1 Evaluation of the costs and benefits of water and sanitation improvements at the global level Executive summary The United Nations Millennium Declaration confirmed the central role of water and sanitation in sustainable development and the major contribution expanded access to safe drinking water and adequate sanitation can make to poverty alleviation. Poverty reduction strategies dominate the current development agenda. From this perspective, the health and socio-economic benefits of improved access to safe water and adequate sanitation are the most compelling arguments to support resource allocations towards this goal. The benefits and the costs of increasing access to improved water and sanitation vary considerably depending on the type of technology selected. For informed and rational decision-making it is, therefore, crucial to carry out a sound economic evaluation of the various options available in different settings. Decision makers will prefer to invest in options for which the value of total benefits exceeds total costs. In response to this need, the World Health Organization commissioned an economic evaluation from the Swiss Tropical Institute. In this analysis which was recently completed, the health benefits, the additional benefits, and the costs of a range of interventions to improve access to safe water supply and sanitation services, were assessed for several WHO regions and at the global level. The time horizon chosen in this analysis, for all interventions, is 2015. Two of the interventions selected are related to the target in MDG 7 and the addition made at WSSD in Johannesburg: halving the proportion of people without sustainable access to improved water supply; halving the proportion of people without sustainable access to both improved water supply and improved sanitation. The results of this analysis point out that achieving the target for both water supply and sanitation would bring economic benefits; US$1 invested would give an economic return of between US$3 and US$34, depending on the region. Achieving this target would require an estimated additional investment of around US$11.3 billion per year over and above current investments. The benefits would include an average global reduction of diarrhoeal episodes of 10% and a total annual economic benefit of US$84 billion. For most interventions, careful consideration of all benefits and all costs of water and sanitation projects will tip the balance in favour of positive investment decisions. Funding estimates of safe water supply and sanitation facilities Total funding requirements for water and sanitation as a whole are difficult to estimate and may vary widely depending on the methodology used and assumptions made. Any calculation to this end will suffer from many uncertainties and substantial data gaps. In this analysis, the total global costs per year were estimated to achieve a selected number of targets. Costs were calculated as the sum of all resources required to put in place and maintain the interventions. They include investment costs for planning, construction of infrastructure and recurrent costs for operation and maintenance, monitoring and regulation. Total costs were annualized to obtain a final cost per intervention per year, based on the length of life of the specific technology used and a discount rate of 3%.2The costs of providing access to safe water and adequate sanitation will vary from high when high standards are applied and sophisticated technology is used, to substantially lower when simple technology, that demands low maintenance, is used. In this analysis, 'improved' water supply and sanitation refer to low technology improvements. ‘Improved’ water supply involves better access and protected water sources (e.g. stand post, borehole, protected spring or well, or collected rain water). Improvement implies a significant increased probability that the water is safe, and that it is more accessible, and some measures are taken to protect the water source from contamination. ‘Improved’ sanitation involves better access and safer disposal of excreta (septic tank, simple pit latrine or ventilated improved pit-latrine). This analysis came out with the following findings for five intervention options: 1. Halving the proportion of people without sustainable access to improved water supply, would cost around US$1.78 billion per year. 2. Halving the proportion of people without sustainable access to both improved water supply and improved sanitation would cost around US$11.3 billion annually. Achieving this target represents an important cost increase compared to the first one, explained by: - higher per capita cost of improved sanitation compared to per capita cost of improved water supply services (basic water supply services are mainly public and shared by a high number of persons as opposed to basic sanitation options) and, - in absolute terms, the number of persons who need access to improved sanitation to meet the MDG target is higher than the number of persons needing access to improved water supply. 3. Access for all to improved water and sanitation services would cost around US$22.6 billion per year. 4. Household water treatment using chlorine and safe storage would cost an additional US$2 billion on top of improved water and sanitation costs, taking the global cost to US$24.6 billion. 5. Access for all to regulated in-house piped water supply with quality monitoring and in-house sewerage connection with partial treatment of sewage would require a total investment of US$136.5 billion per year. Wide-ranging estimates of the costs of meeting the MDG water and sanitation target have emerged. A report from the French Water Academy (2004) presents the additional investments needed to meet the MDG target on water and sanitation, to be approximately US$10 billion per year. The World Panel on Financing Water Infrastructure, chaired by Michel Camdessus (2003), mentioned an extra annual investment cost of also US$10 billion, using the most basic standards of service and technology, to meet this target. But providing full water and sewerage connections, with primary wastewater treatment to the urban population would raise the annual cost of meeting the 2015 goal to US$49 billion. According to the Water Supply and Sanitation Collaborative Council, investing in the most basic standards of service and technology to meet the 2015 target, would require US$10
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