Estimating the Magnitude of Water Supply and Sanitation Subsidies
The water supply and sanitation sector remains heavily subsidized around the world. Yet, the accounting of water supply and sanitation subsidies globally has proved challenging due to utility-level data limitations and their often implicit nature....
| Main Authors: | , , , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/879091603290352424/Estimating-the-Magnitude-of-Water-Supply-and-Sanitation-Subsidies http://hdl.handle.net/10986/34656 |
| Summary: | The water supply and sanitation sector
remains heavily subsidized around the world. Yet, the
accounting of water supply and sanitation subsidies globally
has proved challenging due to utility-level data limitations
and their often implicit nature. This paper develops a
methodology to estimate water supply and sanitation
subsidies that is adaptable to data scarce environments,
while accounting for differences among service providers
such as population served (to account for economies of
scale), coverage of water and sanitation services
individually, and their level of operational efficiency in
terms of water losses and staffing. This methodology is
based on Chile’s empresa modelo (model firm) approach to
cost-reflective tariff estimation and uses utility-level
data from the World Bank's International Benchmarking
Network for Water and Sanitation Utilities database. The
results suggest that the cost of subsidies associated with
the operations, maintenance, and major repair and
replacement of existing water supply and sanitation
infrastructure in much of the world (excluding, notably,
China and India) is an estimated $289 billion to $353
billion per year, or 0.46 to 0.56 percent of the
countries' combined gross domestic product. This figure
rises, shockingly, to 1.59 to 1.95 percent if only low- and
middle-income economies are considered, an amount largely
due to the capital subsidies captured in the estimation.
Subsidies of operating costs account for approximately 22
percent of the total subsidy amount in the full sample and
for low-income economies separately. Annual subsidy amounts
by region range from 0.05 to 2.40 percent of gross domestic
product, and low-income economies are generally at the high
end of this range. The estimations do not include capital
expenditure for infrastructure expansion -- which tends to
be fully subsidized -- or environmental costs. Therefore,
the actual global magnitude of networked water supply and
sanitation subsidies is much greater than the estimation. |
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