Implementing Redistributive Financial Mechanisms in River Basin Management
It is common wisdom that the water crisis is not a resource crisis but rather a crisis of governance (e.g. UN World Water Development Report 2). Improving water governance and achieving the sustainable management of water resources, which will maintain water-related environmental functions and services for the benefits of society, requires both additional effort and additional financial resources. Similarly, a river basin’s resilience to climate change can be enhanced with improved planning and management, as well as with long-term investments, but these measures require significant funding.
This report addresses the design and the implementation of two financial instruments which can help increase the financial resources available for water resources management: "water charges" and "payments for ecosystem services". Both instruments involve a greater participation of water users or beneficiaries in covering the costs associated with the provision of the water resources management service. The report is available for download in English and Spanish.
A key characteristic of these financing instruments is the possibility of their acting as (economic) incentives for actors' behaviour change. They were selected to be presented in this report thanks to this double function: helping fund water management measures that increase resilience to climate change, and increasing the system’s resilience through the instruments’ influence on actors' behaviour.
This guidance document provides an introduction to these two instruments, to then present them at a level of detail that can assist water managers aiming to implement them. It draws on a wide range of international experiences on different continents, and aims to support the activities of river basin organisations in establishing or reforming these financial instruments. The guidance presents principles, practical approaches and examples. The international examples provided are considered to be good practice, so that the guidance can be used both as a toolbox of ideas and as a source of benchmarks.
A partner document, the OECD's 'Review of International Policy Experience with Economic Instruments for Water Management', complements this guidance with a discussion of the economic principles behind these instruments.