According to a new study conducted by water market research firm Global Water Intelligence, water tariffs will need to rise by 5.9% a year to achieve the Sustainable Development Goals.
The report states that the 5.9% increases in water tariffs per annum will enable generation of $449 billion of annual investments required to achieve the Sustainable Development Goal on water and sanitation by 2030.
The report Financing Water to 2030 further states that the 5.9% annual increase in water tariffs will raise the global average combined tariff from $2.08 /m3 to $4.38 /m3 in 2030.
Global Water Intelligence says the increase would also help utilities to reduce reliance on grants but allow them to address ageing infrastructure and rising water demand due to population growth and climate change.
Southern Asia, with average water and wastewater tariffs of $0.14/m3 will require increased tariffs by 15.2% every year to generate enough investments required by 2030 for SDG6.
The Global Water Intelligence (GWI) forecasts the global private finance for water infrastructure to increase from $3 billion during 2013/2017 to $35 billion a year in the next 12 years. The private sector is expected to cover 7% of the global infrastructure investment needs by 2030.
Government grants on water infrastructure are expected to decrease from 31% to 18% of annual investment needs, as governments continue to move away from providing grants to providing utilities with loans and encouraging private-partnerships.
Regulation encouraging private financing of water projects has been introduced by governments including Japan, Brazil, Peru, Indonesia, and Vietnam.
In the US, the government has announced $1.5 trillion infrastructure investment plan, which includes $200 million from the federal government and the rest from private partnerships.
GWI also found that utility consolidation and government reforms aimed at improving the bankability of projects will be crucial in order to attract the infrastructure finance that utilities need to achieve the SDG on water and sanitation.
Christopher Gasson, publisher at GWI and co-author of the report commented, “we are at an inflection point in the way water is financed. For the past two decades there hasn’t been much change in the way utility assets are paid for. Going forward, there will be. We will see the utility sector steadily building its financial independence and the corollary of all this is that tariffs will have to rise.”