The OBER concept gives water companies the opportunity to make greater environmental improvements using markets, so the burden is not passed on to bill-payers.
Wessex Water has developed a report in collaboration with Frontier Economics, setting out the opportunity and need for the Government to regulate differently to deliver its commitment to be the first generation to leave the environment in a better state.
The current climate and biodiversity emergencies require urgent action, and the Government’s 25 Year Environment Plan (25YEP) provides an ambitious framework to help tackle these challenges.
Along with other water companies, we want to use our knowledge and resources to help the Government achieve many of the goals it sets out in its 25YEP. But our hands are tied by the current ineffective approach to environmental regulation.
The problem with the current approach
Our nitrate reduction scheme at Poole Harbour, Dorset is a good example of this. We were obliged to invest in a carbon-intensive treatment process that costs us around £31,000 for every tonne of nitrogen we remove.
We were able to show that we could achieve the same outcome by delivering nature-based solutions in partnership with farmers, at a cost of £9,000 per tonne of nitrogen removed.
Despite this being a 71% cheaper option, which also provided biodiversity benefits instead of more carbon emissions, we still had to invest in the costlier carbon-intensive asset solution to comply with the current environmental regulation requirements.
We are calling for a new outcomes-based approach that has a better result for the environment to be introduced.
The benefits of OBER
Outcome Based Environmental Regulation will allow us to meet the goals of the 25YEP in a far more efficient way and deliver a range of benefits, including environmental improvements for lower private and social costs, more cross-sector collaboration and more private investment in the environment.
Wessex Water Chief Executive Colin Skellett said: “We are living through climate and nature emergencies at a time of huge pressure on the cost of living. The water industry has a significant role to play in improving our local environment and there is an overwhelming consensus that it needs to raise its game.
“However, to deliver the improvements without putting even more pressure on household bills, we have to innovate. Traditional solutions are becoming increasingly unsustainable because they involve significant energy and chemical use.
“The approach would have benefits for water customers, regulators and taxpayers. It will generate new sources of finance for environmental improvement, attract private investment in nature and climate recovery and support a green economic recovery. It would also accelerate place-based environmental leadership by water companies.
“Finally, with the focus back on the domestic environmental agenda post-COP26, it would demonstrate how to finance and deliver the environmental targets introduced by the Environment Act.”
Read our report.