On the Determination of the Rate of a regulatory Charge – the Case of the German Waste Water Charge

Abstract

In the debate concerning the development of the German waste water charge various and controversial ideas on the right rate of charge are rampant. Apart from the rate’s level it is also contentious how to determine the rate. Refering to Article 9 of the EU Water Framework Directive it has recently been argued to calculate the rate according to the “environmental and resource costs” in a way. The paper disagrees on that idea. Theory of environmental economics does not provide a sound basis in order to calculate the rate of a regulatory charge. This would be neither feasible in practice nor based on scientifically sound evidence. What is more, this would be quite assailable politically and exhibit only a spurious accuracy. As a charge following the so-called demeritorisation approach the German waste water charge does not aim at a particular pinpoint target, rather it intends to initiate a long-term structural change in the entire waste water sector and its related economic decisions to relieve waters. With respect to the history of the German charge Act the paper provides a conceptual heuristic for an update of the charge rate that has remained unchanged since 1997 being in line with the economic objectives of a demerit regulatory charge.