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Output Based Incentives for Urban Sanitation - WSP 21nov11


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Output Based Incentives for Urban Sanitation - WSP 21nov11

  1. 1. Output Based Incentives for Sanitation Services to Urban Poor Households Isabel Blackett and Almud Weitz WATER AND SANITATION PROGRAM
  2. 2. The context A rationale for sanitation subsidies but subsidy delivery mechanisms lack clarity about: ... who and what should be financed • • due to fragmented sector supervision, and fragmented delivery, weak and/or informal service providers ... what funds should be used for • • • • as hardware subsidies „wasted‟, insufficient focus on behaviour „too much‟ spent on wastewater treatment, rather than connecting households expected to invest in adequate on-site sanitation, woth limited public support, despite strong public benefits insufficient focus on environmental impacts of poor sanitation 2
  3. 3. What is an output based incentive? • Targeted performance-based payment to reduce the gap between what users can afford and the cost to the provider • “Payments” made to service providers after preidentified outputs are delivered and independently verified and • Results-Based Financing includes conditional cash transfers (CCT), COD, performance-based financing • Used in other sectors e.g. roads, telecoms, health, education, electricity, water etc 3
  4. 4. How OBA differs Traditional Approach Inputs Government purchases specific “inputs”, builds assets and contracts out or provides services itself eg materials Output-Based Approach Inputs eg materials Commercial Finance Service Provider Service Provider Public Finance Outputs (Services for End Users) OBA reimburses the service provider after the delivery of outputs Outputs (Services for End Users)
  5. 5. The sanitation “value chain” Environmental focus MDG focus Value chain Types of services Demand creation Collection Transport Treatment Disposal / Re-use Promote sanitation , create demand, community organisation On-site with reuse On-site w/out reuse Sewer connections Main actors • Local governments • CBOs, NGOs • Households (investors) • Masons /Businesses • Utilities • Pit-latrine emptiers (manual emptying, trucks, etc) • Utilities (sewers) Partial on-site treatment Decentralised treatment facilities Treatment Plants Re-use: energy, agriculture Environment • Local governments • Utilities • SSIPs • Local governments • Local farmers, etc..
  6. 6. MDG focus Potential packaging of output incentives Promote sanitation , create demand, community organisation Demand creation NGP awards India PLM Mozambique Collection On-site with reuse On-site w/o reuse Environmental focus Partial on-site treatment Transport Treatment Disposal / Re-use Payments to septic tank/pit emptier Decentralised treatment facilities Payments for Re-use sludge (energy, re-use agriculture) Environment Sewer connections Morocco Indonesia, Brazil Treatment plants
  7. 7. Examples of services and indicators Value chain Demand promotion Services Output indicators Sanitation marketing No. households who build/rehabilitate a latrine following demand promotion Social mobilisation, triggering No. villages/communities becoming ODF Build on-site sanitation facilities No. facilities built and still operating xmonth down the line Build and operate public toilets No. toilet blocks in disadvantaged areas (used/paid for) Transport pit waste to designated points Volume of waste transported to and disposed in designated locations Build and operate transfer stations No. transfer stations built and functioning x-years later Treatment Build, maintain and operate WWT plants Volume of waste collected and treated to required standard Disposal/reuse Build and maintain biogas facilities Volume of agricultural inputs generated and sold to farmers Collection and latrine access Transport
  8. 8. Output based grants for water and sewerage in Morocco The system • Connecting 11,300 poor households in unplanned urban settlements to water and sewerage • Subsidy paid to service provider in installments 60% after connection, 40% after 6 months of sustained use • Verification carried out by independent third party. Lessons and Findings • Initial progress slow due to new scheme, land ownership and investment delays • Later investment substantially increased, some cities delivering ahead of schedule • Subsidies vary USD420-910, due to different unit costs
  9. 9. Some potential challenges and solutions Common challenges Measuring outputs difficult and costly Potential solutions is Measure behavior change associated with sanitation High costs for performance verification built-in Sewerage subsidies per household tend to be higher than for other services Conveying message that although investment costs are high, economic and social benefits to society are also high! Demand for sanitation services poorly understood Conduct demand assessment studies as part of the design (with adequate funding) Little attention paid to ongoing operational costs e.g. pit and septic tank wastes or sewerage OBI designed to make public funding of operations more efficient and accountable Build sewerage tariff increases as a condition for subsidy release 12
  10. 10. Take home messages • Business-as-usual subsides will not generate improved urban sanitation outcomes • Output based incentives provide a new innovative targeted approach • Expect new learning from Indonesia, Egypt, Senegal, Morocco and India. For more information: Output-Based Aid and Sanitation, WSP 2010 Indentifying the Potential for Results-Based Financing for Sanitation, Sophie Trémolet, WSP and SHARE, 2011 On and at WSP conference booth 14
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