Transcript Slide 1

Financing and water
resources development and
management
Roberto Martín-Hurtado
OECD Environment Directorate
www.oecd.org/water
Martin Walshe
Global Water Partnership
www.gwpforum.org
Context
• Considerable progress made on financing WS&S
BUT to achieve water security need a clearer
understanding of financing for water resources to
meet increasing challenges : climate change and
growing demand.
• Economically productive sectors, (agriculture,
industry, energy etc) and healthy environment
depend on water BUT other sectors not sufficiently
aware that their sustainability depends on
successful WRM.
• THUS need to tackle complex issue of financing for
water resources development and management.
Framework for analysis
• Need to develop a conceptual reference
framework for financing WRM based on in-depth
country analysis
• Key notions in financing:
– Have to reach financial sustainability
– financing gap can be closed by reducing costs
and by increasing revenues from the 3Ts (Tariffs
and other user charges, Tax-based subsidies and
external Transfers)
– Have to look at financing both water governance
and infrastructure aspects
Issues to consider
• Setting the scene: water resources availability;
financing systems; extend beyond the water
system; integrated approach; complex interplay
between the costs and the benefits raises
governance questions
• Benefits of WRM: benefits of different WRM
functions; beneficiaries of individual WRM functions
• Investing in WRM : Tracking expenditures and
evaluating costs, cost effectiveness. Minimising
costs, improving cost-effectiveness, benchmarks.
Allocating existing financial resources
Issues to consider
• Paying for WRM: Establishing a financing
framework; Using a broader set of
mechanism for mobilising revenue;
Undertaking policy and institutional reforms
• actual expenditures presently incurred are
not known – accounted for across many
budgets.
• Little analysis of ways to reduce costs and
the different financing sources to pay for
water resources management.
Soft and hard interventions
• Dynamic interaction between supply (hard)
side of water resources development
(infrastructure and O & M) and demand side
and soft interventions
• Better governance can reduce the need for
and cost of infrastructure.
• Better infrastructure might reduce
governance difficulties (e.g. Reduced
conflict)
Infrastructure
• Infrastructure for water resources
development and management are big cost.
(FFA: five times more finance needed
compared with WS&S)
• UNFCCC estimate that expenditures in water
infrastructure will need to increase due to
climate change.
• Need to both minimise supply-side
infrastructure costs and identify the funding
needed for demand-side measures.
Infrastructure
• Functions relatively well understood but need to
determine costs and how to benefit from
optimisation and how to access financing from
different sources.
• WRM infrastructure have a lumpy nature and long
lead in time
• WR infrastructure very varied
– for productive purposes (such as for energy, industry
or agriculture) > can raise private finance.
– for protective purposes (such as flood management,
wastewater and pollution control, catchment
management and eco-system management) > mainly
public goods requiring different financing solutions
Governance
• Costs of governance functions unknown: e.g.
On policymaking and planning, institutional
reforms, stakeholder engagement, monitoring
and information management, administration
and enforcement of policies and regulations.
• Little guidance on cost norms for establishing
integrated water resources management and
creating the enabling environment for a well
governed sector.
• Consequently there is uncertainty on what to
finance.
Governance
• Making the right decisions on investment and
ensuring financial sustainability depend on
better governance and reforming policies
• Whilst the level of funds needed is much
lower, the governance and management
functions also need to have secure and
adequate financing.
• How to finance the appropriate level of
governance.
Sources of finance
• Different functions have different prospects for
financing
• Well-defined services with clear beneficiaries, such
as for water abstraction or control of pollution, are
suitable for user payments (tariffs or license fees)
• Matching the best sources of finance to different
functions requires careful analysis
• Public goods may have to be provided through
central or local government budgets, (i.e. allocations
of taxation receipts) or through cross subsidization.
Framework for financing WRM
• OECD organised brainstorming meetings
June and August 2009.
• OECD, GWP, EUWI and other partners to
develop an outline report by end 2010.
• Study to include case studies from
selected OECD countries and developing
countries.
Concluding thoughts
• Adaptation funds a potential source for financing
WRM: need to link water resources planning and
National Adaptation Programmes of Action.
• Businesses increasingly aware of WR risks and have
raised this at the World Economic Forum. Reliable
water resources a factor in future investment.
• Complexity suggests the need for more integration
and strategic financial planning that cuts across
sectors.
• Presently no macro-economic case for water (WRM
and WS&S) – do we need a similar study to that of the
Stern Review on the Economics of Climate Change?
Concluding thoughts
• What systems of governance need to be put into
place and what levels of governance are needed?
• What areas of governance expenditure produce the
best returns?
• What type and size of water resources infrastructure
is needed to achieve water security?
• What are the main blockages to financing WRM?
• OECD and GWP welcome comments and
suggestions on taking forward the financing WRM
as well as examples of innovative financing of WRM