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A Framework for Financing Water Resources Management

image of A Framework for Financing Water Resources Management

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.

The report provides a framework for policy discussions around financing water resources management that are taking place at local, basin, national, or transboundary levels. The report goes beyond the traditional focus on financing water supply and sanitation to examine the full range of water management tasks that governments have to fulfill; when appropriate, a distinction is made on distinctive water issues.

The report identifies four principles (Polluter Pays, Beneficiary Pays, Equity, Policy Coherence), which have to be combined. In addition, it identifies five empirical issues, which have to be addressed on a case-by-case basis. Finally, it sketches a staged approach that governments might wish to consider, to assess the financial status of their water policies and to design robust financial strategies for water management. Case studies provide illustrations of selected instruments and how they can be used to finance water resources management.    

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Four principles for WRM financing

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”.

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