.57/m3 in Basel and USD 6.22/m3 in Bern, as of December 2013.

Figure 4.7. Water prices in Swiss cities are fairly high by OECD standards

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Switzerland has long propounded a clear set of water charging principles:

• Water should be metered.

• Water prices should cover all costs (Box 4.2).

• Tariffs should comprise a basic fee and a volumetric price, ideally reflecting both the fixed and variable costs of the utility.

• Enough revenue should be earned to maintain the system’s assets.

As regards the financing of urban water infrastructure, the cantons are required by law to ensure that capital expenditure and the costs of operating and maintaining sewage collection and treatment facilities are charged to users. The 2007 EPR recommended making further progress in financing the upkeep and renewal of water treatment infrastructure. This has been partly achieved. In practice, user charges cover the full costs of operating and maintaining facilities for both sanitation and water supply. User charges also cover all long-term capital expenditure (including renewal) for water supply but, according to the latest survey, only 78% for sanitation. The latest survey on sanitation cost recovery, which for the first time covered investment as well as operation and maintenance costs, was published in 2011 by the Swiss Water Association and the Municipal Infrastructure Organisation, the latter being an agency of the Swiss Union of Cities and the Association of Swiss Communes.14 It revealed an annual gap in long-term investment coverage of around 22% on a sample size of some 80% of inhabitants connected (VSA and KI, 2011). Average annual expenditure over the last decade on operating costs, interest and investment, excluding depreciation, amounted to CHF 1.7 billion. It was covered by revenue from user charges, connection fees, refunds and financial products. The total including depreciation, however, is CHF 2.2 billion; thus CHF 0.5 billion is not covered by long-term provisions. Timely renewal of sanitation infrastructure will require new sources of long-term investment finance. The WPA requires holders of water facilities to set up reserves covering long-term financing of not only the initial investment, but also its depreciation and renewal. Pursuant to the WPA, Switzerland should ensure that water tariffscover all sanitation costs, including capital depreciation.

Financing micro-pollutant removal

Micro-pollutants are bioactive and persistent substances in water that can be harmful even in very low concentrations (nanograms or micrograms per litre). For example, feminisation of male fish by hormonally active substances can occur at levels as low as nanograms per litre (Gälli et al., 2009). Micro-pollutants can harm aquatic ecosystems and possibly also human health. Measured micro-pollutant levels in Swiss drinking water do not currently indicate unacceptable risk to the population (ibid). However, over 30 000 potential micro-pollutants are in daily use in industrial, commercial and domestic applications as ingredients in plant protection products, biocides, pharmaceuticals and consumer products for body care, cleaning and other uses. In 2006, as part of a project to develop a micro-pollutant strategy, FOEN initiated a survey of micro-pollutants in watercourses, based on modelling and measurement campaigns and focusing on substances in urban sewage. Work is continuing on providing a systematic overview on micro-pollutant quantities, uses, releases, behaviour in the environment and toxicity. The number and use of micro-pollutants are likely to rise due to population growth and longer life expectancy (Gälli et al., 2009). While it has initiated micro-pollutant monitoring in water and ecotoxicological evaluation of water pollution, Switzerland has decided to apply the precautionary principle and start reducing micro-pollutant discharges to water bodies without further delay.

Existing legislation on the registration, evaluation, authorisation and restriction of chemicals makes it possible to deal with the most problematic micro-pollutants at source by not placing them on the market. Management of other substances, especially those related to human health such as medications, may prove more sensitive. Hence Switzerland has become one of the first countries to implement a national policy to reduce micro-pollutants in sewage treatment effluent. More than 80% of micro-pollutants can be eliminated with end-of-pipe techniques such as ozone or activated carbon treatment. Consistent with a risk approach, it was decided that such additional treatment should target:

• Switzerland’s upstream responsibility for micro-pollutant loads discharged in neighbouring countries’ waters, which applies to large sewage treatment plants, i.e. > 80 000 population equivalent (PE)

• protection of drinking water resources, which involves the following plant sizes and locations:

  • > 24 000 PE in lake watersheds

  • > 8 000 PE in karst landscapes

  • > 1 000 PE discharging into rivers feeding selected drinking water wells (implementation at a later stage)

• protection of aquatic ecosystems, which involves:

  • > 8 000 PE discharging into rivers with low dilution capacity

  • > 1 000 PE discharging into sensitive rivers (implementation at a later stage).

A preliminary cost-benefit analysis indicates that about 120 of the country’s 800 plants, treating around 50% of Swiss urban sewage, have to be upgraded to meet these criteria (Gälli et al., 2009). The upgrades involve investment of about CHF 1.2 billion (by comparison, the capital cost of the current sanitation infrastructure is about CHF 80 billion15). The upgrades are expected to raise operating and investment costs by between 5% and 10% at larger plants and between 15% and 25% at smaller ones. A further estimate gives a range of 7% to 43%16 depending on plant size and existing infrastructure, with ozone treatment and activated carbon treatment being about equal in cost (Abegglen and Siegrist, 2012).

An estimate of the benefits of upgrading, based on the public’s stated preferences (Logar et al., 2014), indicated that the average willingness to pay is CHF 100 per household annually to reduce the potential environmental risk of micro-pollutants to a low level. As the estimated annual cost of upgrading is CHF 86 per household connected, the cost-benefit analysis justifies the investment decision from an economic point of view.

The cantons are responsible for selecting which plants to upgrade, in co-operation with stakeholders and taking watershed management principles into account while aiming to achieve environmental improvement at acceptable cost. Plant operators can choose which treatment technology to use, as long as it removes at least 80% of trace substances from raw sewage. Indicator substances for enforcement of this standard have been defined. Upgrades must be initiated within 20 years of the entry into force of the WPA amendment (i.e. by 2034).

A fund was created in 2016 to finance the upgrades.17 It will be maintained until the end of 2040. The WPA provides for the fund to be financed by a federal sewage charge levied until the end of 2040 on plants larger than 200 PE. The level of the charge is based on the number of people connected to the plant, with a ceiling of CHF 9 per resident annually. The Federal Council sets the charge rate, basing it on the expected upgrade costs (currently CHF 60 million a year). The Confederation collects the revenue and allocates it to the cantons. These payments, granted for upgrade works begun between 2012 and the end of 2035, cover 75% of the upgrade costs. Alternatively, the fund may cover 75% of the cost to build connections between smaller and larger, more efficient plants, up to the cost of an upgrade. Plant operators pass on the charge to the users connected. Upgraded plants are charge exempt. Plants that treat exclusively industrial sewage are excluded from the policy; they thus do not need to comply with the upgrade standard or pay the charge. It is too early to assess the effectiveness of the charge. Three plants have already been upgraded and work is under way or planned at several others.

All households and firms connected to a treatment plant larger than 200 PE pay for the upgrade of 15% of them (i.e. 120 out of 800 plants). This enlarged charge base allows sharing the CHF 1.2 billion investment cost more broadly than if only households connected to upgraded plants had to pay. However, the polluter-pays principle would be better applied if the burden were shared at the watershed level, as is the case in England and Wales, where water companies each cover a river basin area. This is clearly the case for medium-sized plants, whose impact is mainly confined to the surface water or groundwater watershed where they are located. It is also the case for large plants, whose effluents flow into specific, mostly transboundary watersheds.18 The increase in water bills resulting from the charge seems affordable. Relative to other recurring household expenses, such as transport, health insurance and telephone service, the annual sanitation cost is modest in Switzerland.19 For households connected to sewage treatment it amounts to around CHF 200/year/PE, or CHF 2.30/m3. However, households connected to very small plants have costs up to 2.3 times higher than those connected to larger plants, mainly due to higher fixed costs for small installations.20

The federal sewage charge is aimed at micro-pollutants only. It could be extended to conventional water pollutants, however; some OECD countries levy such pollution charges as incentives to reduce direct discharges to water bodies, including from sewage treatment. Broader pollution charges can represent a significant share of the water bill: about one-third for households in France, for example (OECD, 2010).

Water drainage plans regulate extension of the municipal sewerage network. In particular, the plans entail treating sewage and storm water separately (e.g. by capturing rainwater and preventing runoff) with the aim of improving sewage treatment plant performance. The WPA stated that each municipality had to prepare a plan by the end of 2016; around 90% of municipalities met the deadline. Treatment of storm water helps limit direct discharges of micro-pollutants to water. Work has been under way for some years on more environment-friendly disposal of urban storm water (e.g. polluted pavement runoff). The main objective is to retain storm water and treat it before its discharge into rivers and lakes.

Agricultural policy reform

Prior to the mid-1990s, Swiss agricultural policy support was extremely high by OECD standards, at 77% of gross farm receipts in 1986-88. Most of it was potentially production and trade distorting, with measures primarily based on output or input use. The cost of was high for both taxpayers (public financial support) and food consumers (high market prices), and the environmental impact of agriculture was not explicitly addressed. Switzerland has since undertaken significant agricultural policy reforms in response to four agricultural objectives added to the Constitution in the mid-1990s: ensuring food supply, promoting rural development, ensuring that future generations have fertile soil and clean drinking water, and contributing to a varied landscape. As a result, agricultural policy support decreased to 56% of gross farm receipts in 2013-15,21 though this is still more than triple the OECD average of 17%. In particular, guaranteed prices and markets for agricultural commodities have been gradually removed;22 some direct payments not tied to specific products (i.e. decoupled from agricultural production) have been introduced, as well as environmental cross-compliance for all direct payments (i.e. all direct payments from the public purse to Swiss farmers have to be based on proof of ecological performance).

There has been no ex post cost-effectiveness assessment of the two main categories of direct payments in use between 1993 and 2013: general direct payments and ecological direct payments (Figure 4.8). The former aimed at income support (via area-based payments decoupled from agricultural production); keeping farming in mountainous areas (via payments for farming in difficult conditions); keeping dairy cows (headage payments); and environmental protection (payments for integrated production to enhance biodiversity and soil and water conservation). In 1999, the integrated production payments were discontinued as new environmental cross-compliance requirements were introduced for all general direct payments. The new rules subsumed the integrated production requirements,23 making some more explicit and stringent, such as limiting nutrient surpluses to 10% at the farm level, prohibiting pesticide use on buffer strips of 6 m along rivers)24 (compared to 3 m under the WPA) and requiring at least 7% of agricultural area to be biodiversity promotion areas (e.g. extensive meadows, floral fallows, low-intensity pastures, traditional orchards, tall fruit trees, hedges, hedgerows, wild flower strips, low-intensity cropping strips).

Figure 4.8. Ecological payments to Swiss farmers are growing

Source: OECD (2015), OECD Review of Agricultural Policies: Switzerland 2015, https://doi.org/10.1787/9789264168039-en.

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Ecological direct payment programmes, participation in which was voluntary, aimed to reward farmers performing beyond these requirements. Payments were granted for biodiversity promotion areas as well as for summer pasturing (transhumance), extensive cereal farming, organic farming and animal welfare. Participation increased as a larger choice of programmes became available. Since 2000 a separate programme (and payment) has aimed at improving water quality in problem areas (Box 4.3). Some CHF 74 million was allocated to this programme over 2000-15.

Due to the low and stagnating nitrogen use efficiency since 1990, a new programme and payment were launched in 2009 to improve input (resource) use in agriculture (Decrausaz, 2010). The programme covers nitrogen, phosphorus and pesticides, as well as more sustainable use of soil, biodiversity and landscape. Some CHF 132 million was allocated to the programme over 2009-15.

Under Agriculture Policy 2014-17, direct payments continue to be subject to environmental cross-compliance rules regardless of whether the objective is food supply, maintaining farming in mountains, or environmental or landscape protection. The main change in the 2014-17 policy is reallocation of payments to more closely align them with specific objectives. General direct payments and ecological direct payments are split into six categories, which allows for more explicit payment objectives (e.g. biodiversity payments, payments for landscape quality) (Box 4.4). However, it is no longer clear which payments reward farmers who voluntarily exceed environmental cross-compliance requirements (as was the case of ecological direct payments until 2013). Another important policy change was replacing headage payments with grassland area payments for dairy cows. The former had encouraged intensification of livestock farming; the latter, though, is conditional upon minimal stocking density.

Some direct payments can be qualified as having explicit environmental objectives, such as maintaining extensive meadows and extensive cropland, managing water quality, farming organically, conserving biodiversity and protecting landscape. The proportion of such payments to total direct payments steadily increased from 6% in 2000 to 23% in 2015, with a marked increase since 2014 and implementation of Agriculture Policy 2014-17 (Table 4.4). The payments increasingly focus on preserving biodiversity, extensive meadows and landscape. Such targeting of payments at explicit environmental outcomes is a positive step towards improving agricultural policy cost-effectiveness, as is a shift from public financial support to payments for well-identified ecosystem services. Switzerland has also reduced reliance on payments based on input and output use (Figure 4.8), which tend to incentivise the use of farm inputs. However, a significant share of environment-related payments seeks to reduce reliance on inputs such as nutrients and pesticides, including through organic farming and extensive cropland farming, instead of targeting environmental services. This entails a risk of contravening the polluter-pays principle should farmers be paid to meet their legal requirements. More generally, payments to farmers should be based on local conditions and delivered where needed (i.e. they should take the form of payments for ecosystem services). This is not the case for environmental cross-compliance, which 95% of Swiss farmers practise, and which can be seen more as applying a combination of regulations and public financial support regardless of local environmental conditions.

Nutrient and pesticide management

Agriculture Policy 2014-17 introduced a computer application for simplified farm manure management known as HODUFLU. Pursuant to the WPA, farmers must balance their use of manure with the land available for spreading. If a farmer has too much manure, he can transfer it under certain conditions to another farm that needs nutrients for its crops or, more rarely, to a biogas plant. In the latter case, the residue (digestate) is rich in nutrients and must also be used as fertiliser. HODUFLU, under FOAG, was introduced in 2014 to facilitate and liberalise management of such nutrient flows. Deliveries of farm manure and digestate, previously only possible through written contracts between transferring and receiving farmers, must now be registered with HODUFLU, which contains data from all farmers wishing to transfer or receive nutrients. This allowed simplifying the control of manure flows between the cantons: in 2015, Lucerne and Sankt Gallen cantons transferred the most nutrients, while Berne, Aargau, Zürich and Thurgau cantons received the most. With HODUFLU, nutrient trading was significantly simplified for farmers with nutrient excess, thereby helping them achieve the legal requirement for balanced manure use at the farm level at no cost to the public purse other than operating HODUFLU.

To further enhance cost-effectiveness, HODUFLU could be combined with a tax on surplus nitrogen levied at the farm level, as in Denmark. Schläpfer (2016) proposes this as a cost-effective way to reduce nitrogen pollution in compliance with the polluter-pays principle. The surplus would be calculated from the farm nitrogen balance in Suisse-Bilanz, a farm accounting system for nitrogen and phosphorus. Tax collection would involve a deposit levied on imports of animal feed and mineral fertilisers25 and refunded after deducting the tax (Figure 4.9). The net revenue would be earmarked for the farm sector. Suisse-Bilanz, introduced in 1999 as part of environmental cross-compliance requirements, must be updated every year. Farms whose livestock density does not exceed their soil holding capacity26 and which do not import nitrogenous or phosphorous fertilisers, are exempt. Manure exports recorded on HODUFLU are deducted.

Figure 4.9. How the proposed tax on nitrogen surpluses would work

Source: Schläpfer (2016), “Eine Stickstoff-Lenkungsabgabe für die Schweizer Landwirtschaft?”, www.agrarforschung schweiz.ch/aktuelles_heft_10de.php?id_artikel=2227.

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In 2014, organic farming accounted for about 133 000 ha, or 9%, of agricultural land, mainly in mountain areas. Some CHF 40 million was paid in 2014 to encourage organic farming. The share of agricultural land under organic farming is triple the estimated OECD average of 3% (Chapter 5).

While Switzerland has begun tackling point-source micro-pollutants from sewage treatment plants, agriculture is a major diffuse source of micro-pollutants in the aquatic environment. In response to the Moser postulate27 and following a 2014 parliamentary intervention,28 the Federal Council instructed the Department of Economic Affairs, Education and Research to draw up an action plan for reducing risks and increasing sustainable use of phytosanitary products by the end of 2016, drawing on EU policy.29 A draft plan, published in July 2016 with 2026 as its time horizon, suggests the adverse effects of phytosanitary products could be halved if their use were restricted, including:

• a 30% reduction in application of agricultural pesticides with a high risk profile and a 25% reduction for other agricultural pesticides

• a 50% reduction in watercourses exceeding water quality requirements (0.1 μg/l)

• reduction by half of the agricultural pesticide risk for aquatic life.

As part of preparation for the phytosanitary product action plan, FOAG commissioned a study to evaluate the feasibility of introducing a pesticide tax to be considered in the development of Agriculture Policy 2022-25. After reviewing pesticide taxes in Sweden, Norway, Denmark and France, the study recommended differentiating taxation by toxicity, as in Denmark (Finger et al., 2016). Due to low price elasticity, high tax rates would be required to significantly reduce demand. Levying the tax at the wholesale level or on industry would reduce transaction costs. Redistribution of the revenue to the farm sector would raise acceptance and, if well-targeted (e.g. to new technology, alternative farming systems), would provide further incentives to reduce pesticide use. A prerequisite would be to abolish the VAT reduction on pesticides.

Space for waters

According to Article 36a of the WPA, introduced in 2011, the cantons must delimit sufficient space to allow the rivers to fulfil their natural functions and to guarantee protection against floods and the use of water. The cantons must delimit this “space for waters” by the end of 2018 and include it in their master plan and land use plan.

Rivers with sufficient space fulfil many important functions. They connect ecosystems and provide the water needed for life. Rivers serve an essential function as habitats for animal and plant communities, provide recreational areas for humans and play an important role in the self-purification of waters and in feeding the water table. When rivers flood, however, they can threaten residential areas and farmland. For all these reasons, it is important to reserve sufficient space along watercourses. Excessive use of watercourse space has increased risk to settlements in flood-prone areas, to biodiversity from downstream river development projects and to water quality where river edges are intensively farmed; it has also increased flood risks where stream channelling leads to faster river flows and higher peak flows. Hence the importance of co-ordinating measures relating to flood protection, water protection, agriculture, nature and landscape protection, and recreation planning.

Protecting against floods and providing space for waters go hand in hand. The WMA requires flood protection to be linked to ecological solutions and watercourse rehabilitation. If these objectives are to be attained, it is first necessary to provide sufficient space for watercourses. Spatial planning instruments are particularly relevant to ensure space for waters. The Watercourse Management Ordinance (Article 21) requires the cantons to consider space for waters in their master plans and land use plans. Cantonal and municipal land use plans allow for enforcement of this space or imposition of protective requirements by regulating landowners’ land use rights. Some cantons, such as Zurich, can reserve space for waters by imposing construction limits. For landowners for whom land use restrictions cannot reasonably be imposed, the authorities can opt for purchasing land to ensure the required space. The new Ordinance on Structural Improvements, which is part of agricultural legislation, enables authorities to co-finance land purchase in the context of land consolidation or other land improvement.

The 2007 EPR recommended preparing flood management plans and including flood risk in cantonal and municipal land use plans. This has partially been achieved. There are no flood management plans at river basin level but flood protection is an integral part of land use planning (Section 4.4). In addition, in 2016 FOEN published a flood protection implementation aid for use by the cantons, municipalities and the private sector. Based on lessons from case studies, the aid provides guidance at each stage of risk management, from risk assessment to implementation of flood protection measures, with the aim of achieving an “acceptable” level of flood risk.

To determine the necessary space for waters, a simple method is used, applicable to small and medium-sized watercourses, which account for between 70% and 80% of the hydrographic network. The river bed’s natural width is the reference value from which the width of the riparian zone is obtained by means of a nomogram (Figure 4.11). In less exploited areas, a much wider space – the river meander bend – can be delimited to maintain the watercourse’s natural dynamics. A recreational space will be considered within these limits or beyond if the watercourse and its banks are to be used for recreational activities.

Figure 4.11. A nomogram is used to determine the necessary space for surface waters

Source: SAEFL/FOWG (2003), Guiding Principles for Swiss Watercourses: Promoting Sustainable Watercourse Management, www.sib.admin.ch/fileadmin/_migrated/content_uploads/DIV-2703-E.pdf.

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The river bed is defined as watercourse width at average water level. In its natural state, the channel in which a river flows has a diversified structure and offers habitats for aquatic plants, fish, birds and other life forms. It is also the part of the waterway that fulfils the function of transport. In the case of artificialised watercourses, the natural width of the river bed is estimated from reference sections that have remained in the natural state.

The riparian zone, which includes the river banks, serves as a habitat for a multitude of animal and plant species. Depending on river bed width, a riparian zone capable of performing its functions can extend between 5 m and 15 m on either side. Above 15 m it is considered an autonomous riparian biotope. In Figure 4.11, the values on the continuous line represent the minimum recommended space to ensure habitat networking and flood protection. To enhance biodiversity, more space is necessary, represented by the values on the dashed line. The Ordinance on Substances prohibits use of pesticides and fertilisers on a 3 m strip to either side of the river bed; this buffer strip is part of the riparian zone. In agricultural areas with high nutrient inputs due to steep slope, intensive farming or lack of riparian vegetation, the buffer strip must be extended to or even beyond the limits of the riparian zone.

The river meander bend allows for natural formation of meanders. It should reach at least five to six times the width of the river bed and is delimited only if a project is meant to maintain or restore a watercourse’s natural dynamics.

Streams are attractive as recreational areas, especially when they are easily accessible. A recreational space of at least 3 m (e.g. for roads) should be provided on sections close to residential areas or along traditional walking or cycling routes.

Minimum flow

Since 1991 there have been three levels of minimum flow requirements for new water use rights. The ten-year average of the flow reached or exceeded 347 days per year (Q347 flow rate) is used to determine the first level (WPA Article 31, para. 1). For small rivers (with a Q347 flow rate up to 60 litres/second) this level is relatively higher than for larger rivers. For small rivers, water use is possible only if a minimum flow of 50 l/s is maintained. The reason is that the ecological balance is very fragile for this type of river, which is of particular importance as living space for young fish and the aquatic life they feed on.

The minimum flow requirements must be increased to a second level (WPA Article 31, para. 2) if the WPA requirements are not satisfied in terms of i) water quality (e.g. low dilution of sewage), ii) groundwater supply, iii) protection of biotopes whose existence is directly related to the nature and size of the watercourse and iv) free migration of fish. The minimum flow must also increase in the case of rivers crossing inventoried landscapes and biotopes or in case of “overriding public interest” (e.g. landscape criteria such as presence of a waterfall).

These two levels do not take into account the ecological differences of the various rivers (i.e. the same requirements apply for all rivers). This is why the WPA provides for a third level of minimum flow requirements (WPA Article 33), which consists of setting “acceptable” minimum flows after a weighing of economic and environmental interests, including landscape protection, biotope protection, long-term water quality, and long-term groundwater protection. The third level must be at least as high as the second level (preferably higher). Round tables allow the weighing of interests between enhanced environmental protection (more stringent minimum flows) and economic development (e.g. using water for hydropower). There are successful examples of round tables that led to setting minimum flows in accordance with legal requirements (WPA, Article 33) while taking existing water use rights for hydropower into account (Box 4.6).

Even where much less stringent minimum flow requirements apply by derogation (under Article 32) weighing of interests is required. Derogations apply to the use of hydropower in rivers with no surface water flow for at least 18 days per year, on average (i.e. 5% of the year). This is often the case for many small rivers in the Alps above 1 700 m, where surface water freezes much of the winter. Since 2011 the derogation has also applied to rivers of low ecological potential.

Articles 31-33 of the WPA do not apply to water use rights granted before 1991, where the much less stringent Article 80 applies (Figure 4.12).30 Article 80 (1) specifies that minimum flow requirements only apply if they do not infringe upon existing user rights to such an extent as to justify compensation. Under Article 80 (2), stricter minimum flows apply to watercourses crossing landscapes or biotopes listed in a national or cantonal inventory, or where overriding public interest requires, even if they infringe upon existing user rights to the point of justifying compensation. By end 2016 about 25% of hydropower plants built prior to 1991 did not meet the 2012 deadline for complying with Article 80 requirements (FOEN, 2017b). One of the few examples of Article 80 (2) being implemented is on the River Doubs, where authorities compensated a hydropower plant operator for income loss so as to increase residual water use for nature conservation.

Figure 4.12. The minimum flow differs depending on whether the rights of use were granted before or after 1991

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Some very old rights of water use for hydropower are unlimited in time, which prevents enforcement of the minimum flow standards set in 1991. This is the case for most smaller hydropower installations (around 1 000, out of a total of 1 150), for which minimum flow is not regulated other than by Fishing Act provisions. An environmental NGO, Pro Natura, recently reviewed the legal basis for hydropower use in the various cantons (Vetterli, unpublished).

Hydropower development

Since 2011 all installations related to hydropower use have had to meet three types of requirements to ensure their ecological improvement, in addition to the Articles 31-33 minimum flow requirements. These new requirements relate to hydropeaking (affecting 100 installations), changes in sediment transport (affecting 500 installations) and obstacles to fish migration (affecting 1 000 installations). Hydropower accounts for about 60% of Swiss electricity production and is spread over the Rhine, Rhône, Po and Danube watersheds. When preparing Energy Strategy 2050, which postulates the abandonment of nuclear energy in the medium term, the SFOE estimated that there was still potential for hydropower development. In a 2012 study, the SFOE found that Switzerland would have the capacity to increase its hydroelectric production by 9%, from 35.4 TWh in 2010 to 38.6 TWh in 2050, without contravening current water protection regulations. Some 70% of the increase would come from new installations large and small, with the rest from expansion of existing large plants. Some NGOs argue that the implied increase of 3.2 TWh/year can hardly be achieved without breaching minimum flow requirements, strict application of which to existing plants would reduce current production by 1.4 TWh/year.

An extension of the federal alluvial zone inventory currently under preparation may significantly reduce the scope of hydropower development by 2050 – possibly halving it for large plants, an unpublished SFOE estimate indicates.31 A new Energy Act (not yet in force, it was unsuccessfully challenged in a May 2017 referendum) provides for weighing of interests regarding areas that are part of the Federal Inventory of Landscapes, Sites and Natural Monuments of National Importance, which includes some alluvial zones. However, the new law precludes such weighing of interests for renewables development in non-inventoried alluvial zones and other non-inventoried protection zones, such as dry grasslands. Thus it would be possible to build new hydropower plants in protected landscapes and biotopes, except those inventoried as being of national importance. With few exceptions, all new hydropower development will intersect with protection of nature and landscape. As alluvial zones naturally are concentrated around watercourses32 there is an obvious need to manage trade-offs between their protection and hydropower development. The surface area of alluvial zones may seem negligible in terms of biodiversity conservation – the 282 zones cover 226 km2, 0.55% of the national land area – but comparing them to the area coverage of Swiss rivers (342 km2, excluding lakes) makes their significance clear. The weighing of interests between hydropower development and alluvial forest protection should be the rule rather than the exception, as it would allow the setting of residual flow levels that are acceptable to all stakeholders.

Financing river rehabilitation

The 2007 EPR recommended establishing funding mechanisms for watercourse rehabilitation. This has been achieved. Since 2011 public financial support has been granted for rehabilitation works (via environmental policy) and for provision of space for waters (via agricultural policy), while electricity consumers (via a tax on electricity bills) support ecological improvement of installations related to hydropower use (Table 4.6). These instruments are combined with direct regulations on minimum flows and come in addition to the public financial support for flood control that was in place before 2011.

The Confederation and cantons share responsibility for financing river rehabilitation projects. Federal and cantonal funding may cover up to 80% of rehabilitation work: a fixed 35% and additional funding depending on i) the cost/benefit ratio for the protection of nature and landscape of the selected stretch of river or lakeshore (additional 10%-20%), ii) the extent of space reserved for waters (additional 25%-40%) and, for a limited number of projects, iii) the relevance for local recreation (additional 10%). The cost-benefit analysis is based on the stretch’s ecomorphological status, its natural state and existing installations, such as buildings and roads, on riparian zones (Figure 4.10).

Since 2016, public financial support for rehabilitation projects has been granted only to cantons that have prepared a river rehabilitation strategic plan. This federal allocation to the cantons is based on the cantonal river network length and its morphological status, as well as on negotiation.33 In practice, the Confederation and the cantons jointly prepare programme agreements within the framework of the 2008 fiscal equalisation reform and related division of tasks between the Confederation and the cantons (Chapter 2). These programme agreements set out the rehabilitation objectives and the amount of federal subsidies available.

The space for waters can be farmed, but only as biodiversity promotion areas, in which case the farmland may benefit from public financial support under WPA Article 62b (Box 4.7). CHF 20 million a year has been budgeted under the agricultural policy for the purpose. In addition, landowners and authorities may agree contractual solutions on a case-by-case basis. The cantons and municipalities have considerable room for manoeuvre in this area. For example, Berne canton has enacted special regulations to grant additional payments to farmers.

The rehabilitation of a given stretch of river or lakeshore may be financed under different legal provisions. In particular, there may be rehabilitation projects under the WPA and flood protection projects under the WMA. The two types of projects are essentially subject to the same ecological requirements, as the acts contain identical articles,34 given that most flood protection projects also benefit nature and the landscape. In practice, however, flood protection projects take precedence over rehabilitation projects where flood risks are high.

Another combination of legal provisions exists with rehabilitation measures to be taken in high-value alluvial biotopes, such as alluvial forests, marshes and amphibian breeding sites. In principle, rehabilitation measures are financed under the WPA while maintenance of recovered biotopes along watercourses is covered by the NCHA. Indeed, the NHCA provides that the Confederation may allocate subsidies to the cantons for protection measures in selected landscapes and biotopes (Chapter 5). Thus the rehabilitation policy under the WPA may significantly contribute to achieving the biodiversity policy objectives to protect biotopes of national importance under the NHCA, and vice versa. Moreover, alluvial forest management (like forest management in general) is eligible for public financial support under Swiss forestry policy.

A further combination of legal provisions exists with financial contributions under the Agriculture Act (Article 14 of the Ordinance on Structural Improvements) for rehabilitation of small rivers in agricultural areas. Such rehabilitation can be considered a land improvement measure and be financed as accompanying measures in the context of agricultural structural adjustment policy. Alternatively, if the rehabilitation is not realised as part of land improvement, it can be financed under WPA Article 62b provided it promotes biodiversity protection.

A wide variety of public financial support has thus arisen to pay landowners for the multiple facets of river rehabilitation in terms of protection of nature and landscape, providing space for waters, flood protection and agricultural land improvement. Switzerland ought to ensure synergies and coherence between the different rehabilitation objectives assigned to the same stretch of river or lakeshore. This means evaluating the additionality of ecosystem services (e.g. flood as well as nature and landscape protection; land improvement as well as biodiversity promotion). Where there is an overlap of policy objectives for a given stretch of river or lakeshore, no double funding should be allowed for one and the same service provided, pursuant to the 1990 Federal Act on Financial Aid and Compensation (Subsidies Act, Article 12).

Since 2011 hydropower plant operators have had to limit the negative impact of hydropeaking (WPA Article 39a), changes in sediment transport (WPA Article 43a) and obstacles to fish migration (Fishing Act Article 10). Installations built since 2011 have to comply with these new standards. All installation built before 2011, whatever their size, are eligible for financial support to facilitate their upgrading (i.e. ecological improvement) by 2030. Ecological improvement is entirely financed via a tax of 0.1 cent/kWh on electricity bills,35 in accordance with the Energy Act (Article 15abis). The tax rate is set to raise up to CHF 50 million a year (CHF 1 billion over 20 years). This support (“compensation”) does follow a kind of “electricity pays for electricity” principle but seems to contravene the polluter-pays principle, which would require plants’ operators to cover the ecological improvement cost. However, the provision takes into account operators’ acquired rights, which ensure full compensation for any limitation of hydropower use that entails excessive costs.

Financial support for ecological improvement of hydropower installations comes on top of other financial incentives for hydropower development as part of energy policy. Since 2013, as part of the first phase of Energy Strategy 2050, financial support has been able to cover part of the investment in new plants, the aim being to increase hydropower’s share in the renewables mix. This incentive is financed via additional levies on electricity bills: 0.1 cent/kWh for large plants, 0.03 cent/kWh for small ones.36 Since 2013 and until 2018, a market premium of 0.2 cent/kWh is granted to existing large plants. Electricity consumers also subsidise hydropower development via market price support. Since 2008, new and upgraded plants37 of less than 10 MW capacity have been eligible for feed-in-tariffs (FITs). The smaller the plant, the higher the FIT rate;38 the rates are lower for installations on natural watercourses (as opposed to those on watercourse stretches already in use) as an incentive to protect natural watercourses from too much hydropower development. FITs were granted for 25 years for installations built before end 2013, and for 20 years since then. FIT policy is under review (Chapter 3).

On the other hand, hydropower plant operators are subject to a tax for the use of water to produce electricity (the tax is combined with water use rights). The tax rationale is the use of a public resource. Revenue from taxation of hydropower production totals around CHF 550 million a year nationwide and accrues to the cantons where the hydropower is produced. The tax is designed so that the more hydropower is generated, the higher the tax amount, which creates incentives for cantons to develop hydropower. This is particularly the case in the Alpine cantons, where the proceeds make up a significant share of cantonal budgets. The amount of the tax is obtained by multiplying the theoretical installed capacity (kWB) by a tax rate (CHF/kWB) the maximum of which is set by law. Hydropower plants above 1 MW39 of installed capacity are subject to the tax, whose rate can also vary by type of plant.40 A higher rate for plants requiring dams is environmentally justified because dams entail risk of hydropeaking, changes in sediment transport, obstacles to fish migration and eutrophication. In some cantons, the tax is based on power generated and water withdrawn. For example, in Jura canton the rate decreases when large diversion facilities take more than three-quarters of the average annual river flow and when large impoundment facilities make higher withdrawals in summer than in winter. Such regressive taxation (the tax rate decreases as withdrawals increase) is a disincentive to comply with minimum flow rules.

The maximum tax rate was set at CHF 110/kWB for 2015-19 (compared to CHF 8/kWB when the tax was first introduced in 1916). Since the mid-1970s the maximum rate has been increased significantly to ensure higher revenue for the mountain cantons and, until 2008, to follow significant increases in electricity prices. Since 2008, however, market prices on European electricity exchanges have collapsed. For example, prices negotiated in Leipzig fell by around 66% between 2008 and 2016 (after adjusting the exchange rate effects for Switzerland). The tax now accounts for about one-quarter of the operating cost of hydropower plants and half the market price for electricity, which is significant. The water and electricity sectors have called for a revision of the rate after 2019 to take these changes in electricity prices into account (ASAE, AES and Swisselectric, 2017). The tax should reflect pressures on water resources, for example by acting as a sanction for non-compliance with standards on ecological improvement and minimum flow. To this end, its design should change from an objective of revenue raising to that of an incentive-based instrument.