The water challenge: understanding the issues

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Securing safe and reliable water and sanitation services for all is one of the leading challenges facing sustainable development. All but a few OECD countries have connected 100% of their populations to safe water supplies, and the majority are connected to wastewater treatment. Progress has also been made in developing countries but there is still a long way to go.

A key challenge is to ensure the financing necessary to extend water services to those that are currently not connected, and to maintain and upgrade the existing infrastructure. In 2007 OECD launched a major cross-cutting project on the policies needed to ensure sustainable financing of water supply and sanitation infrastructure. The project will look at the financing needs for water infrastructure, the available sources of financing (including water pricing, public budgets, private investment, official development assistance or ODA), and how the gap between the two can be bridged. It will include specific analysis of current water pricing practices; realistic financing strategies for developing countries; applying the OECD Principles on Private Sector Participation in Infrastructure to the water sector; sustainable water use in agriculture; and innovative business models.

On November 14-15 2007, an Expert Meeting on “Sustainable Financing for Affordable Water Services – From Theory to Practice” was held in Paris. Over 50 experts from OECD and non-OECD countries convened to: (i) share experiences on the challenges and opportunities of financing sustainable and affordable water for municipal and agricultural uses in OECD and non-OECD countries, and sanitation services; (ii) take a fresh look at the theory and practice of water pricing, both as an instrument to ensure the financial sustainability of service provision, and as a tool to encourage the efficient allocation and use of water resources; (iii) fill knowledge gaps in this important policy area, and (iv) provide feedback on the progress and planned work for the OECD Horizontal Water Programme.

Rapporteur’s Summary by Jim Winpenny

Powerpoint presentations :

Session 1: Overview of OECD’S Horizontal Water Project

Session 2: Water Pricing : From Theory To Practice

Session 3: Agriculture Water Pricing and Policies

Session 4: Innovative Business Models to Finance Water Services

A comprehensive list of relevant OECD documents has been prepared on the following issues:

Financing water supply and sanitation systems

Reliable and sustainable financing will be needed to expand and maintain adequate water supply and sanitation services for all. Lessons can be drawn from the experiences of OECD and transition economies in developing systems for financing infrastructure and water services provision and applying full cost recovery water pricing systems.

• Infrastructure to 2030- Telecom, Land Transport, Water and Electricity (the volume 2 will be published in August 2007)
• Pro-poor Design of Subsidies for Drinking Water (Development Centre, Policy Insights n°42, 2007)
• Access to Drinking Water and Sanitation in Africa (Development Centre, Policy Insights n°42, 2007)
• OECD Global Forum on Sustainable Development: Public-Private Partnerships in Water Supply and Sanitation – Recent Trends and New Opportunities
• Keeping water safe to drink 
• The impacts of change on the long-term future demand for water sector infrastructure, published in Infrastructure to 2030: Telecom, Land Transport, Water and Electricity, OECD 2006
• Local capital markets for environmental infrastructure - Prospects in China, Kazakhstan, Russian Federation and Ukraine (2006)
• Ministerial conference on Financing Water Supply and Sanitation in the countries of Eastern Europe, Caucasus and Central Asia (EECCA)
• Financing Water and Environment Infrastructure : The Case of Eastern Europe, the Caucasus and Central Asia
• Environmental Finance: Financing Strategies for Water and Environmental Infrastructure
• Water Management and Investment in the New Independent States

=> More information on OECD Task Team on Sustainable Financing to Ensure Affordable Access to Water Supply and Sanitation
=> More information on OECD work on water supply and sanitation sector reform

Monitoring aid for water

Official Development Assistance (ODA) can make an important contribution to financing water and sanitation services in developing countries.  The statistics of the Development Assistance Committee (DAC) of the OECD provide for detailed analyses of ODA for water by donor and by recipient.  Data are available both at the level of individual projects and in table form.

• Purpose of aid charts: Focus on aid for water
• Measuring aid for water - Has the downward trend in aid for water reversed ...?
• Guiding Principles on Using Infrastructure to Reduce Poverty 
  (read the chapter 3.4 on water, pp 39-43)
• Aid for water supply and sanitation (February 2003)
• Creditor Reporting System on Aid Activities - Aid Activities in the Water Sector 1997/2002 Volume 2003

=> More information on OECD work on aid activities 

Pricing water

Having water users pay the full cost of the service can help to generate the funds needed for infrastructure development and maintenance and provide incentives for efficient water use. Most OECD countries have been moving towards water pricing schedules that reflect the full marginal costs of providing water services for households and industry. More weight is being given to social considerations to ensure affordable access to water services by all.

• Pricing water - OECD Observer article (2003)
• Social Issues in the Provision and Pricing of Water Service (2003)
• Key issues and recommendations for consumer protection: Affordability, Social Protection, and Public Participation in Urban Water Sector Reform in Eastern Europe, Caucasus and Central Asia
• Transition To Full-Cost Pricing Of Irrigation Water For Agriculture In OECD Countries (2003)
• The Price of Water: Trends in OECD countries (1999)

Improving governance of water resources

Proper management of existing water supplies entails sufficient quantities of clean water to support both human needs and essential ecosystem functions. Good governance will require careful consideration of the institutions in place to manage water supply and sanitation systems, including the role that might be played by the private sector.

• Improving Water Management: Recent OECD experience (Policy Brief, 2006)
• Improving Water Management: Recent OECD experience (2003)
• Inland Waterways and Environmental Protection (2006)
• Water and Violent Conflict
• OECD Environmental Performance Reviews - Water: The Experience in OECD countries (2006) 
  (read also the previous edition published in 2003)
• Public-Private Partnerships in the Urban Water Sector
• The Potential role of public-private-partnerships in the water sector of Eastern Europe, Caucasus and Central Asia 
• Financial Reforms and Social Implications in the Water Supply And Sanitation Sector in Eastern Europe, Caucasus and Central Asia
• Guidelines for performance-based contracts between Municipalities and Water Utilities in Eastern Europe, Caucasus and Central Asia (2005)
• OECD Territorial Reviews: Mexico 
  (Chapter 1, pp 76-81, on natural resources: water)
• OECD Reviews of Regulatory Reform - Mexico: Progress in Implementing Regulatory Reform
  (Chapter 4, pp 102- 108, on water sector reform in Mexico)
• Water Management and Investment in the New Independent States (2001)
  

=> More information on OECD work on natural resources management

Achieving sustainable management of water in agriculture

Agriculture is responsible for approximately 70% of water use worldwide. Governments must ensure that farmers use water resources efficiently, and that they are allocated among competing demands in a way that enables farmers to produce food and fibre, minimise pollution and support ecosystems, while meeting social aspirations.

• Environment, water resources and agricultural policies: lessons from China and OECD countries
• Water and Agriculture: Sustainability, Markets and Policies: Proceedings of an OECD workshop, Adelaide, Australia, 14-18 November 2005 (read also the conclusions and recommendations).
• Environmental Indicators for Agriculture Volume 4 (2007, forthcoming). The Report will include chapters on OECD trends in agriculture water use and impacts on water quality, plus reference to water on a country-by-country basis.
• OECD Expert Meeting on Agricultural Water Quality and Water Use Indicators (Gyeongju, Korea, October, 2003)
• Agriculture and Environment: Lessons Learned from a Decade of OECD Work (2004)
• Transition To Full-Cost Pricing Of Irrigation Water For Agriculture In OECD Countries (2003)

=> More information on OECD work on agriculture and environment

Making water clean and drinkable

Inadequate drinking water supply, poor water quality and sanitation are among the main causes of preventable disease and death in the world. While the majority of these deaths occur in developing countries, OECD countries are not immune to outbreaks of water-borne disease.

Many new scientific and technological developments are helping to make more efficient use of available water resources, to reduce pollutants to water bodies, and to improve treatment of drinking water. The OECD has worked extensively on the development of policies to support technological advances.

• Assessing Microbial Safety of Drinking Water - Improving Approaches and Methods
• Workshop on International Scientific and Technological Co-operation for Sustainable Development: water breakaway session
• Emerging Risks to Water Supplies - Best Practice for Improved Management and Preparedness to Protect Public Health
• The science of clean water 

=> More information on OECD work on scientific applications of biotechnology

Last update: 4 July 2007 

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