Water resources management is a key function of governments around the world. Governments need to ensure that available water resources are used in ways to meet economic and social objectives, and this task is becoming increasingly complex as the intersection of water policies with other policy areas (such as energy and agriculture) increases. In many countries, however, water resources management is hampered by a lack of financing and capacity that restricts countries’ abilities to effectively harness water resources for economic growth and prosperity. Water resources management covers a wide range of functions, from the “hard” end of construction, operation and maintenance of water infrastructure to the “soft” end of the design, implementation, monitoring and enforcement of water policy. All this requires resources, without which governments will be increasingly frustrated in the effective management of their water resources

There is a clear and pressing need for governments around the world to strengthen the financial dimension of water resources management. Back in 1978, the OECD Recommendation of the Council on Water Management Policies and Instruments specified the main objectives of water management: to protect water resources against pollution and excessive use; to preserve the water environment and ecology; to safeguard and improve the hydrological cycle in general; and to provide adequate water supply, in quality and quantity, for domestic, industrial and agricultural purposes, account being taken of long-term demands. Recent analysis of water governance arrangements in OECD countries flagged lack of finance as a major and recurrent gap in water policies.

As societies made progress overtime in securing access to water, the subject progressively slipped away from the public agenda, at least in OECD countries. In the second half of the 20th century, rapid demographic and economic growth put increasing pressure on the water resource, both in terms of quantity and quality. As a response, many OECD countries have made significant efforts in the last three decades to clean up rivers – mostly by treating wastewater from urban and industrial centres. Water scarcity has always commanded attention in more arid countries, like Spain and Mexico, but countries that once perceived themselves as water-rich – such as Canada, New Zealand or the United Kingdom – are progressively realising their increasing vulnerability as population and economic growth takes place in areas with relatively low rainfall, where there is currently limited water storage capacity, and exposed to changing hydrological patterns. Managing “too much water” is also a major concern – indeed, flood management is highlighted in most recent Environmental Performance Reviews of OECD member countries.

Traditionally the water sector has been dominated by plans to achieve certain water policy goals (whether in terms of water availability, water services or flood control) focused on building new infrastructures. Discussions on financing were limited to how much money governments should provide to build the infrastructure. Over time, the discussions have evolved, with an increasing emphasis on cost recovery from water users (both for drinking water supply and sanitation and for irrigation; but potentially also for hydropower, navigation and others). Article 9 of the Water Framework Directive in Europe is a prominent illustration of this issue. It states that “Member States shall take account of the principle of recovery of the costs of water services, including environmental and resource costs, having regard to the economic analysis and in accordance in particular with the polluter pays principle”.

A range of mechanisms can be used to transfer some of the costs of water resources management activities from the public purse to the beneficiaries of water management, including (see Rees, Winpenny and Hall, 2008, for more information)...

Several issues need to be addressed, when considering alternative paths to finance water resources management. This section explores some of them. They all have an empirical dimension: there is no generic, definitive answer,

This appendix synthesises information collected on financing water resources management in selected OECD countries, Brazil and India. Each fiche gives an overview and complements illustrations used in the body of the report. These are not necessarily best practices.

The OECD Secretariat recently surveyed the estimated capital cost needed to attain two levels of universal water, sanitation and sewerage coverage worldwide by 2050. It concentrated on municipal (domestic and commercial water provision) and domestic rural coverage. The survey did not cover operations, maintenance or financing. It did not cover other types of water infrastructure (for irrigation, storage, or else). The survey covers capital spending between 2008 and 2050.