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OECD WORK ON WATER

OECD work on water

Overview of OECD work on water The global community increasingly understands how water defines growth and contributes to sustainable development. It also experiences how water risks can affect people’s health and wellbeing, the environment and economies.

Contents Overview of OECD work on water

OECD Council Recommendation on Water

1. Water for sustainable growth

2. Water quantity management

3. Water quality management

4. Managing water-related disasters 12 5. Water governance

6. Financing water resources and water services 18 7. Water and agriculture

8. Water and cities

9. Making water reform happen: National Policy Dialogues on Water 27

The OECD is working to help developed and developing countries meet the water challenge. With a multi-disciplinary team drawn from across the Organisation, the OECD contributes analyses to improve the information base, identifies good practices, and provides a forum for exchanging country experiences. OECD work focuses on water economics and governance: How to manage water so that it contributes to sustainable growth and development. How to finance water-related infrastructure and services. How to protect against waterrelated risks: risks of too much, too little, or too polluted water, and risks to the resilience of freshwater ecosystems. How to enhance effective, efficient and inclusive water governance. How to manage water across levels of government and scales. How to engage with stakeholders. How to regulate water services. How to strengthen capacity, especially at the subnational level. How to foster integrity and transparency. In addition to analytical work, the OECD works with selected regions and countries to facilitate the reform of water policies. This confirms OECD’s aspiration to make reform happen. The OECD has enhanced its convening power and capacity to structure discussion among stakeholders on water issues, by setting up the following international initiatives: the Roundtable on Financing Water, the Water Governance Initiative, and the Network of Economic Regulators.

“OECD work on water” presents an overview of OECD analysis underway to provide governments and stakeholders with new approaches to water management, investment planning and financing that ensure our societies, our economies and our environment are robust and resilient to waterrelated risks, now and in the future.

OECD WORK ON WATER

Overview of OECD work on water

The OECD Council Recommendation on Water, adopted by all OECD member states in December 2016, captures policy guidance developed by the OECD and can inspire water policy reforms in countries around the globe. Non-member countries are welcome to adhere to the Recommendation with a view to create a momentum for water policy reforms that contribute to water security and sustainable growth. The Toolkit for Water Policies and Governance compiles policies, governance arrangements and related tools that facilitate the design and implementation of water management practices in line with the OECD Council Recommendation on Water. It is designed to inspire and support countries which have either adhered to, are considering adhering to, or aim to converge towards the OECD standard. The practices reported in the toolkit have been compiled by the OECD Secretariat, in close consultation with delegates from adhering countries. Regular updates will be made available. This brochure provides an overview of OECD work on water.

THE ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT The Organisation for Economic Co‑operation and Development (OECD) is a multi disciplinary inter-governmental organisation, tracing its roots back to the post World War II Marshall Plan. Today, it comprises 38 member countries that are committed to democratic government and the market economy and the European Commission, with the major emerging economies increasingly engaged directly in the work. The OECD provides a unique forum and the analytical capacity to assist governments to compare and exchange policy experiences, and to identify and promote good practices through policy decisions and recommendations.

KEY LINKS OECD website on water: www.oecd.org/water The OECD Water Legacy 2006-2021: oe.cd/water-legacy-21

OECD WORK ON WATER

OECD work on water

OECD Council Recommendation on Water

are adjusted to local conditions, based on long-term water management plans and enhanced policy coherence with climate change adaptation and across various sectors (e.g. land management, food and energy security, urban development, spatial planning, biodiversity protection)

combine water demand management with the promotion of water use efficiency and allocation regimes that are dynamic, flexible and adjustable to shifting circumstances at least social cost

prevent, reduce and control water pollution through regulatory, economic and voluntary policy instruments that hold polluters accountable

assess and prioritise water-related disaster risk reduction, and develop emergency management capabilities and financial protection strategies

enhance the effectiveness and efficiency of, and trust and engagement in, water governance

set up measures for the sustainable financing of water services, water infrastructures, water resources management and the protection of water-related ecosystems.

The OECD Council Recommendation on Water, adopted by all OECD member countries on 13 December 2016, forms a concise and coherent legal instrument providing high- level policy guidance on a range of topics relevant for water resources management and the delivery of water services: l

managing water quantity

improving water quality

managing water risks and disasters

ensuring good water governance

ensuring sustainable finance, investment and pricing for the water and water services.

The Recommendation captures the main messages that derive from over 40 years of OECD policy guidance on water to OECD members and non-OECD members. It sets out a number of measures to manage water for sustainable growth and development. Notably, it recommends that OECD member countries and countries which have adhered to the Recommendation set up and implement water policies that:

OECD work continues to seek i) adherence from nonmember countries that consider the Recommendation to inspire or guide the reform of policies that contribute to water security and sustainable growth, and ii) develop a toolkit to facilitate the implementation of the Recommendation.

The OECD Toolkit for Water Policies and Governance crystallises country-specific evidence and policy guidance, which can expedite action and convergence towards international good practices for water management.

KEY PUBLICATIONS OECD (2016), OECD Council Recommendation on Water, https://www.oecd.org/water/recommendation/#d.en.431326 OECD (2021), Toolkit for Water Policies and Governance: Converging Towards the OECD Council Recommendation on Water, OECD Publishing, Paris, https://doi.org/10.1787/ed1a7936-en

OECD WORK ON WATER

Water for sustainable growth

Did you know? By 2050 over 40% of the world’s population are likely to be living in river basins under severe water stress. Overall water demand is projected to increase by 55%.

OECD work on water aims at developing policy recommendations to design and implement water

Surface water quality outside the OECD is expected to deteriorate in the coming decades, through nutrient flows from agriculture and poor wastewater treatment. The consequences will be increased eutrophication, biodiversity loss and disease.

policies that are fit for current and future challenges. Because of the long lead time of water cycles and water infrastructures, anticipation is essential. Long-term projections are captured in the OECD Environmental Outlook to 2050. More specific work focuses on managing

Micro-pollutants (medicines, cosmetics, cleaning agents, and biocide residues) are an emerging concern in many countries.

water-related risks and the contribution of water security to food security, sustainable growth and development.

OECD Environmental Outlook to 2050 In 2012, the OECD Environmental Outlook to

Global water demand: Baseline, 2000 and 2050

2050 provided a snapshot of the global state of water under business-as- usual conditions. change that picture for the better. Model-based projections shed light on what demographic and economic trends might mean for water if governments do not introduce new policies to manage

Km3

It also highlighted the policies that could

6 000

The Outlook has helped improve our understanding

2 000

In particular, the Outlook helped realise the issues related to competition to access water and the relative importance of pollution from point and diffuse sources, in OECD and non-member countries. KEY PUBLICATION

livestock

manufacturing

electricity

4 000 3 000

need to be made, and set out achievable solutions.

domestic

5 000

freshwater resources with much greater care.

of the environmental challenges, the trade-offs that

irrigation

1 000 0

2000

2050

OECD

2000

2050

BRIICS

2000

2050

2000

RoW

2050

World

Note: This graph only measures blue water demand and does not consider rainfed agriculture. Source: Environmental Outlook Baseline; output from IMAGE.

OECD (2012), OECD Environmental Outlook to 2050: The Consequences of Inaction, OECD Publishing, Paris, https://doi.org/10.1787/9789264122246-en

DESIGNING EFFECTIVE POLICY INSTRUMENTS OECDFOR WORK BIODIVERSITY ON WATER

OECD work on water

Water security and economic development

along strategic pathways. Securing Water, Sustaining

Water management is not merely an environmental

cities, aquifers, and basins to water security. The 2013

issue. It is a development issue. The OECD-GWP

OECD report Water Security for Better Lives explains why

Global Dialogue on Water Security for Sustainable

governments must promote a risk-based approach to

Growth established how water security contributes to

water security. It proposes steps to implement such

sustainable growth. This connection is highlighted by the

an approach. This work helps establish water, and

role of water in the Sustainable Development Goals, with

water security in particular, on the global development

a stand-alone water goal and several references to water

agenda and provides the justification for investment.

Growth documents some of the pathways taken by

in other goals. On the occasion of the 7th World Water Forum in 2015 The Task Force on Water Security and Sustainable

held in Korea, a High-Level Panel launched the report

Growth demonstrated in their 2015 report Securing

and an accompanying Policy Statement endorsed by

Water, Sustaining Growth that water resources can

leaders in water from around the world. In particular,

play a defining role in economic development.

leaders call for enhanced action and investment in

Water-related risks act as a drag on global economic

water along three lines: invest in water security; invest

growth, and the scale of the challenge that can be

in risk management; and invest in knowledge, people

monetised is estimated to be in the order of USD 500

and partnerships. These messages can inform the water

billion annually (excluding environmental risks).

policy agenda, but are also relevant to the development community and for infrastructure planning. A rethink

Harnessing water to drive sustainable growth requires

of how investment projects are assessed and valued

investments in water infrastructure, information

is required, to account for their contribution to

and institutions. The Task Force argues that the most

sustainable pathways (see section 6 of this brochure

beneficial investments in water security are sequenced

on financing water resources and water services).

Relative global economic impacts of water insecurity

Source: Sadoff et al. (2015), “Securing Water, Sustaining Growth”, Report of the GWP/OECD Task Force on Water Security and Sustainable Growth.

KEY LINK Water for sustainable growth and the SDGs: www.oecd.org/water/sustainable-growth-and-sdgs.htm

OECD WORK ON WATER

Water for sustainable growth

Water security and food security

provide more efficient and effective strategies to mitigate future water risks. The 2017 OECD report

Water security is intrinsically linked to food security.

Water Risk Hotspots for Agriculture develops the use of

Agriculture is expected to face increasing water risks

such a targeted approach, provides an application at

that will affect food production, markets, trade and

the global scale, and presents a policy action plan to

ultimately food security. Targeted policy actions,

mitigate the future impact of water risks on agriculture.

focusing on agricultural water risk hotspots, can

Future water risk hotspots for global agriculture production (2024-50 average)

Note: The index can be interpreted as the expected share of overall global production of the key agriculture commodities likely to face high water without adaptation action risks in each of the 77 largest agriculture-producing countries. Source: OECD (2017), Water Risk Hotspots for Agriculture, based on a review of 64 publications, projections from the AgLink-Cosimo and IMPACT models.

Data to support water-related policies

The establishment of global water accounts in line with the System of Environmental

Quality data are indispensable for developing water

Economic Accounting is being explored.

policies, monitoring their implementation and informing about the results obtained. The OECD produces

The data collected relate to freshwater resources

international water data to support its policy analyses

and their use; wastewater treatment and discharges;

and country reviews, and to calculate OECD and SDG

and the quality of rivers and lakes. Other data relate

indicators, such as water use efficiency and water stress.

to policy instruments for water management. They are maintained in the OECD “Policy Instruments

The main vehicle for data collection is the OECD

for the Environment” database that covers about

questionnaire on inland waters used jointly with

100 countries. They typically include information

Eurostat, and the coordinated UNSD/UN Environment

on abstraction and pollution charges and

questionnaire, which together provide a global

on tariffs for water-related services.

country coverage. Continued efforts are made to improve the data, harmonise them at international

Water-related indicators feature in the OECD flagship

level and fill gaps by better using available data

report Environment at a Glance whose 2019 edition

and new data sources such as earth observation.

includes interactive graphics to compare countries and a thematic webbook on water resources.

KEY LINKS OECD (2017), Water Risk Hotspots for Agriculture, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/9789264279551-en

Main datasets are available on the OECD Statistical Platform: http://dx.doi.org/10.1787/env-data-en

Policy Instruments for the Environment database: http://oe.cd/pine OECD WORK ON WATER

OECD work on water

Water quantity management

However, many allocation regimes are strongly conditioned by historical preferences and usage patterns. They show a high degree of path dependency, which manifests in laws and policies, and in the design and operational rules of existing water

Allocation regimes determine who is able to

infrastructures. As a result, water use is often locked-in

use water resources, how, when and where. As

to uses that are no longer as valuable today as

competition to access water resources intensifies,

they once were. For example, adequate flows to

water resources allocation is an important instrument

support ecosystem functioning are not secured

to manage water for sustainable growth.

in many basins, and many countries still apply very low, or no charges at all, for water abstraction,

Well-designed water allocation regimes allocate

even though the value of water has increased as

water to where it creates the most value for

competition for the resource has intensified.

society—economically, socially and environmentally. They can also adjust to changing conditions

The OECD has developed a Health Check,

and preferences at least cost for society.

which countries can use to assess how robust prevailing water allocation regimes are.

Well-designed water allocation regimes reflect the different capacities of water users to take and

As part of the 2017 publication Groundwater Allocation:

adapt to risks of scarcity. They provide incentives

Managing Growing Pressures on Quantity and Quality,

for investment and innovation in water use

a companion tool has been developed specifically

efficiency. For instance, reforms of water

for the allocation of groundwater. It builds on nine

entitlements in the Murray Darling Basin in

case studies (Denmark; Tucson, Arizona; Kumamoto,

Australia, have triggered innovative responses

Japan; Mexico; the Upper Guadiana Basin, Spain;

from irrigators, freeing water for valuable uses.

Texas; France; India; and North China) designed to show how groundwater allocation challenges are being addressed in diverse contexts.

A Health Check for improving water resources allocation 1. Are there accountability mechanisms in place for the management of water allocation that are effective at a catchment or basin scale? 2. Is there a clear legal status in place for all water resources (surface and ground water and alternative sources of supply)? 3. Is the availability of water resources (surface water, groundwater and alternative sources of supply) identified and possible scarcity well-understood? 4. Is there an abstraction limit (“cap”) that reflects in situ requirements and sustainable use? 5. Is there an effective approach to enable efficient and fair management of the risk of shortage that ensures water for essential uses? 6. Are adequate arrangements in place for dealing with exceptional circumstances (such as drought or severe pollution events)? 7. Is there a process for dealing with new entrants and for increasing or varying existing entitlements? 8. Are there effective mechanisms for monitoring and enforcement, with clear and legally robust sanctions? 9. Are water infrastructures in place to store, treat and deliver water in order to allow for the allocation regime to function effectively? 10. Is there policy coherence across sectors that affect water resources allocation? 11. Is there a clear legal definition of water entitlements? 12. Are appropriate abstraction charges in place for all users that reflect the impact of the abstraction on resource availability for other users and the environment? 13. Are obligations related to return flows and discharges properly specified and enforced? 8

OECD WORK ON WATER

14. Does the system allow water users to reallocate water among themselves to improve the allocative efficiency of the regime? Source: OECD (2015), Water Resources Allocation: Sharing Risks and Opportunities.

Water quantity management

If well managed, groundwater can and should act as a powerful climate adaptation option, a natural insurance mechanism, and not just a component of freshwater supplies. OECD (2015), Drying Wells, Rising Stakes: Towards Sustainable Agriculture Groundwater Use

Zooming in on agriculture and water quantity management

groundwater for irrigation leads to the lowering of water tables, reducing its potential for future use. It can also generate multiple negative

Agriculture faces the enormous challenge of producing

externalities, including salinity, stream depletion,

more with less water. Globally agriculture needs to

or land subsidence that directly affect agricultural

produce almost 50% more food by 2030 and double

productivity, water users and the environment.

production by 2050. This will likely need to be achieved with less water. At the same time, there will be

The 2015 OECD report Drying Wells, Rising Stakes:

growing pressures from urbanisation, industrialisation

Towards Sustainable Agriculture Groundwater Use provides

and climate change. In this context, it is critical

a comprehensive review of agriculture groundwater

that farmers receive the right signals to increase

management instruments. It identifies a combination

water use efficiency and improve agricultural water

of policy measures to alleviate the negative effects of

management, whilst preserving aquatic ecosystems.

agricultural groundwater use and sustain the capacity of aquifers for the future. It emphasises in particular

In the 2010 report Sustainable Management of Water

the need for governments to invest in groundwater

Resources in Agriculture, the OECD analyses the challenges

information systems to properly manage groundwater,

of moving towards more efficient management of water

which remain incomplete and insufficient in many OECD

resources in agriculture, and responding to growing

countries. In regions with intensive groundwater use, the

food demands and the impacts of climate change.

OECD recommends employing a “tripod” combination

Groundwater provides a highly important

of regulatory, economic and collective action policy

resource for agriculture to cope with increasingly

approaches, customised to local circumstances.

variable water supplies. However, intensive use of

KEY PUBLICATIONS OECD (2015), Water Resources Allocation: Sharing Risks and Opportunities, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/9789264229631-en OECD (2015), Drying Wells, Rising Stakes: Towards Sustainable Agricultural Groundwater Use, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/9789264238701-en

OECD WORK ON WATER

OECD work on water

Water quality management

challenges facing OECD countries today, presents a range of policy instruments and innovative case studies of diffuse pollution control, and concludes with an integrated policy framework to tackle diffuse water pollution. An optimal approach will likely entail

After decades of regulation and investment to reduce

a mix of policy interventions reflecting the basic OECD

point source water pollution (e.g. municipal wastewater

principles of water quality management—pollution

collection and treatment), OECD countries still face

prevention, treatment at source, the polluter pays

water quality challenges (e.g. eutrophication) from

and beneficiary pays principles, equity, and policy

diffuse agricultural and urban sources of pollution;

coherence. The choice and design of policy instruments

that is disperse pollution from surface runoff, soil

should build upon one of three management options:

filtration and atmospheric deposition. In particular, agriculture’s impact on water quality (mainly from

1. Manage land use practices and inputs of proxies.

nutrients, soil sediments and pesticides) over the past

2. Reward or penalise polluters collectively.

decade has been either stable or deteriorating, with

3. Manage estimated diffuse emissions via modelling.

only a few cases where significant improvements are reported. The relative lack of progress reflects the

The 2012 OECD report Water Quality and Agriculture:

complexities of controlling multiple pollutants from

Meeting the Policy Challenge also identifies several

multiple sources, their high spatial and temporal

recommendations to encourage the sustainable

variability, associated transactions costs, and limited

management of water quality in agriculture. In

political acceptability of regulatory measures.

particular, the report calls for better enforcement of existing standards, removal of perverse support

The OECD has analysed emerging policy solutions to

mechanisms that degrade water quality, and

address diffuse water pollution in member countries.

recommends a holistic approach, using a mix of

The 2017 report Diffuse Pollution, Degraded Waters:

policy instruments to tackle the complex issues

Emerging Policy Solutions outlines the water quality

associated with agricultural water pollution.

Policy instruments to address diffuse water pollution and protect freshwater ecosystems Water-related risk Water pollution

Regulatory instruments

Economic instruments

Water quality standards

Pollution taxes (on inputs)

Information and awareness campaigns

Mandatory best environmental practices and restrictions on inputs

Pollution charges (on outputs)

Farm advisory services for improved farming techniques (to minimise negative impacts on water quality)

Pollution discharge permits

Water quality trading Payment for ecosystem services

Non-compliance penalties – non-renewal of resource permits or greater restriction on current permits

Minimum environmental flows (also for pollution dilution) Specification obligations relating to return flows and restrictions on discharges in drought conditions

Source: OECD (2017), Diffuse Pollution, Degraded Waters: Emerging Policy Solutions.

10 OECD WORK ON WATER

Contracts/bonds (e.g. land retirement contracts) Best environmental practices (or good management practices) Environmental labelling – products that meet certain environmental standards can be marketed and sold at a premium and/or subsidised

Non-compliance fines Risk to the resilience of freshwater ecosystems

Voluntary or information-based instruments

“Buy-backs” of water pollution allowances to ensure adequate water quality for ecosystem functioning

Information and awareness campaigns Voluntary surrender of pollution discharge allowances

Water quality management

Zooming in on the management of contaminants of emerging concern in freshwater

pollution. It focuses on two sources of microplastics pollution, textile products and vehicle tyres. The report proposes policy insights on measures and

Contaminants of emerging concern (CECs) comprise

strategies that could help minimise microplastics

a vast array of contaminants that have only recently

emitted unintentionally from products and their

appeared in water, or that are of recent concern because

potential impacts on human health and ecosystems.

they have been detected at concentrations significantly

Similarly, the 2019 OECD report Pharmaceutical

higher than expected, and/or their risk to human and

Residues in Freshwater: Hazards and Policy Responses

environmental health may not be fully understood.

provides policy guidance to cost-effectively reduce

Examples include pharmaceuticals, microplastics,

pharmaceuticals in freshwater, and their associated

industrial and household chemicals, personal care

risks to human and environmental health.

products, pesticides, and their transformation products. New work focuses on endocrine disruption. It Microplastics are ubiquitous in the natural environment.

explores if and under which conditions new

The 2021 report Policies to Reduce Microplastics Pollution

analytical methods, such as effect-based monitoring

in Water synthesises the current state of knowledge

and bioassays, can support innovative and cost

on the sources, fate and risks of microplastics

effective regulations for water quality.

Did you know? Pharmaceuticals are essential for human and animal health. However, they are increasingly recognised as a contaminant when their residues enter freshwater systems and affect environmental and human health. For example: endocrine disrupting pharmaceuticals can cause reproduction toxicity in fish and increased risk of breast or prostate cancer in humans; and the overuse of antibiotics is linked to antimicrobial resistance – a global health crisis.

KEY LINKS OECD (2019), Pharmaceutical Residues in Freshwater: Hazards and Policy Responses, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/c936f42d-en OECD (2021), Policies to Reduce Microplastics Pollution in Water: Focus on Textiles and Tyres, OECD Publishing, Paris, https://doi.org/10.1787/7ec7e5ef-en OECD website on water quality and quantity: www.oecd.org/water/water-quantity-and-quality.htm

OECD WORK ON WATER 11

OECD work on water

Managing waterrelated disasters

The governance of water-related disasters The OECD High-Level Risk Forum provides a venue for risk managers from governments and the private sectors to discuss governance mechanisms that reduce

The economic and social costs of water-related disasters

water-related disaster risks. In 2014 an OECD Council

are high and increasing. In 2017 three of the strongest

Recommendation on the Governance of Critical Risks

and costliest hurricanes hit the northern Atlantic,

was adopted to establish a benchmark for a whole

leaving damages of more than USD 245 million in

of-society effort to better assess, prevent, respond

their wake. The severity of droughts continues to

to, and recover from the effects of extreme events.

increase - in 2018 over three million people were affected by them in Kenya alone. Across Europe hot

The OECD Policy Tookit on the Governance of Critical

and dry summers are causing increasingly severe

Infrastructure Resilience proposes practical steps

heatwaves and drought conditions that affect farmers

to focus resilience efforts on where the potential

and health systems across the continent. The impacts

of disruptions by water-related risks can create

of climate change are expected to increase both the

the most damaging cascading consequences.

frequency and the severity of water-related disasters. To address the particular vulnerability of coastal The OECD’s work on climate-change adaptation

regions to the impacts of climate change, the OECD

and disaster risk management supports countries’

developed the report Responding to Rising Seas that

efforts to prepare for the effects of a changing climate

reviews how OECD countries can use their national

and related disaster risks by providing impartial

adaptation planning processes to respond to this

analysis, policy advice and supporting the sharing of

challenge. Specifically, the report examines how

experiences between the public and private sectors.

countries approach shared costs and responsibilities

It seeks to assist countries in their efforts to

for coastal risk management and how this encourages

design an enabling environment for adaptation action

or hinders risk-reduction behaviour by households,

and disaster risk management measures adopted

businesses and different levels of government. The

by all responsible stakeholders. The OECD’s work

report outlines policy tools that national governments

on water-related disasters focusses on governance,

can use to encourage an efficient, effective and equitable

finance, and agriculture. It contributes to international

response to ongoing coastal change. It is informed by

discussions by way of various different platforms

new analysis on the future costs of sea-level rise, and

such as the OECD High-Level Risk Forum.

the main findings from four case studies (Canada, Germany, New Zealand and the United Kingdom).

KEY LINKS OECD work on climate adaptation: www.oecd.org/climate-change/resilience/ OECD work on risk governance: www.oecd.org/governance/risk OECD Recommendation on the Governance of Critical Risks: www.oecd.org/ gov/risk/recommendation-on-governance-of-critical-risks.htm

OECD Recommendation on the Governance of Critical Risks The OECD Recommendation on the Governance of Critical Risks calls on OECD member countries to: l Identify and assess risks, taking interlinkages and knock-on

effects into account. This helps set priorities and inform allocation of resources. l Invest more in risk prevention and mitigation such as in

protective infrastructure, but also non‑structural policies such as land use planning. l Develop flexible capacities for preparedness, response and

recovery, which help manage unanticipated and novel types of crises. l Establish transparent and accountable risk management 12 OECD WORK ON WATER

systems that learn continuously and systematically from experience and research.

Managing water-related disasters

The financial management of water-related disasters

commitments to compensate for disaster losses. The joint OECD/World Bank report Fiscal Resilience

Flooding is one of the most common, wide-reaching

to Natural Disasters identifies the most important

and destructive natural perils causing, on average,

sources of disaster costs for governments. Damages

more than USD 200 billion in damages annually. The

to public infrastructure assets and related service

financial management of flood risk presents a significant

disruptions are among the largest sources of the costs

policy challenge in many countries, requiring careful

governments assume, and they are also the most

consideration of the relative effectiveness of various

difficult to control. The report also shows that many of

tools for managing flood risk, from investments in

such costs arise through claims made by subnational

risk prevention and public awareness, to the use

government agencies, state-owned enterprises or other

of risk transfer tools to protect against significant

partners that own or operate infrastructure assets

post- disaster costs. The OECD report The Financial

and services. The report recommends countries to

Management of Flood Risk applies the lessons from

design clear framework rules for a government’s post-

the OECD’s guidance andanalysis of disaster risk

disaster financial assistance. Moreover, it recommends

financing practices to the specific case of floods.

countries to include the assessment of disaster related contingent liabilities in fiscal risk management

The fiscal impact of water-related disasters on a

frameworks and to manage remaining fiscal risks

government’s budget can be sizeable. Expenditures for

through multi- pronged financial protection strategies.

the government arise from both explicit and implicit

OECD Recommendation on Disaster Risk Financing Strategies

The OECD Recommendation on Disaster Risk Financing Strategies provides guidance on the development of strategies for the financial management of disaster risks. It provides a set of high-level recommendations for designing a strategy for addressing the financial impacts of disasters on individuals, businesses and sub-national levels of governments, as well as the implication for public finances. It specifically targets issues related to the financial management of disaster risks, while recognising the importance of an integrated approach to disaster risk management and the contribution of risk assessment, risk awareness and risk prevention to the financial management of disaster risks, complementing the OECD Recommendation on the Governance of Critical Risks.

KEY LINKS OECD/The World Bank (2019), Fiscal Resilience to Natural Disasters: Lessons from Country Experiences, OECD Publishing, Paris, https://doi.org/10.1787/27a4198a-en. OECD (2016), Financial Management of Flood Risk, OECD Publishing, Paris, https://doi.org/10.1787/9789264257689-en.

OECD WORK ON WATER 13

OECD work on water

Managing water-related risks in agriculture

possible impacts these risks may have on agriculture production and food prices. The report recommends

Agriculture is expected to be the most economically

that government take a strategic approach to risk,

affected sector by climate change, most notably

prioritizing responses in water risk hotspot areas.

due to an increase in rainfall variability. Long-term changes in precipitation, changes in crop water requirements, and the increasing frequency of

OECD’s contribution to international discussions on water-related disasters

extreme weather events are expected to affect crops and livestock production systems in many regions.

The OECD supports several international discussions

As countries develop climate adaptation policies in

on water- related disaster risk management:

agriculture, water management will play a key role in

As a founding member of the United Nations High Level Experts and Leaders Panel on Water and Disasters (UNHELP), the OECD provides policy support to ensure that water-related disasters stay high on the international policy agenda.

In support of the G20 work on quality infrastructure, the OECD developed a background report on ClimateResilient Infrastructure, which highlights the needs and ways countries can integrate a resilience lense, including to water-related disasters, when conceiving and maintaining infrastructure assets over time.

The OECD also supports countries in their implementation of the UN Sendai Framework for Disaster Risk Reduction, especially on their efforts towards improving risk governance.

increasing agriculture’s resilience to climate change. The 2016 OECD report Mitigating Droughts and Floods in Agriculture: Policy Lessons and Approaches proposes a policy framework to overcome market, policy and behavioural failures. The report Managing WeatherRelated Disasters in Southeast Asian Agriculture applies this framework to evaluate policies in place in Myanmar, the Philippines, Thailand and Viet Nam. The 2017 OECD report Water risk hotspots for agriculture analyses the type of risks, from scarcity to risk related, projected for the sector. It identifies regions particularly exposed to these risks and assesses the

Economic robustness of coastal protection globally

Note: This map shows where it is economically robust to invest in coastal protection, under five scenarios of 21st century global mean sea-level rise (from 0.3m to 2.0m). The results show that coastal protection is economically robust across all scenario combinations for 13% of the world’s coastline, which account for 90% of the global coastal population. Conversely, it is robust not to protect 65% of the world’s coastline, which corresponds to a small fraction of global coastal floodplain population (0.2%). For the remaining 22% of the world’s coastline, the optimal adaptation strategy varies across scenarios. Source: Lincke, D. and J. Hinkel (2018), “Economically robust protection against 21st century sea-level rise”, Global Environmental Change.

KEY LINKS OECD (2018), Managing Weather-Related Disasters in Southeast Asian Agriculture, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/9789264123533-en. OECD (2016), Mitigating Droughts and Floods in Agriculture: Policy Lessons and Approaches, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/9789264246744-en.

14 OECD WORK ON WATER

Water governance

tools and reviews at national and subnational level in Latin America (Argentina, Brazil, Mexico, Peru), Europe and Middle East (Netherlands, Jordan), Asia-Pacific (48 countries) and Africa (36 cities).

Coping with current and future challenges requires robust public policies, targeting measurable objectives in pre-determined time-schedules at the appropriate

OECD Principles on Water Governance

scale, relying on a clear assignment of duties across responsible authorities and subject to regular monitoring

The OECD Principles on Water Governance, approved by

and evaluation. In other words, it is necessary to get

the OECD Regional Development Policy Committee, and

water governance right. Water governance is a means

welcomed at ministerial level in June 2015, set standards

to an end. It is defined as the set of rules, practices, and

for more effective, efficient and inclusive design and

processes (formal and informal) through which decisions

implementation of water policies. The Principles were

for the management of water resources and services are

developed by the OECD Water Governance Initiative,

taken and implemented, where stakeholders articulate

through a bottom-up approach. To date, they have been

their interest and decision-makers are held accountable.

endorsed by 170+ stakeholder groups or governments: all OECD Member Countries, seven Non-Member

In order to support governments at all levels in

Countries and 140 Stakeholder Groups, gathered in

improving their water governance systems, the

a Global Coalition for Good Water Governance.

OECD has developed standards, implementation

OECD Principles on Water Governance

Capacity

Data & information

Policy coherence

Financing

Appropriate scales within basin systems Clear roles & responsibilities

Regulatory Frameworks WATER GOVERNANCE

Innovative governance

TRUST & ENGAGEMENT

Monitoring & Evaluation

Integrity & Transparency Trade-offs across users, rural and urban areas, and generations

Stakeholder engagement

Source: OECD (2015), OECD Principles of Water Governance, www.oecd.org/governance/oecd-principles-on-water-governance.htm.

OECD WORK ON WATER 15

OECD work on water

The OECD Principles on Water Governance consider

stakeholders in the design and implementation

that governance is good if it can help solve key water

of water policies, and a How-to Guide to support

challenges, using a combination of bottom-up and

governments at all levels to carry out the self-

top-down processes while fostering constructive

assessment, based on the 10 steps methodology.

state-society relations. It is bad if it generates undue transaction costs and does not respond to place-

The OECD Water Governance Initiative

based needs. The 12 Principles are organised around three mutually reinforcing and complementary

The OECD Water Governance Initiative was created

dimensions of water governance: how you hit the

on 27-28 March 2013 as an international multi-

targets (effectiveness), at the least cost (efficiency)

stakeholder network of 120+ members from the public,

and with whom (trust and engagement). They have

private and non-for-profit sectors gathering twice a

been applied across different scales, stakeholders

year to share best knowledge and experience on water

and sectors, either as a tool to understand how water

reforms, projects and policy. It has several objectives:

governance systems are performing at local, basin

Provide a multi-stakeholder technical platform to share knowledge, experience and best practices on water governance across levels of government.

Advise governments on necessary steps for effective water reforms through peer-to-peer dialogue and stakeholder engagement across public, private and nonprofit sectors.

Framework, a self-assessment tool to assess the

Provide a consultation mechanism to raise the profile of governance in the Global Water Agenda (Sustainable Development Goals, World Water Forum, Habitat III,

state of play of water governance policy frameworks

COP, etc.).

or national level, or as a reading template to guide decisions for water stakeholders and institutions on specific water functions (e.g. service delivery, water resources management, flood risk prevention, etc.). Three years after the adoption of the Principles, the OECD developed tools to support their implementation. These include the OECD Water Governance Indicator

(what), the institutions (who) and instruments (how), and their needed improvements over time. There is also a collection of 50+ water governance stories to inspire policy makers, practitioners and other

Support the implementation of the OECD Principles on Water Governance in interested countries, basins and cities by scaling up best practices, capacity development and the use of and further development of indicators.

Objectives of the OECD Water Governance Initiative

Source: www.oecd.org/cfe/regional-policy/water-governance-initiative.htm.

16 OECD WORK ON WATER

Water governance

Water governance in cities

in order to favour inter-sectoral complementarities, enhance inclusive decision-making and favour co-

Cities are facing growing water-related risks, exacerbated

operation between cities and their surroundings.

by population growth, rampant urbanisation and climate change. With a projected world population of 9.7 billion

The OECD 2021 report Water Governance in African

by 2050, of which 55% will be urban, demand for water is

Cities and the OECD 2021 report Water Governance in

set to rise by 55% compared to 2000 levels. By then, more

Cape Town, South Africa provide a focus on multi-level

than 570 low-lying coastal cities could face sea level rise

governance challenges and solutions in the continent.

of at least 0.5 metres, threatening more than 800 million

In addition, the OECD- UCLG-Africa Roundtable of

people. The OECD project “Cities for a Blue Economy”

African Mayors for Water Security aims to facilitate

supports cities in tackling these risks and fostering a

the design and implementation of robust local water

sustainable blue economy that contributes to economic

policies by producing granular data and evidence,

growth, social well-being and ecosystem preservation.

sharing knowledge, experience and best practices, and enhancing collaboration among Mayors.

The project builds on the 2016 OECD report Water Governance in Cities, which argues that a successful recipe for better water governance in cities relies upon effective co-ordination across policies, people and places,

Did you know? 92% of surveyed cities signalled that ageing or obsolete infrastructure is a major factor affecting water governance in cities.

KEY PUBLICATIONS OECD (2018), Implementing the OECD Principles on Water Governance: Indicator Framework and Evolving Practices, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264292659-en OECD (2019), Applying the OECD Principles on Water Governance to Floods: A Checklist for Action, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/d5098392-en OECD (2019), Water Governance in Argentina, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/bc9ccbf6-en OECD (2021), Water Governance in Peru, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/568847b5-en OECD (2021), Water Governance in African Cities, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/19effb77-en OECD (2021), Water Governance in Cape Town, South Africa, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/a804bd7b-en OECD (2021), «Water Governance in Asia-Pacific», OECD Regional Development Papers, n° 13, OECD Publishing, Paris, https://doi.org/10.1787/b57c5673-en OECD (2022), Fostering Water Resilience in Brazil: Turning Strategy into Action, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/85a99a7c-en

KEY WEBSITES The OECD Water Governance Programme: https://www.oecd.org/water/regional/ The OECD Principles on Water Governance: https://www.oecd.org/governance/oecd-principles-on-water-governance.htm

OECD WORK ON WATER 17

OECD work on water

Financing water resources and water services

contexts. The 2022 report Financing a Water Secure Future compiles relevant insights and key messages from several years’ Roundtable meetings and discusses recent developments and their impact on financing water – such as the ones listed below. We are developing analytical tools and

OECD work on financing water consists of multiple pillars. One major pillar is the Roundtable on Financing Water as well as analytical work on Financing Water.

new approaches related to water financing. Examples of our current work include: l

build a strong foundation for ongoing and future OECD initiatives on Financing Water.

the analysis of the role of intermediaries

an analytical framework for strategic investment pathways

analysis on how water-related risks may impact on the

The Roundtable on Financing Water

financial sector

The Roundtable on Financing Water is a joint initiative of the OECD, the World Water Council, the Netherlands and the World Bank. It draws upon political leadership and technical expertise, with the ambition

indicators to assess the “readiness” for blended finance

Both create the basis of a recent OECD report and

Our future work focuses on: l

Launching the OECD Observatory on Financing

of facilitating increased financing of investments that

water Supply, Sanitation and Water Security, which

contribute to water security and sustainable growth.

provides a unique repository to document good practices on financing water related investments

Both thematic and regional Roundtable meetings offer a platform of exchange and discussion for actors from the public and private sphere. Past meetings covered

and encourages peer-to-peer learning. l

Water to distil policy recommendations, providing

the Americas, Europe and Asia. Thematic meetings

high-level guidance to strengthen the policies and

focused on agricultural water, or climate action.

Analytical Work on Financing Water

institutional arrangements. l

We are documenting financing flows, needs and capacities in different regional and thematic

Did you know? Water insecurity generates significant economic and social impacts. If water-related risks were considered financially material in the financial system, more money might be going into the reduction the physical or economic exposure and vulnerability to water-related risks - and less money would be supporting investments that increase exposure and vulnerability to such risks. This is a direction for future work, in collaboration with the finance community.

18 OECD WORK ON WATER

Developing an OECD Framework on Financing

The work on financing water informs – and benefits from - country-specific work and regional engagement (see below).

Financing water resources and water services

Financing a Water Secure Future

and public health. Due to their cross-cutting nature, investments in water security are central to achieving

The OECD report Financing a Water Secure Future distils

the Sustainable Development Goals (SDGs), global

important insights from the Roundtable on Financing

climate and biodiversity goals and to contributing

Water and related analyses from 2017-21, providing

to a green and resilient recovery from the COVID-19

an up-to-date summary of the key challenges of

crisis. The report provides a strong foundation for new

financing water-related investments and the different

initiatives such as the OECD Global Observatory on

opportunities to address them. Investments in water

Financing Water Supply, Sanitation and Water Security,

services and water resources improve the well-

which will provide a dedicated knowledge hub to share

being of people and the resilience of ecosystems and

good practices and support peer-to-peer learning. The

economies – and yet, a substantial financing gap

report sets a vision for future OECD work on financing

persists. Investments in water security connect multiple

water and provides emerging guidance to move

sectors and policy agendas, including environment,

beyond bottlenecks to finance a water secure future.

biodiversity, agriculture, energy, urban development

KEY PUBLICATIONS OECD (2022), Financing a Water Secure Future, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/a2ecb261-en. Leckie, H., H. Smythe and X. Leflaive (2021), «Financing water security for sustainable growth in Asia and the Pacific», OECD Environment Working Papers, No. 171, OECD Publishing, Paris, https://doi.org/10.1787/3bc15c5b-en. OECD (2020), Financing Water Supply, Sanitation and Flood Protection: Challenges in EU Member States and Policy Options, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/6893cdac-en. OECD (2019), Making Blended Finance Work for Water and Sanitation: Unlocking Commercial Finance for SDG 6, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/5efc8950-en.

KEY WEBSITES The Roundtable on Financing Water: https://www.oecd.org/water/roundtable-on-financing-water.htm

SUSTAINABLE OCEAN, SEAS AND OECD MARINE WORKRESOURCES ON WATER 19

OECD work on water

Blended finance for water-related investment

developing countries2, offers a promising approach to crowd in additional commercial finance in investments

Water flows as a prerequisite through all of the

that contribute to achieveing SDG6 and related goals.

Sustainable Development Goals (SDGs). However, commercial finance flows to the water sector have

In the 2019 OECD report Making Blended Finance Work

generally been limited to date. Preliminary OECD

for Water and Sanitation, the state and potential of

data on amounts mobilised from the private sector

blended finance for water-related investments are

estimates that development finance mobilised an

assessed, drawing on analysis from three sub- sectors:

additional USD 2.1 billion of private resources in 2012-17 for water and sanitation1, which represents

1. Water and sanitation utilities;

1.4% of total finance mobilised in that period. 2. Small-scale off-grid sanitation services; and The OECD is identifying best practices and examining challenges in applying blended finance to water investments. Blended finance, defined as the strategic

3. Multi-purpose water infrastructure and landscape-based approaches.

use of development finance for the mobilisation of additional finance towards sustainable development in

Blended finance approach

Source: OECD (2018), “Making Blended Finance Work for the Sustainable Development Goals”, OECD Publishing, Paris.

1. Data as of April 2019: https://www.slideshare.net/OECDdev/ amountsmobilisedfromtheprivatesectorbydevelopmentfinanceinterventionsin201217 2. OECD (2018), Making Blended Finance Work for the Sustainable Development Goals, OECD Publishing, Paris, https://doi.org/10.1787/9789264288768-en.

20 OECD WORK ON WATER

KEY LINK Blended Finance: Blended Finance: https://www.oecd.org/dac/ financing-sustainable-development/blended-finance-principles/

Financing water resources and water services

Development finance for water supply and sanitation

In addition to official development assistance (ODA), non-concessional developmental flows for water extended by bilateral development finance institutions

The OECD collects and regularly updates statistics

and multilateral agencies are collected through

on development finance for water supply and

the Creditor Reporting System. Data collection has

sanitation. The data collection is based on a

also started from private charitable foundations.

standard methodology and agreed definitions which ensures that data can be used to analyse

OECD analysis provides insight on how and where

trends and compare the efforts of donors.

development finance for water is spent. Regular statistical briefs cover the following aspects:

Data cover flows from members of the OECD

Monitoring trends

Commitments versus disbursements

Geographical allocation of resources

regional development banks, UN agencies and other

Nature of projects financed

agencies such as the Arab institutions or Global

Water and climate change

Environment Facility. The coverage

Water and gender equality

Development Assistance Committee (DAC), nonDAC providers of development assistance, and multilateral agencies including the World Bank,

improves from year to year.

Development Finance for Water Supply and Sanitation, 2005-19 8%

USD Billions (2019 constant prices)

ODA (W&S)

OOF (W&S)

Share of (W&S) ODA

Share of (W&S) OOF

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Source: Figures are based on OECD statistics (2022) available on https://stats.oecd.org/

Data compiled by the OECD tracker suggest an upward

Both components grew in absolute terms with respect

trend over the last 15 years, but a plateau of the last 2

to 2005-06, when they amounted to USD 6.3 billion ODA

years on record. Official Development Finance for the

and USD 3.2 billion OOF. In relative terms, ODA and

water and sanitation sector surpassed USD 14 billion in

OOF for water and sanitation as shares of total ODA

2017 where it has remained stable since. In 2019 ODA

and OOF remained stable in the range 4% to 5% for

represented 67% of the total (USD 9.5 billion), while

ODA and 4% to 7% for OOF. The annual average is for

Other Official Flows (OOF) accounted for 4.6 USD billion.

ODA to account for 65% of Water and Sanitation flows.

KEY LINK Development finance data: https://www.oecd.org/dac/financing-sustainable-development/development-finance-data/

OECD WORK ON WATER 21

OECD work on water

Private sector participation for water supply and sanitation services

in Infrastructure. The checklist helps governments to assess and manage the implications of private sector participation in the water sector and has

Providing an adequate framework for private sector

proved useful in helping countries identify key areas

participation in the financing, development and

for reform. Experience drawn from applying the

management of water and sanitation infrastructure

checklist in a range of countries has pointed to the

is a key challenge. In 2009 the OECD, working

need for countries to assess their frameworks

with non-OECD countries and stakeholders,

for private sector participation. There is also a strong

developed a Checklist for Public Action, building

demand to share tools and access good practice.

on the 2007 OECD Principles for Private Sector Participation

The OECD Checklist for Public Action has been used to carry out assessments of private sector participation in the water sector in Egypt, Lebanon, Mexico, the Russian Federation and Tunisia. The checklist highlights a set of principles across five key policy areas: l

Deciding on the nature and modalities of private sector participation.

Providing a sound institutional and regulatory environment for infrastructure investment.

Ensuring public and institutional support for the project and choice of financing.

Making the co-operation between the public and private sectors work in the public interest.

Encouraging responsible business conduct.

KEY LINK Private sector participation in the water and sanitation sector: www.oecd.org/investment/investment-policy/water.htm

22 OECD WORK ON WATER

Water and agriculture

implementation. Changing policies can be a difficult

There is a large, complex and dynamic set of linkages

reports in 2018-19 examined strategies to support

between agriculture and water. Irrigated agriculture

reform processes for agriculture and water policies.

process that governments often overlook. Recent OECD

makes a substantial contribution to the growth in agricultural production across many countries.

One of the key elements to guide governments towards

Yet, agriculture can have significant impacts

effective agriculture and water policy changes is to

(both positive and negative) on water ecosystems,

evaluate policy performance over time. The 2020 report

and both agriculture and water are becoming

Agriculture and Water Policy Changes looks back at the

increasingly vulnerable to climate change.

evolution of policies in this area and develops indicators measuring changes in policy alignment with the OECD

In most OECD countries, agriculture is a major consumer

Council Recommendation and where relevant the

of water and a significant source of diffuse water

2017 G20 Agriculture Ministers Action Plan. Looking

pollution. While agriculture often suffers the most from

forward, the 2021 report Measuring Progress in Agricultural

droughts, it can also help reduce the impact of floods

Water Management characterises methods to gauge

on the rest of the economy. OECD’s examination of

improvement in policies, considering progress in policy

these linkages focuses on economic and policy analysis,

design, implementation capacity and policy results, and

supported by economic and environmental data.

applies its characterisation to the cases of sustainable irrigation and the control of diffuse pollution.

Overall, OECD work is seeking to provide policy advice to governments that could help move agriculture onto

Recent work also analyses means to build agricultural

a sustainable path in the overall management of water

resilience to water related disasters, through case

systems. Governments should consider the use of a

studies of the management of droughts in Italy

mix of policy instruments at the farm, watershed and

and Turkey, floods in New Zealand and the United

national levels to improve agriculture’s water use, reduce

States and typhoons and heavy rains in Japan.

its impacts on water resource and bolster farmers’ resilience to water risks while ensuring that existing agriculture policies are aligned with these objectives. The knowledge of policy responses to the water challenges faced by agriculture, does not, however, guarantee their effective introduction and

OECD WORK ON WATER 23

OECD work on water

Overall alignment of agriculture and water policies with specific chapters of the Council Recommendation on Water in all 39 considered countries, 2009 and 2019 Indices range from 0 to 1, higher indices (outside) indicate a higher alignment

2009

2019

General recommendations (ch. 2) 1

0.9 0.8

Ensuring sustainable pricing for water and water services (ch. 8)*

0.7 0.6

0.54

Managing water quantity (ch.3)

0.5

0.49

0.4 0.3 0.2

0.58

0.1 0

0.55 Ensuring good water governance (ch.6)

0.54

0.55

Improving water quality (ch.4)

Managing water risks and disasters (ch.5) Note: indices of alignments were adjusted to account for text caveats, but they remain imperfect and should be subject to cautious interpretation. Source: Gruère, G., M. Shigemitsu and S. Crawford (2020), "Agriculture and water policy changes: Stocktaking and alignment with OECD and G20 recommendations", OECD Food, Agriculture and Fisheries Papers, No. 144, OECD Publishing, Paris, https://doi.org/10.1787/f35e64af-en

24 OECD WORK ON WATER

Water and agriculture

Measuring progress in agricultural water management: type of assessment, principles and challenges

Source: Gruère, G. and M. Shigemitsu (2021), "Measuring progress in agricultural water management: Challenges and practical options", OECD Food, Agriculture and Fisheries Papers, No. 162, OECD Publishing, Paris, https://doi.org/10.1787/52b4db7e-en.

Did you know? Agriculture accounts for an estimated 70% of total water withdrawal globally and over 40% in many OECD countries and a much larger proportion of total water consumption.

KEY PUBLICATIONS Gruère, G. and M. Shigemitsu (2021), «Measuring progress in agricultural water management: Challenges and practical options», OECD Food, Agriculture and Fisheries Papers, No. 162, OECD Publishing, Paris, https://doi.org/10.1787/52b4db7e-en. OECD (2021), “Country profiles: agriculture ad water policies”, main characteristics and evolution of agriculture and water policies from 2009 to 2019 for 35 OECD countries, https://www.oecd.org/agriculture/topics/water-and-agriculture/ OECD/FAO (2021), Building Agricultural Resilience to Natural Hazard-induced Disasters: Insights from Country Case Studies, OECD Publishing, Paris, https://doi.org/10.1787/49eefdd7-en. Gruère, G., M. Shigemitsu and S. Crawford (2020), «Agriculture and water policy changes: Stocktaking and alignment with OECD and G20 recommendations», OECD Food, Agriculture and Fisheries Papers, No. 144, OECD Publishing, Paris, https://doi.org/10.1787/f35e64af-en. Gruère, G. and H. Le Boëdec (2019), «Navigating pathways to reform water policies in agriculture», OECD Food, Agriculture and Fisheries Papers, No. 128, OECD Publishing, Paris, https://doi.org/10.1787/906cea2b-en.

KEY LINK Water and agriculture: https://www.oecd.org/agriculture/topics/water-and-agriculture/

OECD WORK ON WATER 25

OECD work on water

from having wide latitude to explore technologies that fit local contexts, often in combination with non-technical innovation.

Water and cities Cities are major contributors to national economies

Financing. The financial conundrum in OECD countries is changing rapidly, with rising investment needs to renew ageing infrastructures, declining water demand in city centres, and fierce competition to access public finance. Tariff structures and business models need adjusting accordingly.

Rural-urban linkages. The urban-rural interface can contribute a great deal to OECD cities’ water security, now and in the future, at least cost to society. National governments should provide incentives and institutional mechanisms to foster the use of cooperative arrangements benefiting cities, surrounding communities, and ecosystems.

Governance. Three issues deserve particular attention: stakeholder engagement; dedicated regulatory agencies; and metropolitan governance. The OECD explores good international practice, drawing on dedicated networks of stakeholders and practitioners.

and play a key role as nodes in global markets. But cities can only develop sustainably when they provide reliable water supply and sanitation services to city dwellers, and manage risks of too much, too little and too polluted water. In OECD countries, cities have achieved high levels of protection against droughts, floods and water pollution, and a vast majority of city dwellers enjoy reliable water services. This remarkable performance derives from distinctive combinations of infrastructures, business models and institutional arrangements. However, whether and how such combinations are fit for future challenges is unclear. The economic, social and environmental costs

OECD cities will not be in a position to respond to all

of water security are increasing, driven by urban

the future water challenges on their own. A number

growth, competition among water users, urban

of initiatives by other tiers of governments, clustered

and agricultural pollution, and climate change.

around three categories – regulation (on land use,

Existing infrastructures are also ageing and

reclaimed water and public procurement), resource

need to adapt to new contexts. In addition,

provision (e.g. information and education) and incentives

city dwellers have rising expectations as regards to

(e.g. financial) – will also contribute to urban water

the quality of water services and water security.

management. Governments can use urban policies and infrastructure financing to promote water-sensitive

The 2015 OECD report Water and Cities: Ensuring

urban design, especially in high-risk regions. The

Sustainable Futures establishes that cities that

interplay between national and local initiatives on

effectively manage water for future challenges combine:

water management will shape the cities of the future,

Innovation. Technical innovation is burgeoning in cities, but is not fully exploited. Cities would benefit

including their capacity to thrive and contribute to bettering the lives of their residents. KEY LINK

26 OECD WORK ON WATER

Water and cities: https://www.oecd.org/water/water-and-cities.htm

Making water reform happen: National Policy Dialogues on Water

In Eastern Europe, the Caucasus and Central Asia, the OECD has been partnering with the European Commission and UNECE to support water policy reforms since 1990s. In Asia, the Ministry of Environment of the Republic of

OECD analyses confirm that water management needs

Korea, the OECD and the Asia Water Council support

to change in most OECD and non-member countries:

the achievement of the Sustainable Development Goals

Fiercer competition to access limited and more variable water resources puts more pressure on allocation regimes.

through addressing Asian water issues in (potentially)

More uncertainty about the future availability of water challenges the way water services and infrastructures are designed and operate.

Council brings its convening power in the region and

New technologies and innovative management practices generate opportunities to deliver better services at least cost for the community.

with facilitating water dialogues at national level; it

8 countries. This project builds on the strengths and expertise of the project partners: the Asia Water expertise in the development and diffusion of waterrelated technologies; the OECD brings experience brings particular expertise as regards the enabling conditions to finance water-related investments and

Water governance needs to adapt to better reach out to

the reform of water-related policies. Thailand and

communities whose behaviour affects water demand

then Indonesia requested to benefit from this regional

and availability (farmers, city dwellers, energy suppliers)

collaboration. The OECD is grateful to the Korean

and to engage stakeholders in complex policy decisions.

government for the financial support to this initiative.

The OECD is committed to supporting governments

In Europe, long-standing cooperation with DG

in their efforts to reform policies that influence the

Environment in the context of the update of existing

availability, use and management of water. The OECD

Directives supports thematic discussions with EU

has worked directly with a number of countries to

member states on issues of common interest. In 2022,

support National Policy Dialogues, helping to make

the OECD and DG Environment convened a series of

water reform happen. National Policy Dialogues are

thematic workshops to facilitate the implementation

a structured process for stakeholder engagement

of the economic dimension of the Water Framework

supported by robust and tailored analytical work and

Directive, with a focus on enhancing investment

lessons learnt from international experience. The

planning and financing decisions, on further aligning

dialogues have been undertaken in a range of countries

with the polluter pays principle, or on cost recovery.

focussing on various elements of water policy reform,

Policy dialogues in Estonia and Lithuania explored

including financing and pricing, governance, allocation,

practical options to support consolidation of

water security and private sector participation.

fragmented water utilities to generate economies of scale and enhance the water sector’s capacity to meet

The policy dialogues are demand-driven. Some

current and future investment needs. The financial

originate from bilateral discussions between

support of DG REFORM is gratefully acknowledged.

interested governments and the OECD. Others coalesce in the context of regional partnerships.

OECD WORK ON WATER 27

OECD work on water

National policy dialogues in Eastern Europe, the Caucasus and Central Asia (EECCA)*

Environment Agency and the International Office of Water of France. A follow up project commenced in January 2022 with focus areas including improving

The OECD assists the EECCA countries in adopting

the use of economic instruments and mobilising

a more integrated approach to water management,

finance to the water sectors in partner countries.

applying robust economic and financial analyses and improving multistakeholder participation. It also

National Policy Dialogues jointly facilitated by the

helps in identifying and removing some of the key

OECD and UNECE and fed by robust analytical

obstacles to effective and efficient water management,

work, often lead to practical implementation of

while reflecting countries’ level of socio-economic

policy advice. The OECD focuses on the economic

development. This work is part of the EECCA component

aspects of water resources management (policy

of the European Union Water Initiative (EUWI), for

coherence, managing water for growth and making

which the OECD is a strategic partner, together with

the best use of economic instruments for water

the United Nations Economic Commission for Europe

management), and on the financial sustainability of

(UNECE). Funded by the European Union and with

water supply and sanitation services (strategic and

recent co-financing from Germany, Norway and

mid-term financial planning and financial support

Switzerland, the programme included the EUWI+ project

mechanisms to the sector). The UNECE focuses on the

which recently concluded in 2021. EUWI+ supported

co‑operation related to the trans-boundary waters.

the six countries of the EU’s Eastern Partnership to improve river basin management and bring their

In Central Asia, dialogues consider the relationship

legislation closer to the EU water acquis. This project

between water, energy and agriculture and are

was delivered in partnership with the Austrian

anticipated to further focus on this area in 2022.

* The EECCA countries are: Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, the Russian Federation, Tajikistan, Turkmenistan, Ukraine and Uzbekistan.

KEY PUBLICATIONS OECD (2021), Developing a Water Policy Outlook for Georgia, the Republic of Moldova and Ukraine, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/512a52aa-en. Oshakbaev, D., Z. Akisheva and A. Martoussevitch (2021), «Developing a national water security indicators framework in Kazakhstan», OECD Environment Working Papers, No. 177, OECD Publishing, Paris, https://doi.org/10.1787/9ce9aa8c-en. The use and management of water resources in Central Asia: A consultation on future directions - Policy Perspectives (2021), https://issuu.com/ oecd.publishing/docs/central_asia_water_management-web OECD (2020), Towards Water Security in Belarus: A Synthesis Report, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/488183c4-en. Policy Perspectives for Irrigation Sector Reform in Tajikistan: A Paper for Decision Makers (2020), https://issuu.com/oecd. publishing/docs/tajikistan_irrigation_pp_2020_web OECD (2019), Enhancing the Economic Regulatory System for Moldova’s Water Supply and Sanitation, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/8696bde7-en. OECD (2018), Facilitating the Reform of Economic Instruments for Water Management in Georgia, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/9789264281776-en. OECD (2018), Strengthening Shardara Multi-Purpose Water Infrastructure in Kazakhstan, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/9789264289628-en.

KEY LINKS OECD Water Policy Reforms: https://www.oecd.org/env/outreach/water-eecca/

28 OECD WORK ON WATER

Tools for strategic financial planning that have facilitated reforms in EECCA include: l Strategic financial planning for water supply and sanitation at national or regional level. l Financial planning tool for water

utilities. l Multi-year investment planning

tool for municipalities. l Guidelines for the development of

performance based contracts for water utilities. l Toolkit for benchmarking water

utility performance.

Making water reform happen: National Policy Dialogues on Water

Consolidation of water utilities in Estonia and Lithuania

National Policy Dialogue on Water in Brazil

Both Baltic States face similar issues regarding the

including water crises in São Paulo and Brasília,

sustainability of the water supply and sanitation sector.

increasing episodes of floods and unequal access to

They did particularly well to build new infrastructures

safe drinking water and sanitation, highlighted the

over the last 2 decades, with financial support from

need to enhance water security and resilience through

the European Commission. Today, in each country, the

effective multi-level governance and adequate finance.

Severe droughts between 2013 and 2018 in the Northeast

sector is characterised by a high level of fragmentation, with a vast majority of small utilities. As a consequence,

A decade of work by the National Water and Sanitation

the sector is struggling to enhance operational efficiency,

Agency (ANA) and OECD has focused on ‘who does what,

attract technical skills and finance investments to

why, how and who pays’ to improve water resources

operate and maintain newly built infrastructures.

management and offer innovative solutions to future

This affects the capacity of each state to comply with

challenges, drawing on established OECD principles

the Drinking Water, Urban Waste Water and Water

and lessons from best practices around the world.

Framework Directives, now and in the future. The 2015 OECD report Water Resources Governance in Brazil Both countries have attempted to consolidate utilities,

highlights two critical conditions for more sustainable,

to reap economies of scale and enhance the technical

inclusive and effective water policies in Brazil: (1)

and financial sustainability of the sector. Progress has

better water allocation regimes to manage trade-offs

been slow for a number of reasons. Both countries

across water users and uses to cope with future water

called on the OECD to facilitate these reforms. The

risks; and (2) a stronger multi-level governance. The

OECD reviewed the state of play in some depth, shared

OECD report Water Charges in Brazil: The Ways Forward

experience from similar attempts to consolidate WSS

(2017) focuses on setting and governing water charges,

in other European countries, and developed policy

including how to design economic instruments, govern

recommendations that have supported stakeholder

water charges and manage the revenues. Finally, the

consultation in both countries. The recommendations

2022 report Fostering Water Resilience in Brazil: Turning

have a lot in common, typically on the potential benefits

Strategy into Action suggests how to improve multi-

of economic regulation to monitor and incentivise

level governance and financing to enhance water

operational performance of service providers, on non-

resilience in Brazil and cope with pressing and emerging

financial incentives to accelerate consolidation.

environmental, economic and social challenges. KEY LINK Building Water Resilience in Brazil: https://www.oecd.org/cfe/cities/BrazilWaterResilience.pdf OECD WORK ON WATER 29

OECD work on water

National Policy Dialogue on Water in Peru

National Policy Dialogue on Water in Argentina

Although Peru has made good progress in water

Ensuring long-term water security is essential in the

management, significant water security challenges

pathway towards climate change adaptation, inclusive

remain in terms of floods, droughts, pollution and

growth and sustainable development in Argentina.

universal access to drinking water and sanitation.

Floods are responsible for 95% of annual economic

Between 2000 and 2020, floods affected an estimated

losses caused by disasters, severe droughts have a

4 million people, while the inadequate management

devastating impact on an economy where agriculture

of solid waste and informal and illegal mining affect

accounts for 6.4% of GDP, and the country is home

water quality, leading to severe public health issues, and

to some of the most polluted basins in the world.

social conflicts, including with indigenous communities. Moreover, still 3 million Peruvians (9.2% of the

Since the launch of an ambitious National Water Plan

population) lack access to water services and 8.2 million

in 2016 and the creation of a dedicated Secretary of

Peruvians (25.2%) lack access to sewerage services.

Infrastructure and Water Policy, water policy gained higher profile in the national agenda. Moving forward,

In the face of climate change and demographic growth,

managing concomitantly the risks of “too much”,

improving water governance in Peru is a means to

‘too little” and “too polluted” waters, while ensuring

achieving long-term water security, and aligning

universal coverage to drinking water and sanitation

individual user behaviour and collective action.

is essential for the country to fit for the future.

In line with the OECD Principles on Water Governance, the OECD report on Water Governance in Peru suggests

As such, the OECD report Water Governance in Argentina

a series of tailored policy recommendations to:

identifies three areas of action to make water policies

strengthen the multi sectoral approach to water;

fit for the future: i) a stronger multi-level governance

improve the use of economic instruments to protect

system that reconciles national and provincial

and sustainably use water resources, its sources and

priorities; ii) a more functional approach aligning

related ecosystem services; and strengthen regulatory

administrative and hydrological boundaries to manage

conditions to improved access to safe drinking

water at the right scale; and iii) an effective regulatory

water and sanitation in urban and rural areas.

framework to provide better quality water services.

30 OECD WORK ON WATER

Making water reform happen: National Policy Dialogues on Water

Water Policy Dialogue in Korea

why charges for water or river water and tariffs for multiregional services do not reflect local conditions.

In 2016, the OECD and the Ministry of Land,

The report was released in September 2017.

Infrastructure and Transport (MoLIT) embarked on a policy dialogue aimed at advancing the water

A new dialogue started in 2017, spearheaded by

agenda under the responsibility of MoLIT, with a

the Ministry of Environment, leading a whole-of-

focus on enhancing water use efficiency in Korea.

government approach. The dialogue focused on the management of the water-food-energy- land

The policy dialogue focused on three key areas: l l

nexus, and on the role of basin organisations.

Economic instruments under the remit of MoLIT and K-water.

Tailored recommendations derived from an

The promotion of innovation, in particular the smart water management initiative.

international good practices. They covered:

analysis of the state of play in Korea and l

co-ordinated planning across areas of the waterfood- energy-land nexus

future-proofing water policies and management

policies for water quality management

governance; in particular how to enhance basin-level water management in Korea and to engage with

Water allocation regimes.

The water policy dialogue outlined the remarkable capacity in Korea to develop water resources so that they support rapid economic growth and urbanisation. It also highlighted a growing push towards demand management and smart technologies that can help make the best use of available water resources and assets.

stakeholders. These are very exciting times to review water policies in Korea, as the government reorganises

The dialogue unveiled specificities of water

responsibilities in this domain and reorients policies

management in Korea, in particular the well-

towards making the best use of available resources and

entrenched objective to supply water under the

assets, with less emphasis on augmenting supply.

same conditions across the country. This explains

OECD WORK ON WATER 31

For more information: www.oecd.org/water/ @OECD_ENV OECD Environment