This chapter presents a Roadmap to transition to the Circular Water Economy in Latin America, addressing governance gaps identified through the OECD/IDB Survey analysis in Chapter 2. The roadmap focuses on three key governance areas: Regulatory and Policy Frameworks, to establish clear and supportive legal structures; Finance and Economic Tools for innovative business models, to allocate funds more efficiently, minimise needs and generate revenues; and Stakeholder Engagement and Capacity Building, to ensure public awareness and acceptance, while equipping professionals with the necessary knowledge while strengthening transparency. Within these key areas, the Roadmap proposes 13 concrete actions to enhance water efficiency, promote resource recovery, and build resilience, offering a practical pathway to circular water management in the region.
The Circular Water Economy in Latin America
Abstract
This report proposes a Roadmap to transition to the Circular Water Economy in Latin America that addresses governance gaps identified through the results of the OECD/IDB Survey laid out in Chapter 2 (Figure 3.1). The roadmap focuses on three key governance areas: Regulatory and Policy Frameworks, to establish clear and supportive legal structures; Finance and Economic Tools for innovative business models, to allocate funds more efficiently, minimise needs and generate revenues; and Stakeholder Engagement and Capacity Building, to ensure public awareness and acceptance, while equipping professionals with the necessary knowledge and simultaneously strengthening transparency. Within these key areas, the Roadmap proposes 13 concrete actions to enhance water efficiency, promote resource recovery, and build resilience, offering a practical pathway to circular water management in the region.
Source: Author’s elaboration
Action 1: Update and streamline regulations to explicitly embed circular economy principles into existing water policies
Latin American countries need to identify regulatory gaps and update and streamline their water management regulations to explicitly integrate circular economy principles. Concrete mechanisms to set the regulatory foundations of the circular water economy include establishing clear quality standards for the reuse and recycling of water and materials, creating market structures for the trading of energy and by-products recovered from treatment plants, and incorporating circular economy targets into national and regional water policies. In Europe, a set of regulations and policies, including a dedicated circular economy policy and various water-related policies spanning urban wastewater management, water reuse, sewage sludge management, and renewable energy, exemplifies a holistic approach (Box 3.1).
The European Commission has defined regulations related to water and wastewater reuse and recovery of materials and energy, emphasising the importance of circular economy principles and climate goals in the water sector. These align with the 2020 European Green Deal aiming for a carbon neutral European Union by 2050. In 2020, the Circular Economy Action Plan, a key component of the European Green Deal's acceleration framework, materialised European efforts to transition to a circular economy. The Plan focuses on sectors that consume the most resources and where circularity potential is high. Specifically, the plan identifies 7 value chains, including "food, water, and nutrients". It requires circular approaches to water reuse in agriculture through the Water Reuse Regulation, the development of an Integrated Nutrient Management Plan, as well as the review of directives on wastewater treatment and sewage sludge. As a result of this plan, the following outcomes were achieved:
In November 2024, the European Council adopted the new EU Directive on Urban Wastewater Treatment aimed at enhancing water management and achieving a circular economy. The revised directive introduces stricter targets to expand the scope of wastewater treatment, address more pollutants, and advance energy neutrality. It lowers the threshold for mandatory wastewater collection and treatment to include agglomerations with populations of 1 000 or more, down from 2 000, ensuring that all domestic wastewater in these areas is connected to treatment systems by 2035. Secondary treatment to remove biodegradable organic matter will also be required by 2035, with exemptions for member states requiring significant investments or those with recent compliance efforts. By 2039, urban wastewater treatment plants managing loads of 150 000 or more will need to implement tertiary treatment to remove nitrogen and phosphorus, with quaternary treatment for micropollutants mandated by 2045. To address micropollutants, producers of pharmaceuticals and cosmetics will cover at least 80% of additional treatment costs under the “polluter pays” principle. Additionally, the directive sets a 2045 target for energy neutrality, requiring large treatment plants to generate renewable energy to offset emissions and support EU climate goals.
In 2023, the European Water Reuse Regulation set out minimum water quality requirements for the safe reuse of treated urban wastewaters in agricultural irrigation; harmonised minimum monitoring requirements, notably the frequency of monitoring for each water quality parameter, and validation monitoring requirements; risk management provisions to assess and address potential additional health risks to human and animals; and possible environmental risks; permitting requirements for producing and supplying reclaimed water; transparency, whereby key information about any water reuse project is made available to the public. Although this new resolution was welcomed by Member States, some national regulation still imped the further development of wastewater reuse in some EU countries, with national standards being more stringent and restrictive than EU ones.
In 2023, an evaluation of the 1986 Sewage Sludge Directive was conducted as part of the European Circular Economy Action Plan, which showed that the levels of heavy metals in sludge have significantly decreased and that a lot of Member States go beyond the Directive standards. Nevertheless, the Directive is still considered relevant, although more could be done regarding the list of contaminants and their risk to the environment and health.
The European Commission is also developing an Integrated Nutrient Management Action Plan aiming at helping to deliver on the EU Green Deal's targets to reduce nutrient losses by at least 50% and fertiliser use by at least 20% by 2030 in Europe.
Finally, sewage treatment plant, gas and biogas are identified in the revised Renewable Energy Directive 2023/2413 as energy from renewable sources. As such, their production and use are promoted by the new Directive. The revised directive sets an ambitious renewable energy target of at least 42.5% binding at the EU level by 2030, with a goal of reaching 45%. Furthermore, it aims to enhance energy and nutrient recovery in wastewater treatment plants, recognising their significant energy consumption, estimated at 24 747 GWh per year, equivalent to about 0.8% of total EU electricity generation. Notably, small plants account for 42% of energy consumption in wastewater treatment, while large plants utilise 58%. Energy costs can represent a substantial portion, ranging from 25% to 56% of a wastewater treatment plant’s operation and maintenance expenses.
Source: European Commission (2022), Nutrients – action plan for better management, https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12899-Nutrients-action-plan-for-better-management/public-consultation_en; European Commission (2023), Renewable Energy Directive, https://energy.ec.europa.eu/topics/renewable-energy/renewable-energy-directive-targets-and-rules/renewable-energy-directive_en; Joint Research Centre (2019), Water Energy Nexus in Europe; Council of the European Union (2024), Urban wastewater: Council adopts new rules for more efficient treatment, https://www.consilium.europa.eu/en/press/press-releases/2024/11/05/urban-wastewater-council-adopts-new-rules-for-more-efficient-treatment/.
Action 2: Integrate water-related circular criteria into public procurement for by-products
Including water reduction, reusing and recycling, as well as energy and materials recovery requirements in public procurement, can help Latin American countries create a market for circular water economy outputs (clean water, energy and by-products), encourage the adoption of circular business models, and promote the incorporation of secondary materials into material flows. For instance, public procurement can incorporate criteria to prioritise compost made from sewage sludge to enrich soil health in public parks, or investing in biogas for powering public transportation fleets, thus reducing GHG emissions. In 2017, the "Circular Public Procurement in the Nordic Countries" report conducted by the Nordic Council of Ministers, explored the potential for promoting the circular economy and fostering new business opportunities through public procurement and investments, with a particular focus on wastewater treatment. In Finland, the region of Helsinki and the cities of Porvoo and Vaasa promote the recovery of materials and energy from the wastewater treatment through public procurement (Box 3.2).
In 2014, the City of Porvoo initiated a procurement process to improve the recycling and reuse of phosphorus and nitrogen in biowaste and sewage sludge treatment. This was the first time in Finland that nutrient recycling was integrated into a procurement process. The procurement involved both waterworks and biowaste management facilities. Criteria included a minimum of 80% of the nitrogen delivered to the treatment plant to be used as a fertiliser product or industry chemical, and only 20% may end up in the local wastewater treatment plant.
In 2014, the City of Vaasa embarked on a procurement initiative for a fleet of 12 buses designed to operate solely on biogas derived from organic waste and wastewater sludge processed at local treatment facilities. The contract incorporated performance clauses, offering a rebate to the supplier for exceeding estimated annual consumption efficiency and a refund for underperformance, thus incentivising sustained and dependable service. This procurement not only displaces 280 000 litters of diesel annually but also establishes a circular pathway for local waste by-products while facilitating the expansion of infrastructure to accommodate biogas-fuelled vehicles, benefiting an additional 1 000 cars.
In 2016, the Region of Helsinki carried out a procurement process to acquire and pilot test 4–5 new wastewater treatment technologies. The objective was to assess and evaluate innovative methods for treating and utilising digested sewage sludge and other biomass at the waste treatment centre in Espoo, Finland. Via a market inquiry, proposals were sought outlining the end product, market potential, and operational costs, with the flexibility for value chain collaboration among multiple parties. The final procurement was implemented between 2017 and 2018. Additionally, the City of Helsinki currently offers opportunities for its suppliers to develop and pilot products and services in the area of circular economy on the Testbed Helsinki website which is intended for companies and research, development and innovation operators.
Source: Nordic Council of Ministers (2017) Circular Public Procurement in the Nordic Countries, available at https://norden.diva-portal.org/smash/get/diva2:1092366/FULLTEXT01.pdf; European Union (2017) Public procurement for a circular economy. Good practice and guidance; City of Helsinki (n.d.) Testbed Helsinki, available at https://testbed.hel.fi/
Action 3: Encourage experimentation through regulatory innovation
Latin American countries can develop regulatory frameworks that promote innovation within the circular water economy, encouraging controlled and safe experimentation under clear and safe quality parameters, thereby mitigating health and environmental risks. Promoting regulatory innovation is crucial for developing more cost-effective and resource-efficient solutions, which can significantly reduce water use and treatment costs in the long term. Regulatory sandboxes can facilitate the development of experimental pilot projects on a small scale while managing risks effectively. If successful, the pilot projects can later be scaled up with legislative and regulatory reforms that have already been tried and tested (Box 3.3). This can reduce the time and cost of bringing innovative ideas to market while ensuring safeguards to protect consumers are in place to meet water quality and health standards. However, the short-term implementation of these temporary regulatory sandboxes can compromise the impetus to invest due to the lack of sufficient time to recover capital. For example, France established an authorisation procedure in 2022 for new uses of treated wastewater, offering a regulatory sandbox for experimenting with innovative wastewater reuse within a capped time limit of 5 years.
Regulatory sandboxes are policy instruments that facilitate small-scale, live testing of innovations in a controlled market-like environment. Sandboxes are typically employed in cases where the emerging technology is potentially disruptive. It allows the testing of innovative technologies and business models that are not fully compliant with current rules and regulations, by providing temporary suspension of certain mandatory provisions or requirements for those who participate in the sandbox. This means that participants are not required to follow all the regulatory requirements that would normally apply outside the sandbox in the regulated market. In return for this dispensation, participants are required to incorporate appropriate safeguards to insulate the market from risk from their innovative business. This gives participants a safe space to experiment without running the risk of being punished for noncompliance while reducing liability concerns among regulators. Regulatory sandboxes tend to be delivered with the strong presence of a regulator, who also provides monitoring and supervision. Another key aspect of regulatory sandboxes is the establishment of feedback mechanisms that allow regulators to gather evidence of potential needs for change in the existing regulatory framework, to facilitate the creation of more products or business models. As such, regulatory sandboxes entail an “interest in regulatory discovery”.
Sources: Federal Ministry of Economic Affairs and Energy, Germany (2019), Regulatory sandboxes: experimental areas for new energy technologies, https://www.bmwk-energiewende.de/EWD/Redaktion/EN/Newsletter/2019/07/Meldung/topthema.html; Zetzsche et al. (2017), From FinTech to TechFin: The Regulatory Challenges of Data-Driven Finance, doi: 10.2139/ssrn.2959925.
Action 4: Adopt a systems approach to the circular water economy
Latin American countries have an opportunity to significantly improve the coordination of policies across the environment, water and sanitation, agriculture, energy, urban and regional development, and industry sectors by establishing integrated coordination mechanisms that address common objectives and avoid conflicts. One way to better coordinate policies is by establishing coordination mechanisms linking these policy areas. Looking beyond the water sector, there are several international examples of coordination mechanisms to boost broad circular economy initiatives (e.g. in Melbourne, Australia; Oulu, Finland; and Toronto, Canada) (OECD, 2020[1]). The city of Toronto, for instance, created a Cross-Divisional Circular Economy Working Group comprised of 11 divisions1, including the Toronto Water as the municipal division in charge on water and sanitation. Its mandate is to provide informed input, ideas, and feedback during the development of the city’s circular economy initiatives. Convening these cross-divisional groups helps the city identify sector-related trade-offs as they move forward with circular economy implementation.
Action 5: Assess and reduce investment needs
Latin American countries need to take a strategic approach to assessing and reducing investment needs in the water sector. This includes prioritising cost-effective measures such as reducing NRW – addressing water leakages, outdated or inaccurate meters, and excessive water pressure – before resorting to costly infrastructure expansion. Many utilities in low- and middle-income countries lose a third of the water they extract, treat, and distribute, resulting in significant financial and operational inefficiencies. By optimising existing water systems and aligning with circular economy principles, countries can achieve better returns on investment than by simply expanding supply. Effective NRW management can help delay or even eliminate the need for expensive projects like desalination plants, ensuring that resources are directed toward sustainable and high-impact investments.
Successful examples demonstrate the financial and operational benefits of such an approach. In New Providence, Bahamas, the Bahamas Water and Sewerage Corporation implemented a Performance-Based Contract2, leading to significant reductions in NRW and improved financial performance (IDB, 2018[2]). Similarly, Israel has made NRW reduction a core component of its water management strategy, achieving losses below 5% in some areas through rigorous measurement and intervention (EPA, 2023[3]).
Action 6: Apply a life-cycle approach to investment decisions
Implementing a life-cycle approach (LCA) to inform decision-making ensures data-driven investments, offering both immediate and long-term returns and catalysing the transition to the circular water economy. In particular, adopting a LCA approach to wastewater treatment plant investments can significantly reduce operating and maintenance (O&M) costs while unlocking economic opportunities and reducing environmental impacts. This approach entails assessing the long-term benefits, environmental and innovation externalities, and revenue potential of wastewater treatment infrastructure by incorporating circular water economy principles, such as water reuse and by-product recovery. Traditional wastewater treatment plants, designed primarily to meet discharge standards, can evolve into self-sustaining systems by integrating energy recovery, nutrient extraction, and water recycling technologies. By analysing energy potential and payback periods under scenarios like energy self-sufficiency or biogas sales, plants can lower emissions, reduce dependency on subsidies, and create revenue streams. Concrete mechanisms to achieve this include recovering biogas for energy generation, as demonstrated by Anglian Water in England, where sludge treatment centres generate renewable energy for on-site use and export surplus to power grids (Anglian Water, 2023[4]). Similarly, nutrient recovery from sludge for agricultural use adds further value. Internationally, carbon credit schemes such as the Australian Carbon Credit Unit Schemereward wastewater projects that reduce methane emissions or produce renewable energy. These practices illustrate how O&M costs can be offset while promoting environmental sustainability (Box 3.4).
The Australian Carbon Credits Unit (ACCU) Scheme supports projects aimed at either avoiding the release of GHG emissions or capturing and sequestering carbon from the atmosphere. It was established in 2012 under the Carbon Credits (Carbon Farming Initiative) Act 2011 and is overseen by the Clean Energy Regulator, an independent statutory authority responsible for administering the ACCU Scheme, ensuring project compliance, and managing government carbon abatement contracts.
ACCU Scheme methods and projects can involve various approaches, such as adopting new technologies, upgrading equipment, improving land or business practices, and managing vegetation more effectively to store additional carbon.
Projects earn ACCUs based on the amount of carbon dioxide equivalent (tCO2e) emissions they store or avoid. ACCUs can be sold to private sector buyers and government entities, generating income.
Wastewater sector projects are available under the Domestic, Commercial and Industrial Wastewater method (2015) and the Animal Effluent Management method (2019). Eligible activities include installing equipment to capture and use or destroy methane emissions that would otherwise be released to the atmosphere from deep open anaerobic lagoons. Eligible activities also include upgrading biogas from wastewater treatment to produce biomethane. The biomethane can then be used as a natural gas substitute within Australia, contributing to overall carbon abatement efforts, although uptake of this activity has been very limited under the methods to date.
Source: DCCEEW (n.d.) Australian Carbon Credit Unit (ACCU) Scheme, available at: www.dcceew.gov.au/climate-change/emissions-reduction/accu-scheme
Action 7: Diversify sources of finance
Latin American countries need to diversify beyond public sources of finance. In particular, this involves engaging the private sector more actively to access the required economic capital and acquire the technical skills for the transition to the circular water economy. In the LAC region, while the private sector contributed to 78% of total investment in 2019 (below the OECD average of 84%), only 0.2% of private finance in 2018 was directed to water and sanitation infrastructure (OECD et al., 2023[5]). Blended finance can be an effective instrument to mobilise private finance to bridge finance gaps in water and sanitation. However, this requires strengthening transparency and the enabling environment around investment in general and water-related investment in particular (OECD, 2019[6]). According to the Water Integrity Network and the IDB, corruption, mismanagement, and other integrity failures account for up to 26% of wasted investment in the water sector, contributing to the financial shortfall (Water Integrity Network, 2024[7]). Increasing transparency will reduce uncertainty regarding investment risks and opportunities, helping to make water and sanitation investments more appealing to the private sector. Through appropriate contractual agreements or a combination of financial instruments and mechanisms, it becomes feasible to mitigate various risks. Remaining risks can then be shared with the public sector or commercial co-investors or, alternatively, a financier may choose to assume a specific level of risk on their own balance sheet. However, for such an evaluation to be meaningful, the risks linked to an investment must be transparent and quantifiable. Additionally, it is essential to integrate blended finance strategies with initiatives aimed at enhancing the enabling environment. Blended finance alone cannot offset the impact of an unfavourable enabling context, which may include inadequate policy frameworks and institutional structures. Instead, it should be complemented by efforts to establish a stable and supportive broad policy environment. A weak enabling context marked by poorly designed or absent regulations, policy parameters (such as water prices and tariffs), and institutional arrangements can hinder commercial investments.
Action 8: Collaborate with regional development banks to close infrastructure gaps and promote innovation and research
Multilateral development banks (MDBs) have a critical role to play in closing infrastructure gaps and promoting innovation and research. By unlocking regulatory and financial challenges as part of their “country strategies” and setting incentives to strengthen the policy and institutional frameworks, MDBs can help countries foster a more conducive environment for investment choices. Developing policies and regulations that support circular economy initiatives in the water sector, such as through water reuse standards, incentives for sustainable practices, and penalties for pollution is a way forward. Promoting the circular water economy is in line with the IDB’s mission to “foster transformative social and economic progress while actively combating climate change” (IDB, 2023[8]). This implies focusing more prominently on projects generating social and environmental impacts across Latin American countries, beyond each country performance. Regional collaboration should also be promoted to share best practices, resources, and technologies for water management.
Action 9: Allocate financial resources to innovation related to circular economy practices
Latin American countries should use a range of financing tools as a means to direct financial resources towards spurring innovation. For instance, in some countries, water regulators have set up specific funds providing financial resources to support innovation, including innovation related to circular water economy practices. This is the case of Ireland (Box 3.5), where the Commission for Regulation of Utilities in its 2014 Water Charges Plan exercised its discretionary power to allow for Irish Water to undertake EUR 2 million in expenditure over its forthcoming review period through an innovation fund3. The purpose of this fund was to encourage Irish Water to invest in research and innovation projects to “explore technological advances and other innovations in areas such as effective customer engagement, energy reduction, treatment processes, infrastructure rehabilitation, increased understanding of customer behaviours, climate change adaptation and environmental compliance, which could ultimately benefit customers.”4
Irish Water is required to submit a proposal to the Commission for Regulation of Utilities (CRU) before incurring expenditure, to demonstrate that the proposed investment in research or innovation meets the qualifying criteria. The proposals for innovation fund expenditure must (a) have a reasonable probability of delivering defined and tangible benefits to customers and (b) the expected benefits of the investment must outweigh its costs. Proposals must target at least one of the following objectives: the provision of safe, secure, and reliable water services; increased understanding of customer behaviours and their drivers and effective customer engagement; enhanced energy savings in the provision of water services; achievement of relevant environmental standards and the objectives of the Water Framework Directive; mitigation of negative climate change impacts; provision of water services in an economical and efficient manner; and improved conservation of water resources.
In addition to requiring Irish Water to seek approval for innovation fund expenditures in advance, reporting requirements are also in place to measure the outcomes of these projects and measure them against expected benefits. As of November 2021, CRU had approved 10 projects whose expenditure could be counted against the innovation fund component since its introduction at the beginning of the 2015 regulatory review period.1
1. Commission for Regulation of Utilities (Ireland), Water Services Innovation Fund, Annual Report 2020, November 16th 2021 (CRU/21/121)
Source: CRU (2020) Water Services Innovation Fund Annual Report 2020, CRU21121-Water-Services-Innovation-Fund-Annual-Report-2020.pdf (divio-media.com)
Action 10: Incentivise regenerated materials and energy through economic mechanisms
Latin American countries can make greater use of economic instruments to incentivise the recirculation of by-products generated in wastewater treatment (clean water, biocomponents and energy) into the economy, making them cheaper than linear alternatives (e.g. extractive water, chemical fertilisers, and non-renewable energy). Economic instruments such as tax discounts, environmental taxes, or differentiated tariffs can serve as tools for encouraging or discouraging specific market behaviours. For instance, offering tax discounts for industries that use regenerated water or recycled materials in their production processes can stimulate demand for these resources while reducing overall water consumption and waste generation. Similarly, imposing environmental taxes on industries that excessively pollute or generate wastewater can incentivise the adoption of cleaner production methods and encourage investment in water-efficient technologies. Moreover, implementing differentiated tariffs for water usage based on the degree of treatment and reuse can promote efficient resource allocation and encourage industries to invest in advanced wastewater treatment technologies to produce high-quality reclaimed water suitable for various purposes. Economic instruments can also promote the recovery of energy and materials from wastewater treatment. The Italian regulator ARERA has introduced mechanisms to boost energy neutrality in its 2024-2029 tariff methodology by incentivising electricity self-production and encouraging energy savings through sharing factors (Box 3.6). These instruments can be useful for developing markets around recovered by-products. Adjustments in the prices of treated wastewater, recovered biosolids, or generated energy, as well as exemptions on Value Added Tax (VAT), can incentivise businesses and users to reuse recovered materials and energy. Additionally, extended producer responsibility (EPR) schemes can help develop programmes to reuse materials or stimulate innovation.
In 2018, the Italian regulator ARERA introduced innovative and multi-sector measures aimed at energy efficiency, plastic use reduction, energy and raw material recovery, and wastewater reuse. The measures include the installation of soft starters and inverters, pressure management, and energy recovery devices for improved energy efficiency. Additionally, high-quality fountains were installed, tap water was promoted as an alternative to bottled water to reduce plastic usage, and biogas production from sludge was implemented. Furthermore, mini hydroelectric power plants were installed, and biopolymers, struvite, and phosphorus were recovered from sludge for energy and raw material recovery purposes. Finally, reclaimed water was reused for irrigation or industrial purposes, along with internal plant reuse for technical water in wastewater treatment processes.
These measures are incentivised through a revenue sharing mechanism. Operators are not compelled to implement such measures as they are not considered by ARERA as being part of mandatory water and sanitation services standards.
The environmental and resource costs include both operational and capital cost components and are used to promote sustainability and resilience. More specifically, some operational components of environmental costs are used to reflect and cover expenditure targeted towards remote control operations aimed at reducing or preventing water losses. Since 2016, ARERA has also introduced 6 macro performance indicators with differentiated regulatory targets according to the operator’s efficiency. If the operator fails to achieve the expected improvement, and thus lower water losses, it is penalised.
Source: Bardelli, L. (2023). Report on Water Services & Waste Management, https://www.arera.it/fileadmin/allegati/eventi/230412analistiAmbiente.pdf.
Action 11: Raise awareness and promote effective stakeholder engagement
Latin American countries need to emphasise transparency and information sharing to ensure that communities understand the benefits of the circular water economy and are engaged in policy making and implementation processes. Community concerns increase as the degree and likelihood of personal contact with recycled water rises. For example, use of recycled water for urban or agricultural irrigation has high levels of acceptance (Po et al., 2005[9]), whereas closer contact, including consumption of recycled water, has lower levels of support (Fielding, Dolnicar and Schultz, 2018[10]). Proposals to use recycled water for drinking supply tend to polarise views in communities, meaning that consultation with stakeholders is a key element when developing recycled water schemes. Tailored communication mechanisms should be implemented, encompassing both online and offline channels. This includes communication campaigns involving the creation of dedicated websites and social media platforms, events for the exchange of knowledge and practices, conferences, etc.
Action 12: Ensure that water-related decision makers and practitioners have the skills required to shift the paradigm
Capacity building activities tailored to different stakeholders in both the public and private sectors can enhance the skills and knowledge in the water sector, fostering a deeper understanding of circular water management principles. For instance, capacity-building initiatives for policy makers could focus on providing them with the tools and knowledge to develop and implement policies that promote circular water practices. Practitioners in the water sector, such as engineers and technicians, could benefit from hands-on training programmes specifically designed to enhance their technical expertise, covering practical topics like the design and operation of decentralised wastewater treatment systems.
Action 13: Strengthen transparency and accountability of circular water systems and related data
Latin American countries need to strengthen transparency in water management and treatment to foster public trust and engagement. This requires monitoring circular water economy data, which goes beyond drinking water and sanitation access rates to include indicators related to water reduction, reuse and recycling, and material and energy recovery. This includes data on indicators such as NRW, water savings from the implementation of conservation techniques and technologies, volume of treated wastewater reused for various purposes, volume of recovered sludge used as fertilisers, and energy savings from recovery during treatment, among others. Regular monitoring of these indicators of water management circularity can help ensure efficient fund utilisation and gauge the impact of circular water initiatives. Regulators from various countries have already established key performance indicators targeting water losses, water, and energy efficiency (Box 3.7).
The association of European Water Regulators (WAREG) assesses key performance indicators used by regulators to evaluate the performance of utilities. The reports notes that 18 WAREG members (Albania, Azores, Brussels, Bulgaria, Estonia, Flanders, Georgia, Greece, Hungary, Ireland, Italy, Kosovo, Latvia, Malta, Montenegro, North Macedonia, Portugal and Romania) use KPIs to monitor and assess NRW / water loss (Table 3.1).
The report highlights that NRW is widely used by regulators for monitoring and assessment, whether expressed as a percentage (11 regulators), in volume per km per day (6 regulators), or in litres per connection per day (2 regulators). Real losses are commonly monitored by 5 regulators, while 3 other regulators use an infrastructure leakage index.
Additionally, some water regulators have created incentives for energy recovery through benchmarking regulatory indicators (Table 3.2).
Source: WAREG (2023), Key performance indicators framework in WAREG Member Countries, https://www.wareg.org/documents/kpis-report-2023-wareg-pdf/
References
[4] Anglian Water (2023), 2025 – 2050 Bioresources Strategy, https://www.anglianwater.co.uk/SysSiteAssets/household/about-us/bioresources-strategy-2025---2050.pdf.
[3] EPA (2023), From Water Stressed to Water Secure: Lessons from Israel’s Water Reuse Approach,, https://www.epa.gov/system/files/documents/2023-04/Action%2011.1%20Closeout_Draft_041723_508%20Compliant.pdf.
[10] Fielding, K., S. Dolnicar and T. Schultz (2018), “Public acceptance of recycled water”, International Journal of Water Resources Development, Vol. 35/4, pp. 551-586, https://doi.org/10.1080/07900627.2017.1419125.
[8] IDB (2023), IDB Group Institutional Strategy: Transforming for Scale and Impact, https://www.iadb.org/en/who-we-are/institutional-strategy.
[2] IDB (2018), Case Study: Performance-based Contract for NRW Reduction and Control New Providence, Bahamas, https://publications.iadb.org/es/publicacion/12918/case-study-performance-based-contract-nrw-reduction-and-control-new-providence.
[1] OECD (2020), The Circular Economy in Cities and Regions: Synthesis Report, OECD Urban Studies, OECD Publishing, Paris, https://doi.org/10.1787/10ac6ae4-en.
[6] OECD (2019), Making Blended Finance Work for Water and Sanitation: Unlocking Commercial Finance for SDG 6, OECD Studies on Water, OECD Publishing, Paris, https://doi.org/10.1787/5efc8950-en.
[5] OECD et al. (2023), Latin American Economic Outlook 2023: Investing in Sustainable Development, OECD Publishing, Paris, https://doi.org/10.1787/8c93ff6e-en.
[9] Po, M. et al. (2005), Predicting Community Behaviour in Relation to Wastewater Reuse : What drives decisions to accept or reject ? Water for a Healthy Country National Research Flagship, https://www.researchgate.net/publication/242602980_Predicting_Community_Behaviour_in_Relation_to_Wastewater_Reuse_What_Drives_Decisions_to_Accept_or_Reject.
[7] Water Integrity Network (2024), Water Integrity Global Outlook 3, https://www.waterintegritynetwork.net/_files/ugd/3abf8e_7081cf31513f4898bd79656bbb75b4b5.pdf.
← 1. The 11 divisions are: Solid Waste Management Services (SWMS); Purchasing and Materials Management (PMMD); City Planning; Economic Development and Culture; Environment and Climate Division; Corporate Real Estate Management; Parks, Forestry and Recreation; Transportation Services; Toronto Water; Toronto Public Health; and Engineering and Construction Services.
← 2. Performance-based contracts (PBCs) are specialised public-private partnerships increasingly used by utilities to manage NRW. These contracts link payment to contractors' performance, incentivising them to meet NRW reduction targets. PBCs enable utilities to access expertise and equipment while retaining control over operations and assets. IWA (n.d.), Performance-based contracts for non-revenue water management; PPIAF (2023), Using performance-based contracts to reduce non-revenue water; World Bank (2006), The challenge of reducing non-revenue water in developing countries; World Bank (2018), The use of performance-based contracts for non-revenue water reduction.
← 3. Commission for Energy Regulation (Ireland), Water Charges Plan Decision Paper, October 8th 2014 (CER/14/746)
← 4. Commission for Energy Regulation (Ireland), Water Services Innovation Fund, April 10th 2015 (CER/15/076), p. 2