An adequate and dependable source of water is needed to sustain human life, future economic development, and the integrity of ecosystems. About 884 million people lack access to safe water supplies (although the number of people without access to water in their homes is considerably higher) and 2.6 billion are without access to basic sanitation (JMP, 2010). Approximately 10% of the global burden of disease worldwide could be prevented with improvements to water, sanitation and hygiene and better water resource management worldwide. The burden of water-related diseases falls disproportionately on developing countries and particularly on children under five, with 30% of deaths of these children attributable to inadequate access to water and sanitation. Wastewater from industrial and domestic uses often reach the environment untreated or insufficiently treated, resulting in major impacts on surface waters and associated ecosystems.

The provision of water supply, sanitation and wastewater services generates substantial benefits for public health, the economy and the environment. Benefits from the provision of basic water supply and sanitation services such as those implied by the Millennium Development Goals are massive and far outstrip costs. Benefit-to-cost ratios have been reported to be as high as 7 to 1 for basic water and sanitation services in developing countries. Wastewater treatment interventions can generate significant benefits for public health, the environment and for certain economic sectors such as fisheries, tourism and property markets, although these benefits may be less obvious to individuals and more difficult to assess in monetary terms. Finally, protecting water resources from pollution and managing water supply and demand in a sustainable manner can deliver clear and sizeable benefits for both investors in the services and end water users. Investments in managing water resources are going to be increasingly needed in the context of increasing water scarcity at the global level. The full magnitude of the benefits of water services is seldom considered for a number of reasons. Non-economic benefits that are difficult to quantify but that are of high value to the concerned individuals and society, i.e. non-use values, dignity, social status, cleanliness and overall well-being are frequently under-estimated. In addition, benefit values are highly location-specific (depending on the prevalence of water-related diseases or the condition of receiving water bodies, for example) and cannot be easily aggregated.

This report synthesises available information about the benefits of investing in drinking water supply and sanitation services (WSS), with the goal of making this information more widely available to policy makers in both OECD and non-OECD countries.

This Chapter provides some background on the size of the investment challenge for water and sanitation and identifies where benefits are likely to emerge from investment along the value chain of water and sanitation services. Potential types of benefits include health, environmental and economic benefits, as well as benefits that are more difficult to quantify, such as dignity and well-being. Annex A provides an overall methodological framework for evaluating such benefits.

Access to water and sanitation has contributed to major improvements in living conditions, with corresponding reductions in mortality and morbidity, historically in the developed world and presently in the developing world. Providing access is often perceived as the core function of water and sanitation services and therefore considered to be the area where most benefits materialise. Partly as a result, access to water and sanitation services is the focus of Target 3 of the Millennium Development Goals 7, set out as follows: “To halve, by 2015, the proportion of the population without sustainable access to safe drinking water and basic sanitation”

Providing safe access to water and sanitation generates significant benefits, as shown in Chapter 2. However, discharging untreated wastewater into the environment can affect users downstream (including population settlements, industry, agriculture etc.) and cause environmental damages. Collecting and treating wastewater and stormwater is required to ensure the long-term availability of water in a convenient quality for human use and environmental demands.1 Despite its importance, it appears that investments in wastewater treatment are often below the required levels to generate sustained benefits.

For water services to be provided sustainably over time, it is critical to ensure that the raw material, clean water, is adequately protected and managed. This will become increasingly relevant with the threat of climate change, in both developed and developing countries, even though the latter are likely to be more exposed to variations in rainfall and overall scarcity. According to forecasts presented in the Stern report (Stern, 2007), a 2°C rise in global temperature will lead to between 1 and 4 billion people experiencing growing water shortages, mainly in Africa, the Middle East, Southern Europe, and parts of South and Central America. In South and East Asia, by contrast, between 1 and 5 billion people may receive more water. But as much of the additional water will be available during wet seasons, sufficient storage capacity will be needed if shortages during dry seasons are to be alleviated.

This Chapter brings together data and analysis from the previous chapters in order to identify where the most significant benefits from investing in water and sanitation stem from. The chapter starts by identifying what we currently know about the overall benefits of investing in WSS (Section 5.1.). Second, we examine how such information can be used to support policymaking for identifying priority investments in WSS so as to allocate scarce financial resources to the areas that generate most benefits (Section 5.2). Finally, the chapter explores needs for additional research, at both the local and global levels in order to gather additional evidence for sound policymaking and investment in WSS (Section 5.3.).

This Annex sets out in more detail methodologies that are commonly used to evaluate the types of benefits generated by investments in water and sanitation services. It examines how benefits can be defined and how each main category of benefits can be measured, with respect to health, environmental, economic and intangible benefits.