Smart Water Regulation


Smart regulation can significantly influence fresh water availability and consumption. As a public good, water is often heavily regulated. Reforming these regulations can reduce consumption in several ways and even result in more water being available for households and industry.

Introducing pricing mechanisms that encourage efficiencies among the big water consumers in agriculture and industry is a starting point. For example, introducing penalties for misuse, a price premium or a progressive pricing scheme whereby the first units of water are cheap followed by rapidly rising prices for greater quantities can incentivize the adoption of efficient water practices. The revenues from such a scheme can be reinvested to create more efficient water infrastructure. If kept in a closed loop, the funds could also help industry and agriculture create further savings and remain competitive in spite of rising water prices. To enable this, measuring and monitoring water use is crucial but can also be supplemented by other initiatives like labelling products to allow consumers to make water-efficient purchases.

Mobilizing private sector investment to renovate and expand water infrastructure is also an option. The OECD estimates that the societal benefits of expanding water infrastructure to meet the Millennium Development Goals can outweigh the costs by a factor of almost nine. This could warrant government action to incentivize private sector investments towards infrastructure. Available tools in this arena include issuing water-related bonds, creating transparent and predictable regulatory environments, and developing a transparent pipeline of investable projects. However, it could also entail establishing private-public partnerships where the private sector delivers most of the capital while the public shoulders most of the risk. Finally, governments (national and local) can also play a significant role in enabling better collaboration between stakeholders competing for the same water resources.

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