Governance as infrastructure for water security
Much of Aither’s work program in Australia and overseas relates to how improved governance and decision making can enhance water security and increase the value and sustainability of water infrastructure. In the 10 years since our founding, Aither’s experience and growing global footprint informs our perspective on these issues.
In a recent keynote address to the International Conference on Water Resources Management in Dubai, Will Fargher discussed the increasing consensus on:
- the water security crisis
- the challenges we face in addressing water security, and
- the importance of focusing on water governance and infrastructure in response.
The real challenge for government and business leaders is how to respond. Australia’s practical experience provides insights into where efforts can best be directed.
Water insecurity threatens the viability of economies and societies across the planet
Surface and groundwater supplies in many parts of the world have declined precipitously and are on the verge of collapse, and water crises are consistently cited by government and business leaders as a top global risk in terms of impact (WPG 2021; CDP 2022; WEF 2021). The Economist magazine recently observed that water will increasingly feature in geopolitical conflicts.
In the Middle East and North Africa, water scarcity is already a huge problem — the region is home to 12 of the world’s 17 most “water stressed countries” according to the World Resources Institute. The World Bank estimates that water scarcity will cost Middle Eastern nations between 6 per cent and 14 per cent of their GDP by 2050, due to water-related impacts on agriculture, health, and incomes.
Water insecurity is both acute and chronic. At different times, a lack of water availability has traumatic impacts for people and livelihoods; and ongoing insecurity impacts on the underlying quality of life for populations and the viability of economies.
Dwindling supply and growing demand will make this crisis increasingly acute across the globe.
On the demand side, there is growing competition for available water. Agriculture will continue to account for the bulk of demand, and the bulk of growth in demand out to 2030. Population growth, particularly in cities, is placing increasing pressure on already stretched and ageing water networks, while patterns in demand are shifting in reaction to climate change.
On the supply side there is increasing uncertainty regarding the frequency and severity of both rainfall events and droughts – impacting heavily on climate-dependent supply. Pollution and environmental degradation are reducing water availability due to poor water quality, a and shortfall in infrastructure means disconnects between supply and demand.
By 2030, 45 cities (totalling almost half a billion people) will experience extremely high water stress, and by 2050, global water demand is expected to increase by 20 to 30 per cent above the current level of water use. This will have serious repercussions for economic development, public health and social unrest, and have a multiplier effect on phenomena like mass migration and political insecurity.
The challenges are well recognised – many of these facts and figures will be familiar. It is for good reason that Sustainable Development Goal (SDG) 6 focuses on water security; that the UN initiated the Decade of Action on Water in 2018; and that a large majority of countries see water management as a priority in their climate adaptation plans (The Conversation, 2022).
Despite these intentions, progress is very much lagging. The United Nations’ Summary Report on progress states that even before COVID struck, the world was off track to meet SDG 6. Alarmingly, the current rates of progress need to quadruple in order to reach the global target of universal access by 2030, with no SDG region currently on track for this goal.
Why addressing water security is so challenging
Many reasons are given to explain the poor progress being made towards addressing water security, but our global experience suggests the problem lies in:
- The lack of agreed water security definitions and objectives, and clearly articulated strategies in response.
- Fragmented institutions and a complexity of players, which obscures lines of decision making, roles and responsibilities and accountability.
- Inadequate cost recovery and incentives, which impede attempts to better attract and direct capital, improve efficiency, improve coverage and service delivery, and achieve a financially viable sector.
These challenges are – at their heart – governance problems.
By water governance we mean laws, regulations, policies, institutions and processes, pricing and markets introduced in support of better decisions about water management and use.
Many of the problems we are facing are created by a lack of goal setting; poorly defined roles and responsibilities; the inability to prioritise action; weak monitoring for performance and weak accountability for results; and inadequate frameworks to drive efficient planning, investment, and use.
We know we need water infrastructure, but infrastructure without governance reform will fail to achieve genuine water security.
Indeed, poor governance was identified in a recent survey of global water sector leaders as the primary reason for them considering that tackling water insecurity was either challenging or impossible. So, how do we act to improve both governance and infrastructure. And how do efforts in these areas relate?
There are a growing number of examples of effective responses, and insights to be gained from practical experience.
Australia’s experience in responding to scarcity with improved governance and infrastructure
Among these experiences, Australia’s response to scarcity through governance reforms and improvements to infrastructure investment and use is particularly relevant to other arid countries.
While events like the Millennium Drought remain in our memory, Australia has long faced the drivers of scarcity that are increasingly presenting themselves across the globe. Our naturally dry and variable climate is becoming more so, with extremes of flood and drought occurring against a backdrop of increasing water scarcity.
We also face challenges balancing growing and competing demands from agriculture, urban growth, and the environment.
In response, wholesale reforms of Australia’s approach to water governance and infrastructure have taken place over the last two decades. Australia has:
- sought to define clear objectives for managing water sustainably and efficiently
- overhauled water planning, pricing, entitlement and allocation frameworks, utility ownership, and regulation – as well as introducing water trading
- made major investments in infrastructure to secure supply – across the full set of water sources: water recycling, managed aquifer recharge, stormwater harvesting, and efficiency programs for rural and urban use, new dams (including smaller, targeted dam developments)
- introduced transparent performance monitoring and reporting frameworks at multiple scales.
The net effect has been positive, enhancing water security through:
- more sustainable water use – including enabling more efficient and high value allocation of available supply between different users and uses
- driving efficient service delivery and improved cost recovery through utility and regulatory reform
- providing more certainty for investors and operators
- making increasingly efficient investments through better economic appraisal, and
- improving publicly available information on performance and transparency.
With this snapshot of Australia’s journey in mind, three lessons stand out.
Lesson 1. Have clear objectives, a clear pathway, and a commitment to track and report on progress
There may be general agreement between stakeholders on issues, but we often see vastly different interpretations of the true nature of the problem. These differences can amplify policy incoherence, fragmentation, and uncertainty, and undermine efforts to respond.
From the 1990s onwards, Australia benefitted immensely from an explicit focus on economic efficiency and environmental sustainability. These objectives anchored reforms and guided the water sector.
Enshrining these objectives in national reform agreements was instrumental in bringing stakeholders into the debate, achieving consensus on the detail of reforms, and maintaining commitment to long term improvements.
Effective implementation also requires actionable plans and measuring and reporting on performance. Well-developed frameworks for this are required at the organisational and program level across the water sector.
Lesson 2. Recognise that improved governance and improved infrastructure are interdependent
Where we see success, it can often be traced back to decision makers who are willing and able to accept and act on advice about the interdependency between good governance and infrastructure.
Australia’s experience shows the role of good governance in supporting economically efficient and financially sustainable water outcomes. From splitting policy and service delivery functions to corporatising utilities and introducing independent economic regulation, better governance has changed Australia’s approach to infrastructure planning and delivery. It has allowed for the recovery of more of the costs of infrastructure in urban and rural settings, for more efficient and financially sustainable utilities, and for greater transparency and public accountability.
Governance reform can be hard fought, incremental, and seldom achieved in a vacuum. Infrastructure investments can be strategically linked to improvements in governance and policy reforms and it’s imperative we leverage incentives available, including approaching funding in smarter ways. For example, using government infrastructure funding to influence structural adjustment outcomes in rural areas; or improved water services to demonstrate the case for tariff increases.
A cycle of funding and reform ‘commitment and reward’ has been central to achieving incremental progress in Australia, but to be effective this commitment must be maintained.
Lesson 3. Build the capability for next generation water management
Improved economics, policy and strategy is a critical part of responding to water scarcity, and for the water sector this requires learning new languages and approaches. Water management is no longer the exclusive domain of engineers, and the future lies in committing resources over the long term to build the necessary capability and capacity to advance new agendas.
One of the major changes Aither has seen in the last two decades is the practical incorporation of economics in water sector decision making. Economic appraisal and other decision support methods have proved essential in better infrastructure and utility planning, and investment decisions. Without these methods, political or crisis-driven decisions can easily dominate.
Business cases that address the distribution of costs and benefits, and consider long-term financial and environmental sustainability, support better due diligence and transparency on major expenditure. This can make a real difference to decision-making processes and outcomes. However, these approaches are relatively new. Globally there’s still a low level of literacy in water agencies when it comes to the use of these tools, and adherence to these best practice approaches is by no means universal.
Government can support the adoption of these approaches, including by introducing requirements and standards for cost-benefit analysis and business case development. Academic institutions can offer programs which help integrate these skills. And utilities can adopt these decision support methods in their work. Doing so will raise the quality of decisions by raising the quality of inputs to decision-making.
Governance is an integral part of the infrastructure to deliver water security
Around the world, our response to water scarcity will define the success of economies and societies for future generations.
The complexity and enormity of the challenge can seem overwhelming – masking obvious entry points and preventing practical steps to effect change. It is clear, however, that good governance must be at the core of our response. Good governance is an essential part of the infrastructure we need to deliver water security.
Good governance shapes any decision to build physical infrastructure, it guides the nature and timing of any development, and it supports the effectiveness and extends the life of the physical assets. This governance itself requires planning, design, integration across many disciplines, effective operation and maintenance, and investment in capability to deliver.
It is time to recognise the role of good governance in realising the enormous economic, social and environmental upside of improved water infrastructure investment and use. Doing so will help see water security become a force multiplier for driving investment and growth.