Following a decision to decentralise water and wastewater services, many questions regarding the sustainable financing of water and waste services was raised. Recognising that economic and financial conditions are critical to the effectiveness of various tariff and effluent charge reforms, a financial model (ASTEC) was devised. This case demonstrates the value of using economic instruments to support the implementation of IWRM management objectives.
For centuries the Upper Guadiana Basin has been irrigated with groundwater, resulting in a drop in the water table of more than 20 meters. Actions were taken to address this issue, including regulations restricting aquifer abstraction and economic incentives to encourage farmers to improve irrigation efficiency and plant alternative crops. The key lesson learnt is that surface and underground waters cannot be managed separately.
The Maltese islands experience acute water shortage as an area. To address this, leakage control has been developed to become a strategically important component for water resource management, and has been used to reach an optimum economic balance between water supply and water demand. The key lesson is that leakage management is an effective supply side action to increase efficiency in water use leading, and can be used as a strategic tool.
In Marocco, rapid urbanisation has led to increased demands for quality and quantity of water resources. To meet the challenges posed by the growing water scarcity, Morocco has adopted an integrated approach to water resources management through mutually reinforcing policy and institutional reforms, including the adoption of a long term IWRM strategy. The key lesson is the importance of introducing economic incentives to water management.
Steadily shrinking for decades due to unsustainable irrigation policies, the Aral Sea is under increasing pressure, making both allocation and availability major challenges. Action has been taken and the Basin Economic Allocation Model has been developed as a long-term decision support system to facilitate putting “value on water use”. This demonstrates that economic models can be applied to assess economic value maximization of different water uses.
In Chile, water has been privatised. However, in order to make sure that access was still available to all strata of society, the privatisation was accompanied by a robust regulatory framework, including a system of direct subsidies for drinking water consumption and sewage services for low income households. This case thus illustrates that in case of privatisation, a direct subsidiary scheme should be considered.
The legal and regulatory framework of water utilities in Peru provides opportunities for local financing of investments. Despite this, the sector remains heavily dependent on public financing. Action has been taken by the World Bank to initiate a study investigating the barriers to local private funding. This case study illustrates that public loans, private loans and equity investment are appropriate to fund the necessary investment.