Financing Water in integrated approach

The integration approach might be investigated regarding two aspects:
1.a  integration regarding the sectors that should take part the water financing scheme : all economic activities using water (i.e. Households, Industry, Agriculture) are integrated in the financing of water through global scheme and tools (e.g. fees, taxes).
1.b  integration regarding the scope of the financing : access to water and sanitation but also the protection and management of the water resources and ecosystem that are key to ensure this access but more generally sustainable development.

Clearly there are bridges with others targets from CS2 (in particular target 1 and target 3), exchanges with these groups will be done in order to avoid duplication.
Regarding 1.a, it means that the sectors should be identified (e.g. Households, Industry, Agriculture, Hydropower,…), characterised regarding their uses of water (water abstraction/consumption, water discharge, irrigation, energy production,….) and capacity to pay for these uses. For example, the development of access to water for the households requires setting water tariffs regarding financing objectives (for covering at least running cost and maintenance) but also according to the financial capacity of the households (and in particular for ensuring that the poorest households  can have access to water).

This analysis of the financial capacity is crucial to set tariffs that can target several objectives: (i) contribute to a financial scheme for the considered use (e.g. water service) (ii) social aspects (e.g. ensure that the poorest can have access to water through block tariffs and/or specific social fund) (iii) environmental objectives (e.g. increasing blocks tariffs can reduce over-consumption). An on-going work from the NGO “Action Against Hunger (ACF International)” and the Water Agency Artois-Picardie is seeking to tackle the issue of setting tariffs of WASH projects in urban context (see illustration box n°1).

Illustration Box n°1: Learning kit for setting water tariffs in Urban Context
The NGO “Action Against Hunger (ACF International)” and the Water Agency Artois-Picardie are working together on a learning and practical kit on tariffs targeting the staff from NGOs who are implementing WASH projects in poor urban areas in developing countries. The purpose of this kit is to provide to the staff of NGO and/or local authorities:
•    background elements on tariffs  (lump sum, fix + volumetric part, increasing block tariffs,…)
•    a roadmap for collecting information on the area of the project (number of inhabitants, consumption ratio, affordability,….)
•    a small model for computing  these information and make some simulation on potential incomes with several types of tariffs
The final purpose is to help to make recommendations on appropriate tariffs regarding the affordability of the population but also the capacity to generate incomes that will enable to maintain the assets and, if possible, to extent the service provided.
This learning kit will be finalised and disseminated for the 6th World Water Forum

The same approach is not only relevant for the water and sanitation services but also for some others water uses such as water abstracted for irrigation or for producing energy.
“Financing water in an integrated approach” requires having a clear identification of the different sectors that should be included in the financial scheme and collection of information (in particular regarding financing capacity) on these sectors in order to design tariffs/taxes that will be economically acceptable for each sectors and efficient regarding the objectives set. This will be also the background for development of sound financial scheme or to target Cost-recovery (note that the concept of Cost-Recovery is not limited to water and sanitation services but also to all main services using water e.g. irrigation, hydropower,…..).
Thus a way to formulate a SMART target could be to set the following target:
“By 2015 XXX countries will finalise and implement roadmap for the development of integrated water financing”
Then the purpose of this CS2-Target 6 should be to develop the main outlines of this roadmap with illustrations that could form a toolbox.

Regarding 1.b, the integrated Water financing approach might not only focus on the financing of water and sanitation services (through tariffs, Taxes and Transfers) but also participate to integrate management and protection of the water resources and ecosystems  that ensure the long term provision of the above mention services : no long term access to water if the technical assets are not maintained but no long term access to water either if the water intakes is not sufficiently protected toward pollution.
The protection of ecosystems is thus necessary to ensure this access of water but also to preserve a full range of amenities provided by ecosystem (from fish population to recreational activities). This is the principle of payment for ecosystem services. The system of fees of the French Water Agencies in France is integrating this aspect (see Illustration box n°2).

Illustration Box n°2: The French Water Agencies and the fees principle  
The six french Water Agencies have been set in 1966 after the implementation of the French Water law of 1964. Six River Basins have been delimited regarding main rivers and water courses and in each of the six River Basins a Basin Committee have been set and a water agency implemented.
The water agencies are collecting fees regarding the use of water (abstraction) and discharged of waste waters. The calculation of the level of the fees is made regarding the volume (abstracted, discharged) but also the content of pollution discharged (regarding different parameters polluting parameters).
The fees are collected for all main users (Households, Industry and Agriculture) and the unit price of each fee (euros/kg or grams of polluting parameters) are voted by the Basin Committee and endorsed by the French Parliament.
The money collected through these fees (around 2 billions euros per year for the whole 6 water agencies) are earmarked for investments and measures regarding water resources protection and management. Waste water treatment plant are subsidised by the Water Agencies but the fees are also used for measures targeting the protection of water intakes, restoring wetlands and implementing buffer zones on river’s banks.
Thus these fees are the expression of payment for ecosystem as the calculation of the fees is taking into account the pressure on environment and the use of the fees is earmarked not only of financing water & sanitation assets but also all measures targeting a better management/protection of ecosystems.
More that this the way that the Basin Committee is composed with representatives from Local Authorities and Municipalities, State services and users (Industry, Agriculture, Environmental NGOs, Consumer NGOs and Angling association) provides legitimacy to the fees that are voted by the Basin Committee.

A broad integrated water financing requires designing its financial scheme that will contribute to preserve/manage water resources and ecosystem and not limit itself to technical capital (assets).