Water Rates, Subsidies Need Changes to Ensure Safe Supplies

(Bloomberg) — Governments must reform policies on water
and utilities should begin charging higher rates to reduce waste
and guarantee safe supplies, according to the International
Monetary Fund.

Realigning incentives and pricing, and better managing
current supplies would benefit millions, the IMF said in a
report Monday. Climate change is “likely” to stress global
supplies, adding urgency to calls for change, the report found.

“Since water use is expected to continue to rise with
population and income growth, and freshwater resources cannot be
easily increased, these challenges will only intensify,”
Kalpana Kochhar, deputy director of the IMF’s Asia and Pacific
Department, said on a conference call Friday.

While millions lack access to clean drinking water, public
utilities in many countries continue to underprice the life-sustaining fluid. That creates waste and fails to return enough
capital to maintain delivery systems, according to the report.
Public utilities provided $456 billion in water subsidies in
2012, and the incentives disproportionately benefited upper-income groups.

“Getting incentives right, notably by reforming water
pricing, can help rationalize water use, promote needed
investment, and protect the poor,” according to the report.

Water management affects economic stability, growth and
poor and vulnerable groups, the IMF said. The group staked out a
role in water policy, offering to help find and replace
ineffective subsidies with long-term investments in areas
including infrastructure.

“Water pricing reforms should be complemented by a policy
that rationalizes water use in areas such as agriculture, trade
and energy, while achieved gains could be redirected to work
affecting the poor,” Kochhar said.

To contact the reporters on this story:
Justin Doom in New York at
Louise Downing in London at

To contact the editors responsible for this story:
Randall Hackley at
Jim Efstathiou Jr., Will Wade

About BloombergNEF

BloombergNEF (BNEF) is a strategic research provider covering global commodity markets and the disruptive technologies driving the transition to a low-carbon economy. Our expert coverage assesses pathways for the power, transport, industry, buildings and agriculture sectors to adapt to the energy transition. We help commodity trading, corporate strategy, finance and policy professionals navigate change and generate opportunities.
Sign up for our free monthly newsletter →

Want to learn how we help our clients put it all together? Contact us