Implementing the Water SDG

Financing and economic instruments: Challenges and toolsAn OECD perspective

Hannah LeckieOECD Environment Directorate

OutlineWater security as a driver for economic growthThe value of economic instrumentsOECD experience with:• Pricing for WSS• Financing WRM• Implementation issues and tools

Water security as a driver for growth

• A causal factor in level of economic development

• Hydrological variability

• 4 water risks

Hall et al., Science (2014)

Economic instruments• Market instruments• Trading mechanisms (quantity, quality)

• Non-market instruments• Abstraction and pollution charges• Water pricing• Payment for Ecosystem Services• Certification / eco-labelling• Insurance schemes

The value of economic instruments• Raise revenues• Promote efficient uses• Allocate water where it creates more value• Value the benefits of water-related services• Provide incentives to explore low-cost options• Engage stakeholders

Financing WSS services. The role of tariffs

How are tariffs used in OECD countries?

Source: OECD (2010), Pricing water and sanitation services, OECD Publishing, Paris

Water Prices (2008) Water bills as a share of the disposal income of the lowest decile of the population (2008)

Italy

Denmark

3 % threshold

Tools to support better use of tariffs• Benchmarking• 3T’s• Strategic financial planning• Performance-based contracts• PSP for water supply and sanitation

Financing WRM

Financing is required:• To invest in and operate infrastructures• To operate institutions

The sector remains underfunded:• Low price of water for irrigation• Increasing infrastructure needs• Degradation of water quality• …

OECD tools to bridge the financing gap• The OECD Framework for Financing WRM:

1. Polluter Pays2. Beneficiary Pays3. Equity4. Consistency across adjacent policies

• Guidance on Payment for ecosystem services• Reform of environmentally harmful subsidies

Key messages• Economic instruments are essential for

achieving the SDG on water• There are implementation issues• Robust economic analysis is required to:• document costs and revenue• establish facts to move policy dialogues

further.

GraciasThank you

www.oecd.org/water

Hannah.Leckie@oecd.org