Doing More with Less : Smarter Subsidies for Water Supply and Sanitation

In 2010, the United Nations (UN) declared clean drinking water and sanitation to be human rights. At the time, the UN’s Millennium Development Goals focused on halving the number of people living without access to improved water and sanitation services by 2015. Then, in the fall of 2015, the UN adopted the Sustainable Development Goals (SDGs). These raised the global ambition by aiming to ‘achieve universal and equitable access to safe and affordable drinking water’ and to ‘achieve access to adequate and equitable sanitation and hygiene for all’ by 2030. As of 2015, about 29 percent of the world’s population was without safely managed drinking water, and about 61 percent without access to a safely managed sanitation service (WHO and UNICEF 2017). The World Bank estimates that to realize the SDGs by extending safely managed services to these people will cost dollar 114 billion a year over the period 2015-30 (Hutton and Varughese 2016). In this report, authors explore the question of how scarce public resources can be used most effectively to achieve universal delivery of WSS services. To inform our discussion, we analyze subsidies in the sector, including their magnitude, their efficacy in achieving their policy objectives, and the implications of poor design. The authors then provide guidance to policy makers on how subsidies can be better designed to improve their efficacy and efficiency in attaining their objectives. Finally, authors discuss how to design a subsidy reform package that will have the best chances of success.