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A Framework for Financing Water Resources Management

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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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Why is financing water resources management an issue?

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.

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