Catalyst #2: Introduce Water Pricing

Full and fair water pricing, the second catalyst for promoting sustainable development, is an essential part of good water governance. Pricing that reflects the full cost of supplying fresh water and treating wastewater leads to improvements in the efficiency of services. Full cost pricing also creates additional resources for investment, encourages demand management and promotes pollution control and prevention.^[17]

(By the way, here's an interesting historical footnote: the Romans funded their sophisticated water system in part by charging industrial users for the cost of the water they used. )^[18]

Wherever it has been implemented, full water pricing dramatically improves the efficient use of water. For industry in particular, full pricing is a vital component in creating sustainable growth.

Industry uses water in two basic ways - the so-called "inflow" and "circulating" systems. In the "inflow" system, water is extracted at the source, used and then discharged into water systems, often without being treated. In the "circulating" system, the water is used, cooled, treated and reused. The circulating method uses much less fresh water, and in nearly every case, it creates much less pollution.^[19] But without full water pricing, it is much cheaper to use the "inflow" system - industry is actually rewarded financially for polluting the local water supply.

As the world water vision notes, it is a paradox that the poor suffer most from water pricing that does not reflect its true cost. But this paradox is also true. Lowering the cost of water benefits those with easy access to it - the wealthy, and many industrial and agricultural enterprises - while leaving insufficient resources for system expansion and operation. The poor are always at the end of the line.^[20]

The combination of full water pricing and involvement by the private sector can make the difference, as the residents of Buenos Aires have discovered.

When the company Lyonnais Des Eaux began managing the city's water supply in 1993, the water bill for some hotels was identical to that of a studio apartment.

Lyonnais began charging for actual water use while cutting nonpayment rates from 20 percent to 2 percent, all while investing tens of millions of dollars in the water infrastructure.

Prices immediately dropped an average of 27 percent, and much more for the poor. And the company has added 1.6 million new customers, extending the service to many of the poorest quarters of the city.^[21]

In sum, full and fair water pricing encourages infrastructure investments and private sector involvement, reduces pollution and encourages the use of water-saving practices and technology.^[22] Every organization with influence over the process should seek to introduce water pricing at the earliest opportunity.