A green deal for water and sanitation utilities to rejuvenate the service delivery and financing model

As stated by the OECD, "water security in many regions will continue to deteriorate due to increasing water demand, water stress and water pollution." Indeed water supply and sanitation (WSS) utilities in many countries are already and increasingly faced with pressing water risks which include the risk of "water shortages (including droughts), water excess (including floods), inadequate water quality, as well as the risk of undermining the resilience of freshwater systems (rivers, lakes, aquifers)" (OECD, 2013). These risks are exacerbated by climate change which increases the magnitude and frequency of extreme events. As a matter of fact, WSS utilities are already commonly faced with qualitative and quantitative pressures on water resources, the intensity of which varies over time and space. These developments, as well as the financial constraints on the services (limited capacity to increase the price of water in an inflationary context and strong constraints on post-covid public finances) are all elements that encourage operators to rejuvenate their economic and operating model in order to ensure the sustainability and resilience of the services in an environment now marked by threatened water security. This paper gathers four case studies to illustrate some characteristics of this rejuvenated service delivery model. This paper identifies current practices implemented by two WSS operators (one in Belgium and one in England) to cope with falling billed volumes, diversify their activities and sources of income, and integrate into their investment policy a mix of green and grey investments, and/or investments aimed at decarbonization and the development of circular economy practices that ultimately aim to reduce operating costs. This paper then describes current practices employed by some regulators to support, incentivize and financially reward water and sanitation utilities that implement, voluntarily and beyond their regulatory obligations, water demand management strategies, decarbonization projects, climate change adaptation or resource conservation projects, and/or more stringent wastewater treatment efforts.