Worldwide, infrastructure plays a key role in responding to the pressures on water resources and enhancing water security. Those pressures will continue to increase in the coming decades because of demographic change, economic growth, pollution, land-use change, ecosystem degradation, and climate change. Brazil is no exception. The country made good progress in identifying and addressing challenges, funding and maintaining infrastructure based on public investment. However, the funding model has reached a limit, while technical skills and capacity, and stakeholder engagement need to be improved to further progress and move from a risk to a resilient approach. This chapter offers options to achieve these goals.
Fostering Water Resilience in Brazil
Turning Strategy into Action
OECD Studies on Water
1. Governing water infrastructure for greater resilience
Abstract
Infrastructure for water security in Brazil
The increased frequency and intensity of extreme, water-related events in Brazil due to climate change put people at risk, reduce the reliability of water infrastructure and have consequences for food and energy security. In 2020, 1.1 million people were affected by floods and about 15 million by droughts (ANA, 2021[1]). In 2021, the depletion in hydropower reservoirs due to a sequence of below-average hydrologic years starting in 2013 threatened the electricity supply for 213 million people who rely on hydropower for two-thirds of their electricity. Floods and droughts can simultaneously occur in different parts of the country, impacting the reliability of water infrastructure. For example, during droughts, reduced water inflow increases the uncertainties of reservoir storage, while the reduced capacity of multipurpose hydropower dams can generate tensions between users.
Rapid population growth and urbanisation in Brazil affect water infrastructure development. However, gaps remain, especially between urban and rural areas. In 1970, 51 million of the 93 million inhabitants lived in urban areas. By 2010, out of 190 million people, 160 million lived in urban centres or near the coast (IBGE, 2015[2]; ECLAC, 2012[3]). Due to population growth, by 2040, water demand is expected to grow by 43.5% compared to 2017, representing an increase of 4 337 billion m³ (Trata Brasil, 2020[4]). About 15 million Brazilians living in urban areas do not have access to safe drinking water protected from external contamination and available at home (Siwi/Unicef/World Bank, 2020[5]). In rural areas, 30% of the population (7.8 million inhabitants) lack access to safely managed water (WHO/UNICEF, 2021[6]). Untreated sewage reduced 13% in 10 years, from 62.2% in 2010, to 59.2% in 2014 and 49,2% in 2020, but remain high (MDR, 2020[7]). Other issues are related to water pollution. High BOD concentrations are found in rivers crossing large urban centres, which receive large organic pollution loads from untreated effluents and diffuse pollution (ANA, 2021[8]).
Overall, 95.2 million people lack proper sanitation services (MDR, 2020[7]) . A total of 21.6 million uses inadequate sanitation facilities, while 2.3 million uses unsafe water sources for human consumption and personal and domestic hygiene. The lack of access is especially acute in indigenous villages and in urban peripheries, informal settlements and slums, where approximately 13 million Brazilians live. According to the Atlas Aguas – Water Security for Urban Water Supply, BRL 110.3 billion investment in water production, distribution and infrastructure replacement will be needed in 5570 urban centres by 2035 (ANA, 2021[8]).
The National Water Security Plan (PNSH) set out strategic infrastructure requirements in 2019 and an investment plan to 2035. Projects proposed in the PNSH will benefit one third of the 74 million people who live in areas where water supplies are at risk and where an economic impact of BRL 518 billion is likely to occur from loss of industrial and agricultural production in the absence of action. According to PNSH, there is a need for BRL 26.9 billion in investments in new, strategic water infrastructure by 2035, mainly to provide expansion of water storage and supply, of which BRL 17.6 billion by public federal funds (to date, BRL 13.2 billion have been already invested) (ANA/MDR, 2019[9]). Thus, alternative funding is needed to provide part of the strategic water infrastructure (ANA, 2019[10]). The Ministry of Regional Development (MDR) will monitor and update the PSH and proactively guide its implementation where necessary. In doing so, it will work with federal agencies, state institutions and other stakeholders to ensure that the programme ties in with others for the provision of sanitation and for the promotion of regional development. At each stage of each project, the ANA will provide a water infrastructure assessment certificate (CERTOH) to allow it to continue operating according to the quality standards (ANA, 2021[8]).
Investments needs are estimated to be almost double than the current peace. From 2013 to 2017, Brazil invested BLR 12.94 billion per year on water and sanitation (MRD, 2019[11])). In 2020, that amount reached BLR 13.7 billion. However, there is a need for BRL 357 billion in order to reach universal access to water and sanitation, which corresponds to BRL 23.8 Billion per year by 2033 (1.8 times the average investment currently observed). Other studies estimate the investment needed is BRL 498 billion, not counting BRL 255 billion due to asset depreciation, providing a total of BRL 753 billion (KPMG/ABICON, 2020[12]) or BRL 50.2 billion per year by 2033 (3.9 times the current investment rate). The new regulatory framework intends to attract more private investments in order to face that investment demand.
A modern approach to water security cannot rely only on infrastructure as such. It requires bottom-up regional development strategies to address economic and social disparities. The OECD (2015[13]) highlighted the need to overcome the legacy of a Keynesian approach in Brazil’s public policy, based on intense public investment for the construction of large infrastructure. As such, measures towards greater water security (e.g., combining supply and demand, grey and green infrastructure, risk management and resilience, with a holistic view in connection with the environment, territorial development and land use) will entail robust water governance, as highlighted by the OECD Principles on Water Governance (Box 1.1).
Box 1.1. The OECD Principles on Water Governance
The OECD Principles on Water Governance aim to enhance water governance systems to manage “too much, too little and too polluted” water and foster universal access to drinking water and sanitation in a sustainable, integrated and inclusive way, at an acceptable cost and in a reasonable timeframe. The principles acknowledge that good governance is a means to master complexity and manage trade-offs in a policy domain that is sensitive to fragmentation, silos, scale mismatch, negative externalities, monopolies and capital-intensive investment. The principles consider good governance as helping solve water challenges using a combination of bottom-up and top-down processes while fostering constructive state-society relations. Bad governance, on the other hand, generates undue transaction costs and does not respond to place-based needs.
The principles support effective, efficient and inclusive water governance systems:
1. Effectiveness relates to the contribution of governance to define clear sustainable water policy goals and targets at all levels of government, to implement those policy goals, and to meet expected targets.
2. Efficiency relates to the contribution of governance to maximise the benefits of sustainable water management and welfare at the least cost to society.
3. Trust and engagement relate to the contribution of governance to building public confidence and ensuring the inclusiveness of stakeholders through democratic legitimacy and fairness for society at large.
The 12 principles are:
Principle 1. Clearly allocate and distinguish roles and responsibilities for water policymaking, policy implementation, operational management and regulation, and foster coordination across these responsible authorities.
Principle 2. Manage water at the appropriate scale(s) within integrated basin governance systems to reflect local conditions, and foster coordination between the different scales.
Principle 3. Encourage policy coherence through effective cross-sectoral coordination, especially between policies for water and the environment, health, energy, agriculture, industry, spatial planning and land use.
Principle 4. Adapt the level of capacity of responsible authorities to the complexity of water challenges to be met, and to the set of competencies required to carry out their duties.
Principle 5. Produce, update and share timely, consistent, comparable and policy-relevant water and water-related data and information, and use it to guide, assess and improve water policy.
Principle 6. Ensure that governance arrangements help mobilise water finance and allocate financial resources in an efficient, transparent and timely manner.
Principle 7. Ensure that sound water management regulatory frameworks are effectively implemented and enforced in pursuit of the public interest.
Principle 8. Promote the adoption and implementation of innovative water governance practices across responsible authorities, levels of government and relevant stakeholders.
Principle 9. Mainstream integrity and transparency practices across water policies, water institutions and water governance frameworks for greater accountability and trust in decision-making.
Principle 10. Promote stakeholder engagement for informed and outcome-oriented contributions to water policy design and implementation.
Principle 11. Encourage water governance frameworks that help manage trade-offs across water users, rural and urban areas, and generations.
Principle 12. Promote regular monitoring and evaluation of water policy and governance where appropriate, share the results with the public and make adjustments when needed.
Figure 1.1. OECD Principles on Water Governance
Source: OECD (2015[14]), OECD Principles on Water Governance, http://www.oecd.org/cfe/regional-policy/OECD-Principles-on-Water-Governance.pdf.
Getting the governance of water infrastructure right
Enhancing coordination across levels of government
Brazil has an institutional framework to plan and implement water infrastructure projects to enhance water security. In response to the need to develop water infrastructure, the National Water and Sanitation Agency (ANA) sits within the MDR, having moved from the Ministry of the Environment. In 2019, ANA published the PNSH (ANA, 2019[10]), focusing on two types of intervention: (1) multi-purpose dams for water supply and flood control, and (2) infrastructure to distribute and transfer water resources. Suggested solutions are based on a comprehensive evaluation and mapping of the water risks in the country using the Water Security Index (ISH), which combines human, economic, ecosystem and resilience criteria. The ISH revealed that coastal areas and the northeast part of the country are the most vulnerable.
Implementation of the PNSH will require coordination across levels of government. In Brazil, water resources management is a responsibility of the 27 states and the Federal District, and there is a history of participatory democracy based on more than 200 river basin committees. The OECD (2015[15]) recognised that Brazil’s river basins are very diverse in terms of their hydrological characteristics and level of economic development, and in terms of institutional capacity and skills. Solutions to water management challenges need to reflect this diversity and the reality of dissimilar levels of progress towards overarching policy objectives. Moreover, potential tensions between federal and state priorities are exacerbated by challenges related to the “double dominion” over water management, whereby competences over federal and state rivers are allocated to different levels of government.
As part of the appraisal of any major capital project proposal, roles and responsibilities must be in place for each stage, from the initial policy decision through to operation and maintenance of the infrastructure, as argued by the OECD Principles on Water Governance (OECD, 2015[13]). Options to consider include:
Strengthening the relationship between all relevant institutions. The Ministry of Regional Development, to which ANA belongs, should have a central role in relation to water infrastructure, with the engagement of entities simultaneously relevant to water resources management and to the social and economic development of the country, such as the CODEVASF (Company for the Development of São Francisco and Parnaíba Valleys) and DNOCS (National Department of Infrastructure against Droughts), both linked to the Ministry of Regional Development (Ministry of Regional Development, 2021[16]; 2021[17]).
Formalising institutional arrangements for decision making about every major infrastructure project to ensure that roles, responsibilities and funding are clear and in place at each stage of development.
Setting a legislative basis for green infrastructure and cross-sector strategic engagement. The extent of the policy ambition for green infrastructure as a climate change adaptation measure needs to be agreed between relevant ministries. Planning, funding and delivering green infrastructure must be more formal, with legislative and budgetary support, and clear accountability for delivery depending on the nature of the scheme. An optimised portfolio of grey and green infrastructure1 appears critical to build and sustain water security and resilience. For example, nature-based solutions are among the most efficient to sustainably increase water yields (Box 1.2).
Box 1.2. Reaping the benefits of green infrastructure in the water sector
Green infrastructure is defined as “a strategically planned network of natural and semi-natural areas with other environmental features designed and managed to deliver a wide range of ecosystem services. It incorporates green spaces (or blue if aquatic ecosystems are concerned) and other physical features in terrestrial (including coastal) and marine areas” (EC, 2013[18]). Green infrastructure is recognised as part of the answer to water challenges in OECD countries, especially when cities compete with other users (e.g., agriculture and thermal energy) for the water they need, and when water management is addressed in relation to land use and other policies.
The United Nations Environment Programme (2014[19]) lists green infrastructures for water resource management, some of which are useful in an urban context. Colin Green (OECD, 2013[20]) adds demand management and local processing of black or grey water to this list. Technologies related to sludge recycling, wastewater-energy generation and water cycle energy efficiency could also be considered. Green infrastructure provides solutions to all four risks that determine urban water security: droughts, floods, pollution and ecosystem resilience. Furthermore, it must be noted that most of the technologies inventoried in Table 1.1 are mature. Some have been in use for centuries. For example, Venice has relied on rainwater harvesting since its infancy, while Paris adopted a three-pipe system in the 19th Century, supplying non-potable water to uses that did not require potable water.
The benefits of green infrastructures are well-documented. The Nature Conservancy (McDonald and Shemie, 2014[21]) computes that if cities invested in watershed conservation, 700 million people could receive better-quality water, and water utilities could save USD 890 million a year in water treatment costs. Watershed conservation may be particularly relevant to low-income cities that cannot afford the capital and operation and maintenance (O&M) costs of built infrastructures.
Table 1.1. Green Infrastructure solutions for water resource management
Green infrastructure can be significantly more cost-effective than grey solutions. However, it usually must co-exist and interact with grey infrastructure. The key to successful implementation is land planning, ideally at a basin scale, since, although rainfall cannot be altered, how it runs off land depends on land strategies and landscape modifications.
Green infrastructure can provide multi-functional benefits. For example, urban parks and other green spaces in La Marjal de Alicante, Spain, provide multi-functional amenities, which are an attractive alternative to conventionally engineered flood defences. Such schemes are in use in many countries, using combinations of bypass tunnels, natural or artificial bypass channels, or large scale reconnection of the flood plain with the river to restore it to its natural purpose.
Source: Adapted from UNEP (2014[19]), Green Infrastructure Guide for Water Management: Ecosystem-based Management Approaches for Water-related Infrastructure Projects, United Nations Environment Programme; OECD (2013[20]), “Barriers to and Incentives for the Adoption of Green Water Infrastructure”, OECD, Paris; OECD (2015[22]), Water and Cities: Ensuring Sustainable Futures, http://dx.doi.org/10.1787/9789264230149-en; McDonald, R. and D. Shemie (2014[21]), Urban Water Blueprint: Mapping Conservation Solutions to the Global Water Challenge, https://www.nature.org/content/dam/tnc/nature/en/documents/Urban_Water_Blueprint.pdf; EC (2013[18]), Building a Green Infrastrcuture for Europe, European Commission, https://ec.europa.eu/environment/nature/ecosystems/docs/green_infrastructure_broc.pdf;
Aiming for resilience
Under the principle of subsidiarity, Brazilian legislation indicates the division of tasks between national, state and river basin plans, which often lack effective implementation. The State should focus on strategic issues and larger scales, and address strategic issues in their regional contexts, while river basin plans, with a more local approach, should focus on executive and operational tasks. According to Article 35, of the 1997 Water Law, the National Water Resources Council (CNRH) promotes the coordination of water resource plans with national, regional, state and sectoral plans, and approves the National Water Plan, making sure its targets are met. However, the National Water Resources Plan is too broad to set specific priorities and fails to link to broader development strategies. River and state basin plans are often “paper tigers”, not implemented due to a lack of buy-in from the stakeholders and decision makers within whose remit measures might have to be taken and funds allocated. Plans often lack proper implementation (OECD, 2015[15]).
Resilience thinking can develop more robust plans and flexible solutions. Resilience is not simply whether a system would be able to maintain supplies in the event of a drought, but also how it might respond to a range of shocks such as loss of power on a wide scale or cyber-attacks. Climate change creates a range of potential impacts that infrastructure will need to be resilient against. For example, dams will need to cope with changing flow levels, and urban surface-water drainage systems will need to cope with higher runoff rates compared to the historic record. Infrastructure adjacent to rivers, such as drinking water and wastewater treatment plants are likely to face an increasing risk of inundation.
System resilience is a critical part of the User Pays Principle, which aims for equitable sharing of costs and access to a resource, coupled with efficient supply of water and resource conservation through demand management. A ‘presumption of change’ is key to assumptions around levels of resilience and to identifying the conditions for recovery from failure. Institutional and governance arrangements are also integral to resilience. The economic regulator in England and Wales, Ofwat, has a legal duty to secure the resilience of the water companies it regulates through their planning and investment, including for operation and maintenance (O&M), and to ensure that they are managing water sustainably and increasing the efficiency of use by their customers. All companies’ quinquennial business plans are required to address resilience, such as by good design, not relying on single assets of a specific type, greater connectivity in their networks, protecting their assets as far as possible, and improving their incident response processes so that when there is a failure it can be identified and dealt with quickly, and before it has the potential to cause consequential failures.
To respond to the increasing risk of droughts, new infrastructure planning should consider:
Including worst-case scenarios for the potential impact of climate change and levels of future water demand. ANA made progress in understanding and managing risks to water supplies, and this approach now needs to include resilience thinking so that the duration and magnitude of failures is minimised. This assessment should then inform water planning, along the lines of ‘hoping for the best but planning for the worst. This will help identify capacity gaps and technical skills to be addressed and prioritise spending.
Assessing system vulnerabilities to shocks such as more extreme droughts than those planned for, or from cyber-attacks and telemetry failures. Also, consider measures implemented to mitigate impacts.
Ensuring greater reliability and resilience of existing supply systems, and introducing a wider range of source types less vulnerable to drought. For example, in Spain, increasing uncertainty over the reliability of abstractions led to greater reliance on less conventional sources of water than dams. The country has 765 desalination plants with an output of over 100m³ per day, producing around five million m³ per day, for urban supply, agriculture and industry. Desalinated water can be more expensive than resources from dams and rivers, depending on how externalities are considered, and produces large volumes of brine to be disposed of. Water reuse is also important in Spain, with 368 plants in operation or planned, yielding nearly 11% of the total available water. There are strict rules and quality standards for each type of use. Some uses are prohibited, such as for human supply, the food industry, hospitals, mollusc aquaculture etc. The EU is considering what standards to apply across Europe to address real and perceived concerns about risks to public health.
Developing drought management plans for new and existing assets. It is important to develop drought management plans that set out accountabilities and actions agreed in advance with stakeholders across all sectors. Plans would help manage demand, with defined triggers for each step as drought intensifies. Where emergency resources can be utilised, it is important to agree on the conditions for their use and any mitigation measures to offset environmental and social impacts. Drought management plans contribute to moving from crisis management to risk management, as they require risk assessments, monitoring, and clear decision-making based on a series of indicators.
Ensuring policy coherence
Water security is a long-term policy requiring costly infrastructure that will last for 50 years or more. It has cross-sectoral policy impacts at national, regional and local level. Fundamental synergies can be found between water and environment, territorial policies and land use. First, conservation of water ecosystems should be enhanced to guarantee water for all necessary uses in the long term. Second, high urbanisation rates in Brazil highlight the need for compatibility with territorial development policies, with consequences for water resource management. Third, land use directly affects the magnitude of extreme, water-related events, such as floods, especially for vulnerable people. As such, coordination across policy areas and sectors is essential so that water infrastructure contributes to wider development goals. This integrated view can be achieved by:
Initiating cross-departmental dialogues between ministries, such as establishing a permanent commission for policy integration to enhance cross-sectoral coherence and identify multiple benefits from every policy decision which could impact water directly or indirectly. It is not always recognised that water plans such as the PNSH generate wider consequences that might benefit or adversely impact parts of society, or stimulate or stifle economic growth in different areas. A permanent commission for integrated planning would ensure that the impact of plans on each other is considered explicitly, and synergies, gaps and adverse impacts identified. Embedding this approach would deliver more efficient investment, improve coordination between fragmented institutions and ensure that the multiplicity of plans focuses on delivering positive outcomes.
Extending the concept of integrated work into routine practice. There is currently no institutional model to deliver an integrated approach to planning horizontally across different ministries and vertically between layers of government in order to overcome the fragmented approach and lack of clear accountability. Each level of government needs to have clear accountability for communicating and delivering on its role.
Taking into account the implications of wider policy decisions for water supply and sanitation, and taking proactive measures at an early stage in the planning process so that water becomes an enabler rather than a hurdle. Policy and legislation for municipal developments should consider water impacts, with developers and development authorities accountable for funding the additional demand they put on water infrastructure and ensuring that construction meets standards for water efficiency and minimising surface water runoff. Economic instruments may have a part in ensuring that development is properly controlled and in accordance with agreed rules; enforcement of the rules and penalties may be needed where these are ignored.
Making a policy decision on levels of service for public water supply and other key sectors (i.e., an acceptable frequency of failure, such as during a once-a-century drought), and to confirm sectoral priorities during water emergencies, besides those already set by Law No. 9.433/1997, changed by Law No.14.026. Water supply planning in Brazil is based on the worst drought recorded in the hydrological record, but this fails to recognise that the worst drought to stress supply systems will not have happened yet. Conflicts between users during times of water stress are likely to increase unless action is taken to manage them. Making a policy decision on levels of service must be based on inclusive discussions that involve both public water supply and other key sectors, and must confirm sectoral priorities during water emergencies.
Building capacities
OECD (2015[15]) shows that Brazilian states have different capacity needs and priorities towards water resources management. Problems can relate to understaffing and underfunding, lack of proper enforcement and compliance with the law, and incomplete water information systems. Especially at the state level, decisions should be enforced and plans elaborated with the participation of users and civil society. Greater empowerment and qualification of state water agencies can help achieve this, making those agencies fully accountable for the implementation of all decisions. This emphasis on states should not exclude the role of the river basin committees and agencies but drive a learning curve whereby states, as they become stronger, will likely contribute to strengthening river basin institutions as well. In practice, action is needed on two fronts for stronger state authorities in water resources management: at technical and financial levels.
For new water infrastructure, it is important that state and municipal actors have adequate capacity for planning and implementation. This implies:
Addressing technical capacity through structured training programmes at an appropriate scale to ensure the operation and maintenance of sophisticated water supply systems and treatment processes. Technical capacities at municipal and state levels could be developed or strengthened to assess the effectiveness and efficiency of wastewater treatment and drinking water delivery against international standards for drinking water quality and pollution limits, and benchmark costs with other countries.
Piloting different approaches to skills development to ensure consistent professional standards across the country.
Developing training courses for river basin committee members to help them understand the complexities of water management and the trade-offs involved in decisions. For example, where there are large numbers of stakeholders in a particular sector, such as irrigators, the training could help make it clear that a user association would be able to speak for them and have more influence on decision-making.
Setting up mechanisms to share best practices within and between states, together with structured programmes for the continued professional development of staff. This could be done through virtual networks and discussion fora for specialists in particular disciplines, or periodic conferences or workshops to present case studies and encourage peer-to-peer learning.
Considering how professional institutions could assess and recognise competence, and support continued professional development.
Considering the benefits from the amalgamation of delivery bodies (as happens extensively in Europe) to provide efficiencies through economies of scale and adoption of best practices. Municipalities, particularly smaller ones, are vulnerable when technical skills are offered by just a few individuals, so sharing resources and amalgamating training can increase resilience (Box 1.3).
Box 1.3. Enhancing capacity at a sub-national level in the EU
The 28 states within the European Union are, to a degree, analogous to Brazil, with issues relating to different levels of capacity to manage water infrastructure. Standards are set centrally for a wide range of water-related criteria such as drinking water quality, bathing water quality, wastewater treatment and the ecological status of rivers. Member States have different levels of compliance; their performance is related to their capacity and capability, and the funds available to invest in improvements. Treated drinking water reaches 96% of the population (2015 figures), but the management of sewage effluent is more variable. The coverage of sewer networks reaches 92%, but only 82% is sent for treatment.
As the EU progressed its rollout of standards on wastewater treatment, it became clear that responsibility for this activity in most countries lies with municipalities, which have neither the capacity nor the technical skills to deliver it effectively. Actions to enhance capacity have included:
Appropriate scale: In many countries, there was consolidation across municipalities to achieve critical mass and economies of scale. France consolidated the work of 35,000 municipalities into 1,200 to deliver these efficiencies. Denmark took a similar route in 2008, reducing from 1,350 municipalities to 98. Where sewage treatment is privatised, it there must be independent regulation; otherwise the contractor enjoys the benefits while the client carries the risk.
Financial support: The EU provides financial support where needed, and imposes sanctions – infraction proceedings – where performance is poor and commitment for improvements lacking. The use of conditionalities to fund schemes proposed at a state or municipal level has increased compliance with regulatory standards. The combination of carrots and sticks has proved very effective in delivering significant improvements in access to water and sanitation, and to protecting and improving the water environment throughout Europe.
Source: OECD/ANA (2019-21[23]), “Water Governance Workshops”.
Improving data collection and analysis
Forecasting demand and developing options are the foundation of water security planning. However, assumptions about population growth, urbanisation, water use in homes and industry, and irrigation demand are all subject to considerable uncertainty. Understanding the impact of uncertainties in forecasts is essential to developing a robust and adaptable plan that delivers cost-effective solutions, and which manages the risk of supply failure. Moreover, the relevant information does not lie exclusively with one level of government, and actors depend on each other’s knowledge to disseminate information between relevant levels of government. In practice, according to (OECD, 2015[15]), sub-national governments tend to have more information than national ones about local needs and preferences, and about the implementation and costs of local policies. Unless they generate and publish this information on a timely basis and communicate it to the central level, an information gap can occur. Nevertheless, the sub-national level’s views are only “partial” – limited to a specific area or territory. Thus, the central government plays an indispensable role in managing the information to support a broader vision of public policy objectives. Information can also be used to identify capacity needs. Once again, this indicates a relationship of mutual dependence. To improve data collection and analysis, efforts should include:
Producing and collecting good data for managing water and assessing the potential of different options beyond grey infrastructure. Water security planning requires a broad range of data across different disciplines, such as hydrology, ecology, demographics and social science. It is essential to review the data needs for water supply security planning and establish the mechanisms to collect and store it so that it is accessible for use within a water planning process that takes account of climate change and adopts a twin track approach: implementing demand management measures in tandem with cultivating resource options.
Improving data on water demand beyond historic data that has been used for planning purposes. There is a need for more and better data on water demand to improve models for forecasting. Data should be objective driven. In other words, they need to be collected for a purpose, which will help to ensure quality and consistency.
Integrating data collection and planning processes with a clear overall purpose. Long-tern planning (10-yearly with a 30-year horizon) already exists within the power sector and could be a model for water, which would also need to ensure that it is integrated with national development strategies. Having a single entity to oversee it could be beneficial.
Using scenarios can help understand risk and uncertainty, and what contingencies might be needed if reality deviates significantly from the plan. The PNSH only extends to 2035 and uses historic rainfall and flow records as the basis to develop schemes. The dams and transfers constructed will have asset lives well past that date and, by not taking account of climate change, there is a risk that the yield characteristics of the sources will alter significantly, jeopardising the benefits of the scheme and the options chosen. The PNSH should be tested for risk, resilience and uncertainties using scenarios for different levels of demand and for water availability under climate change on timescales that are compatible with the expected life of water infrastructure.
Performing cost-benefit analysis of the performance of infrastructure should be carried out to define if remedial works are needed, or whether low-cost improvements such as better control systems would allow it to perform better. The cost-benefit assessment for a new scheme should therefore consider a ‘Do Nothing’ option to see whether the capital and associated operational costs for O&M are more cost-effective and sustainable when the money is spent on improving and maintaining existing infrastructure, or on managing demand so as to negate the need for additional infrastructure.
Funding the multi-purpose operation and maintenance of water infrastructure
Brazil prioritises funding and spending for new infrastructure over O&M. The PSH indicates that the BRL 27.58 billion of new investment would require an average annual operation and maintenance spend of BRL 1.2 billion. It is just as important to maintain existing assets so that they perform as intended and risks are minimised. An example is the maintenance of 1454 dams assessed at high risk by the ANA Dam Safety Report (ANA, 2021[24]). The report presented 21 953 dams with volume information, many of which are at high risk of failure. There are thousands (3 355 multi-purpose dams) of small (less than one hectometre3) private dams and around 400 large (more than 10 hectometre3) public dams. Among the public dams, 281 belong to the Federal Government. A total of 3 690 dams are classified as high hazard, with the potential for loss of life if they failed, while 1161 dams are simultaneously classified as high hazard and high risk. Issues revealed by the report include spillway deterioration, concrete failure, leakage, piping and slope failure. Large irrigation infrastructure such as concrete canals is also deteriorating. These dams have now been prioritised for funding, but public funds have proved to be highly variable year-on-year, making planning for remediation and ongoing maintenance very problematic. Even where funding has been budgeted, actual expenditure reached 42% of the available sum. In 2020, BRL 162 million were budget for dam safety interventions, and BRL 58 million were actually spent, including federal and state budgets.
Better O&M may prove to be a more cost-effective option than new infrastructure. The cost of maintenance is specific to each asset, and will depend on a range of parameters such as what it is (e.g. dam, pump, pipeline etc.), its age, the materials used in its construction etc. The cost tends to be viewed in isolation, and not considered against the cost of failure. Routine inspection and preventative maintenance can help avoid such costly failures, and is an expense, which should be assessed as part of the approvals process for any new infrastructure. Apart from funding by the government or dam owners and operators (most dams are operated by DNOCS and CODEVASF), other options for O&M include payment from beneficiaries or new sources such as recreation or renewable energy generation. As yet, there is no experience of developing different funding models and it is questionable how realistic this would be for the foreseeable future. Box 1.4 provides an overview of funds applied in the European Union.
There is almost no culture among users of water services of having to pay for the benefit they receive from the associated infrastructure. Even where charges are levied for water use, it is not clear whether these should be spent on O&M or on new assets. The result is progressive underinvestment in maintenance and a deterioration in asset condition, which is likely to negate the benefit of the new infrastructure. More often, because dams are typically a long distance from the population served, their remoteness results in a lack of awareness of the true cost of the service or any willingness to pay for it. One exception is in Arroio Duro in Rio Grande do Sul, where users took over the operation of a reservoir, which benefits local communities and farmers, and charge a fee to users to cover the operating costs. Innovative funding options have also been explored, such as the development of floating solar energy generation, which may have potential because it creates an additional funding source for the O&M of dams. It is proposed that the successful bidder for the right to install floating solar systems would be expected to assume responsibility for the O&M of the dam. The incentive for investment in this model depends on the conditions established in the bid, particularly if there is a legacy of underspend and the asset condition is problematic.
OECD (2017[25]) looked at how water charges could contribute to current and long-term policy objectives, and deliver results for improving water management. The report set out a case for change, identified challenges to implementation and set out a way forward. A critical finding was that water charges must operate within an effective, enforced regulatory regime for abstractions and discharges; without these in place pollution, wasteful use and misallocation will hinder economic growth and improvements in social welfare. Water charges must be defined and used in conjunction with other policy instruments, such as water allocation regimes and water quality goals. Well-designed charges can influence behaviour, but must be applied within a clear regulatory, monitoring and enforcement regime. Charge payers need to understand what the money is being used for and how they will benefit from the expenditure; setting them at a level which is likely to deliver policy objectives is a challenge in Brazil. A major problem is that the capital investments planned in Brazil will require financial resources far greater than the potential revenue from water charges, which cannot legally be used to fund operations.
A more structured and explicit approach to funding for O&M from different budget streams is needed, as is application of charges to beneficiaries, allocation of sufficient funds for the routine maintenance of infrastructure, and institutional capacity development. In practice, a functioning model for funding and maintaining water infrastructure in the context of more integrated and coordinated public policies could be achieved by:
Clarifying responsibility for O&M, transferring it to state governments, as is not currently the case, and increasing stakeholder involvement.
Applying preventative maintenance so that assets function more reliably and are cheaper in the long run than assets that have not been properly maintained and fail repeatedly or catastrophically. Implementing a programme of routine preventative maintenance for water supply and wastewater assets would help ensure that they can reliably deliver target levels of service to customers.
Conditioning the availability of federal funding for state and municipal priorities on regulatory compliance and the effective operation and maintenance of water infrastructure.
Exploring other mechanisms for funding, including use of the Land Tax as a mechanism for funding some water infrastructure, such as for flood risk management, and the potential for developers to help fund the consequent water impacts. There is a risk that funding water infrastructure is viewed as the responsibility of one government department or ministry. However, the constructed assets may provide a much wider benefit. As such, a more structured and explicit approach to funding the development and maintenance of water infrastructure from different budget streams may be justified. For example, the proportion of the capital and revenue costs of a resource that provides benefit to energy or agriculture could be funded by the relevant ministry. In addition, applying charges to the ultimate beneficiaries can provide a reliable revenue stream. Funding of multi-beneficiary structures would depend on finding a process by which all beneficiaries are able to pay their share. Although agriculture is cited as a sector, which could struggle to afford to pay, it is important to distinguish between large-scale, export-oriented agriculture and subsistence farmers; there may need to be separate charging regimes to reflect affordability. The way in which agricultural subsidies are targeted should be reviewed as part of this process. Municipalities are required to charge a Land Tax, but few do, even though this could be a source of revenue for flood prevention measures or drought supply security.
Applying different tariff structures on a sectoral or geographic (scarcity) basis. In this case, some issues to be taken into account are: the degree of water scarcity; the level of environmental sensitivity and degree of ecosystem stress; the proportion of used water that returned to a location where it could be reused; and effluent quality. It is also key to identify how to safeguard low-income and vulnerable households and other users, such as through cross-subsidies, social tariffs, income support or special rebates or discounts. There is a question of whether, in a period of economic recovery, it is feasible for funds for the sustainable operation and maintenance of water infrastructure to be provided by the central government or whether users should be required to pay according to the benefit they derive in order to fully fund the O&M. Taking the analogy of the central cohesion fund in Europe, to support poorer states, there may be a case for the equivalent in Brazil, in the same way that individual users who cannot afford their bill would be subsidised by others. Cross-subsidies can create greater equity, but also can create tensions – as can the divide between rich and poor.
Agreeing on restriction rules and compensation fund: there is general agreement that Brazil needs to have plans in place before a crisis so that actions, accountabilities and desired outcomes are clear at each pre-determined stage of a drought, mitigation measures are established, and the rules for restricting use have been agreed. The process for doing so should be inclusive and have a formalised governance system. For example, this could include agreeing drought adaptation measures such as rules for restricting certain types of use as a drought progresses, potentially establishing a compensation fund using abstraction charges so that lower priority users are not financially disadvantaged if they are restricted during a drought. The process for doing so should be inclusive and have formalised governance to ensure that funds are ring-fenced and used for the intended purpose.
Setting up incentives and penalties to ensure that infrastructure is properly maintained and operated. Droughts and supply failures have an economic and social cost for both urban citizens and agriculture, but this is difficult to quantify. There is a perception by some that previous droughts have affected some sectors unevenly (agriculture in particular) but there is little culture of preventative planning. Incentives and penalties may be needed.
Revising subsidies is important to understand whether agricultural subsidies are leading to poor water management or unsustainable farming practice, which could have an adverse impact on water resources, such as from the use of fertilisers and biocides causing pollution. Extending the application of the Water Producer Programme across more river basins could be also considered.
Improving transparency about the need for these decisions at the highest levels of government. The availability of funding will always be a constraint on the level of service ambition, but greater transparency on what is being provided could make it easier to move towards levels of charging that support O&M as well as new capital investment.
Box 1.4. Financial support for water infrastructure in the EU
Across the European Union, there is financial support for water infrastructure. Obtaining it requires that charges are in place for the management of water resources. However, in some countries this is not fully developed. Poorer Member States such as Romania and Bulgaria struggle to find the resources to invest in improving or developing infrastructure. Where this is the case, the EU can subsidise the activity to deliver improvements and ensure multi-level policy coherence in order to work towards reducing disparities between Member States with regards to GDP per capita. The so-called ‘cohesion funding’ of around EUR 63 billion can provide up to 85% of investment needed for the country to meet EU standards, such as on wastewater treatment. However, such funding is conditional on, among other criteria, there being coherent river basin management plans in place, which should include plans of action to deliver the identified improvements. There must also be tariffs in place. In other words, for a country to receive financial assistance, it must be seen to be doing as much as it can to achieve resilience within the constraints of its economy.
Source: OECD/ANA (2019-21[23]), “Water Governance Workshops”.
Developing demand management
Demand management techniques such as education and raising awareness of opportunities to save water in homes and businesses are often lower-cost alternatives than developing large infrastructure. However, they require good data on water usage and effective communication with water users. Just as green infrastructure can provide more flexible and cost-effective alternatives to hard engineering solutions (Box 1.5), demand management can provide an alternative to dams and transfers. However, it can be challenging to persuade customers to be more careful with water use if losses from the distribution network are high. Reducing leakage not only makes more water available for supply, but also sends a signal that the supplier is serious about the need for water conservation. Developing demand management as an essential component of sustainable and resilient water supplies includes:
Understanding the actions needed to manage demand in different sectors, such as industry and agriculture, and in the case of domestic water use.
Establishing mechanisms to share resources equitably and efficiently. A good start would be to assess the potential benefits of different demand management techniques and develop a demand management strategy and communication programme to reach all sectors, with a delivery plan to implement the actions with the greatest potential without delay.
Creating a demand management culture where water is regarded as a scarce and valuable resource. Techniques such as the use of tariffs or the introduction of more water-efficient fixtures, fittings and appliances, coupled with education and awareness-raising could all help create this culture. The application of tariffs could depend on the use, water scarcity or environmental impact, and there should be safeguards for those who would struggle to pay for an essential service.
Defining targets for water efficiency to drive action. For this to be effective, however, there needs to be a coherent demand management and communications strategy in place, and agreed mechanisms for equitable allocation and charging.
Assessing the potential benefits of different demand management techniques and developing a demand management strategy and communication programme to reach all sectors, with a delivery plan to implement the actions with greatest potential without delay. This should include a programme of leakage reduction with performance targets, benchmarked against international good practice together with programmes of awareness-raising to improve the efficiency of industrial and agricultural processes. Household demand management could also include education and awareness raising, the distribution of water efficient fixtures and fittings such as low-flow shower heads and cistern displacement devices, water efficiency labelling of appliances, and nudge messaging on bills. Regulatory penalties and incentives could be applied in the most water-scarce areas.
Box 1.5. International experience in moving from supply to demand management
The European Commission has adopted demand management as a priority for water management, including efficiency measures and effective pricing policies. In addition to pricing, various techniques can be used to improve water efficiency in agriculture, such as changing crop patterns and planting dates, and improved irrigation systems. In distribution networks leakage rates are up to 50% of the system input volume, with the potential for significant savings. Another key challenge relates to land use and agricultural practices that threaten water quality and quantity, and a large proportion of the water quality failures across Europe results from poor agricultural practice. In 2012, the European Commission prepared a Blueprint to set out the water policy agenda. The Blueprint demonstrates the potential for preserving water resources and aquatic ecosystems, indicates how water availability could evolve and suggests tools to improve water allocation, such as ecosystem needs and water efficiency targets, to take account of uncertainties about future development, reducing risk and increasing ecosystem resilience. The Blueprint presents policy proposals and recommendations that set the EU water agenda, in particular under the Common Implementation Strategy (CIS) of the Water Framework Directive.
The region of Murcia, in southwest Spain, is informally known as “Europe’s garden”. One out of every ten agro-food products exported by Spain comes from this region; 21.4% of the wealth of the region and 28.4% of total employment depend directly and indirectly on the agri-food sector. This area is very active for agricultural production despite its location in a traditionally water-stressed area. Most water used for irrigation purposes is groundwater (40.9% of total water resources used by the sector) and a significant portion of the surface water that is used originates in the Tajo-Segura transfer. The estimated water deficit to irrigate the entire agricultural area in the region is 143 hm3/year, rising to 303 hm3/year when accounting for the threshold of natural recharge of the aquifer. Without the Tajo-Segura transfer, both deficit figures increase to 276 hm3/year (27.7% of demand) and 436 hm3/year (43.7% of demand) respectively. Authorities and research institutions agree that political will is essential to ensure the sustainability of water resources in an economically viable manner while protecting the environment. In the region, good water culture has shaped the lifestyle and way of working, which has led to many efforts in collecting information and reflecting on sustainable demand management, managing incentives for water users and benefitting from technology to increase efficiency in water resources management.
The US state of California in recent years has endured the longest drought in its history, lasting 376 weeks beginning on 27 December 2011 and ending on 5 March 2019. However, while harvested acreage in California declined during the drought, agricultural revenue remained high due to a range of response strategies. Growers changed crops, improved their irrigation practices, fallowed land, engaged in water transfers, received insurance payments and pumped more groundwater. These strategies helped buffer the state’s agricultural sector from drought-period losses and contributed to far fewer job losses than had been projected.
With the mounting challenges related to climate change, urbanisation and demographic growth, responses may rely on policy coherence across different sectors, such as agriculture and food. For example local production and proximity, and a policy against food waste may have consequences for water quantity and quality. Certainly, impacts on jobs in relation to a different food policy (both internal and external/export) should be considered and offset. The question is how to decouple economic growth from environmental damage when the aim is to allow economic growth in the agricultural sector, which is responsible for 70% of water consumption globally but contributes little financially.
Source: OECD (2021[26]), Water Governance in Peru, https://doi.org/10.1787/568847b5-en.
Engaging stakeholders
Investing in natural infrastructure can contribute to managing pollution risks as well as supporting low flows. However, showcasing the benefits of ecosystem services is important to raising awareness among stakeholders and encouraging them to participate. The use of ecosystem economic valuations as tested tools for analysis is increasing, so that decision makers can weigh the costs and benefits of alternative choices for water infrastructure. Moreover, if ecosystem valuations encourage relevant stakeholders to participate – such as water service providers, rural communities and agricultural users – then better informed and consensus-based decisions can be made. Enhancing stakeholder engagement for inclusive decision-making can be achieved through:
Greater participation by stakeholders in operational and investment decisions, which might imply developing the capability of existing river basin committees. Where there are large numbers of stakeholders in one sector, such as irrigators, they are likely to have more influence on decision-making if they belong to a user association that is able to speak for them. In some areas it may be possible to move towards collaborative, cooperative user groups responsible for funding the operation and maintenance of infrastructure, and the monitoring of compliance with agreed rules. It was recognised that, in some states, if the river basin committees were to fulfil this role, there would be a lack of capacity and technical capability, and these would need to be developed. For dialogue to be effective there would also need to be clear sectoral policies to determine priorities and agree the level of funding and standard of service for each sector.
Stakeholder consultation and engagement on the regulation and management of each scheme, with clearly identified roles and accountabilities. This will help ensure that changes in demand and water availability are managed sustainably and transparently. Over time, experience in the operation of a major water resources scheme will identify ways in which the operation and management can be improved and become more responsive to changes in demand from users or fluctuations in water availability. In addition, as users understand the regulatory framework, compliance should improve and create the potential for lighter touch regulation to take place.
References
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Annex 1.A. Action plan
The tables summarise the main actions presented in Chapter 1.
Annex Table 1.A.1. Governing water infrastructure for greater resilience
Note
← 1. Green infrastructure (GI) is a nature-based solution encompassing all actions that rely on ecosystems and the services they provide to respond to societal challenges such as climate change, food security and disaster risk.