Biodiversity, water and natural resource management

A Framework for Financing Water Resources Management


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A lack of finance for water resources management is a primary concern for most OECD countries. This is exacerbated in the current fiscal environment of tight budgets and strong fiscal consolidation, as public funding provides the lion’s share of financial resources for water management.

This report provides governments with a‌ framework to assess and strengthen the financial dimension of water resources management. It proposes a set of four principles to frame financing strategies for water management, with a specific focus on the potential role of economic instruments.

It highlights implementation issues, which have to be addressed in a pragmatic way and outlines a staged approach that governments might wish to consider in to assess the financial status of their water policies and to design robust financial strategies for water management. Case studies illustrate selected instruments and how they can be used to finance water resources management.

Read our Policy brief.

                               Table of contents                               

Executive summary

Chapter 1.
Why is financing water resources management an issue?
-Future challenges regarding water resources management
-Financing WRM: Expenditures and sources of finance
Chapter 2. Four principles for WRM financing
-A case for public funding
-Two well-established principles: Polluter Pays and Beneficiary Pays
-Two additional principles: Equity and Policy Coherence
Chapter 3. The value added of economic instruments
-Economic instruments for water management
-Abstraction charges in OECD countries
-Pollution charges in OECD countries
-Putting a price on water
-Innovative instruments to finance water resources management
-A note of caution: Requisites for economic instruments to deliver
Chapter 4. Issues related to the implementation of the four principles
-Earmarking revenues from water-related taxes: Balancing efficiency and financial security
-How can costs of water management be reduced: Efficiency and costeffectiveness as drivers for financial performance
-Roles for the private sector: Harnessing private sources of finance
-How to value water services: A precondition for sound financing
-Governance arrangements that match financing strategies
Annex A. Cost-recovery strategies in selected OECD countries and BRICS
-Cost-recovery strategies in Australia
-Cost-recovery strategies in Brazil
-Cost-recovery strategies in the Czech Republic
-Cost-recovery strategies in France
-Cost-recovery strategies in India
-Cost-recovery strategies in Sweden
Annex B. An OECD survey on investment needs for water supply and sanitation

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