Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use Rochi Khemka and Rolfe Eberhard TOC © 2025 International Bank for Reconstruction and Development/The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. 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Washington, DC: World Bank. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Cover photo: Kalyakan/Adobe Stock Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 2 TOC FOREWORD Water reuse is no longer a marginal consideration; it is a strategic necessity. Yet current adoption remains limited. As of 2024, global reuse across all Around the world, cities and industries are under growing pressure from water applications accounts for only 12% of municipal freshwater withdrawals, scarcity, pollution, and climate stress. The treatment and reuse of used water and just 3% of potable and industrial use. Moving from isolated projects to offers a powerful and practical response—a dependable source that enhances sustained, large-scale programs will require a significant shift in how reuse water security, supports economic development, and strengthens climate is financed, delivered, and governed. resilience. This report identifies five key transitions to enable that shift: (1) Cities and industries generate nearly 1 billion cubic meters of used water appropriately valuing clean water; (2) prioritizing high-value applications; (3) each day, much of it untreated and discharged into the environment. normalizing the creation and use of ‘new’ water; (4) advancing programmatic, Capturing and purifying this water to meet municipal and industrial needs platform-based approaches; and (5) mobilizing private innovation and can reduce pressure on freshwater sources, lower pollution, and unlock new finance. Taken together, these actions could unlock up to US$340 billion in investment opportunities. With the right policies and financing structures in investment and increase reuse capacity eightfold by 2040. place, used water can become a cornerstone of a more resilient and circular water economy. Realizing this ambition will require a coordinated effort. Governments must provide regulatory clarity, establish economic incentives, and invest in the This report, Scaling Water Reuse: A Tipping Point for Municipal and Industrial enabling infrastructure. The private sector plays a vital role as a user, financier, Use, is the result of a joint effort by the World Bank, the International Finance and solution provider. Through policy engagement, technical assistance, and Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA). financial instruments, the World Bank Group is committed to helping bridge It reflects close collaboration with various institutions and builds on extensive these efforts, building the conditions for viable, scalable reuse markets. consultations with governments, utilities, private water users, and financiers. Together, these partners are shaping a common vision for embedding reuse This report comes at a critical moment. Water reuse is not a solution of the into national and local water strategies, anchored in strong public leadership future—it is a solution for today. With the right frameworks and partnerships and supported by private sector expertise and capital. in place, it can become a defining feature of how we secure clean, reliable water for generations to come. The case for scaling reuse is compelling. It is often more cost-effective than desalination or long-distance transfers, especially where collection and treatment infrastructure exists and where used water is available close to the point of reuse—such as for urban centers and industrial parks. As such, reuse should be considered part of a broader portfolio of water solutions, in conjunction with other demand-side and supply-side water management solutions. When water is properly valued and full lifecycle costs for various supply alternatives are considered, reuse stands out as both an economically sound and environmentally sustainable solution. Moreover, reuse as a solution Saroj Kumar Jha Bertrand Heysch De la Borde can be promoted across the public sector and private sector, as well as at the Global Director Director national, municipal, and local levels. Water Global Department Global Head of Infrastructure The World Bank Group International Finance Corporation Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 3 TOC PREFACE This report makes a case for scaling investments in the treatment of used water1 to make it fit for purpose for municipal and industrial use, turning 'waste’ water into valuable 'new' water. The report sets out the business case for these investments and outlines roadmaps for governments and the private sector to achieve this transition to sustainable water use. Investments in 'new' water2 are critical to support water service delivery to all sections of the population and to enable job creation and economic development in municipal and industrial contexts. This document aims to advance such investments through the efforts of the public and private sectors, and, where appropriate, those of the World Bank Group. It focuses on the creation and shaping of markets by the public sector to unlock private sector investments in and contributions to ‘new’ water, encompassing the role of the private sector as water users, solution providers, and financiers. This requires key public sector contributions toward setting and enforcing rules related to water abstraction, discharge, and water quality; creating financial and economic incentives through the design of markets and pricing; and investing in public infrastructure to shape the supply side of the market. A core focus of the report is on the generation of 'new' water for municipal water systems and industrial users. This is because the business case for reuse is strongest when used water is available close to the point of use, which tends to be the case for urban centers and industrial parks. Agricultural reuse may be relevant in specific contexts with cost-reflective irrigation tariffs and where such use is planned in close proximity to the availability of used water. However, this is not the focus of this document. Pawinee/Adobe Stock 1 This ‘used’ water is conventionally called ‘wastewater,’ suggesting it has no value. This report has adopted new terminology to emphasize the intrinsic value of this source of water. 2 ‘New’ water refers to purified used water. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 4 TOC ACKNOWLEDGEMENTS This report is co-authored by: The report has received editorial support from Natasha Skreslet and Amanda Green (Communications Consultants, World Bank) and stakeholder • Rochi Khemka, Senior Private Sector Specialist, World Bank 2030 Water coordination support from Ekaterina Ghosh (Junior Professional Associate, Resources Group (WRG) and Task Team Leader, and World Bank WRG). • Rolfe Eberhard, Consultant, World Bank WRG. The team is grateful for external support from Christopher Gasson, Publisher, It is a joint output of the World Bank, International Finance Corporation, and Global Water Intelligence. In addition, Singapore’s Public Utilities Board Multilateral Investment Guarantee Agency. served as a co-contributor to the case study on Singapore. In addition, the team consulted various national, state, and municipal governments, This work was carried out under the leadership and guidance of Juergen water utilities, financial institutions, industrial water users, multilateral Voegele (Vice President, Planet, World Bank), Saroj Kumar Jha (Water Global development banks, and others in the process of developing the document, Director, World Bank), and Bertrand Heysch De la Borde (Director, IFC). It along with over 20 task teams across the World Bank Group that have engaged received managerial support from Michael John Webster (Program Manager, on reuse initiatives. World Bank WRG) and Sumeet Thakur (Senior Manager, IFC). The peer reviewers for this activity included technical specialists across the A core working group of experts across the World Bank Group provided input World Bank Group and an external client, to whom the team expresses its and support to this activity (in alphabetical order): sincere appreciation (in alphabetical order): • Anais Christine Julienne, Senior Investment Officer, IFC • Canan Yildiz, Senior Water Resources Management Specialist, World Bank • Anna Delgado Martin, Consultant, World Bank • David Savage, Manager, MIGA • Carlo Alberto Amadei, Water Specialist, World Bank • Klaus Oppermann, Senior Economist, World Bank • Dan Vardi, Principal Investment Officer, IFC • Markus Pohlmann, Senior Counsel, World Bank • Diego Rodriguez, Lead Economist, World Bank • Nagaraja Rao Harshadeep, Lead Environmental Specialist, World Bank • Gerhardus Nicolaas Albertus Soppe, Senior Water Supply and Sanitation • Pierre van Rensburg, Strategic Executive, City of Windhoek Specialist, World Bank • Victoria Delmon, Manager, IFC • Gustavo Saltiel, Strategic Advisor, Water Supply and Sanitation, World Bank • James Tay, Water Specialist, World Bank • Jihoon Lee, Water Specialist, World Bank • Jonathan Andrew Ettinger, Senior Underwriter, MIGA • Nicola Saporiti, Senior Investment Officer, IFC • Patricia Lopez, Senior Water Specialist, World Bank • Rajesh Balasubramanian, Senior Investment Officer, IFC • Shona Fitzgerald, Senior Water Supply and Sanitation Specialist, World Bank The team expresses its appreciation to the Governments of Hungary and Japan • Wenhe Zhang, Senior Underwriter, MIGA for their support to this activity. • Zael Uriarte, Senior Water Supply and Sanitation Specialist, World Bank • Zhengrong Lu, Lead Specialist, Water and Finance, World Bank Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 5 TOC KEY MESSAGES 1. Cities and industries are already at risk from an insecure water supply, impacting livelihoods, jobs, and economic growth. 2. Reuse can serve as an insurance strategy against water insecurity. 3. As such, reuse should be considered part of a portfolio of options for water security, alongside other water demand and supply-side management strategies. 4. Yet the current levels of potable and industrial reuse (at 53 million cubic meters per day) represent only 3% of freshwater withdrawals for the municipal sector. 5. Reuse is at a tipping point: accelerating investments in reuse can develop the market, drive down costs, and spur innovation and commercial finance. 6. Impact at scale can unlock investments of up to US$340 billion over 15 years, with reuse capacity for potable and industrial use growing annually at 14%. 7. The World Bank Group can support the standardization of approaches to drive scale, similar to Scaling Solar, through the Scaling ReWater package of support. Photo Gallery/Adobe Stock Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 6 TOC TABLE OF CONTENTS EXECUTIVE SUMMARY 1. WHY reuse? 2. WHEN is the tipping 3. WHAT is the point for reuse? investment opportunity? 1.1 Benefits of Reuse 2.1 Constraints to Reuse 3.1 Market Size for Reuse 1.2 Urgency of Reuse 2.2 Lessons from the Renewable 3.2 Financing Instruments for Energy Sector Reuse 1.3 Economics of Reuse 2.3 Tipping Points for Reuse 3.3 Delivery Models for Reuse 1.4 Business Case for the Public and Private Sectors 2.4 Countries with Significant Water Reuse Activity 4. HOW can investments 5. CONCLUSIONS 6.  ANNEXES in reuse be scaled? 4.1 Mechanisms to Support Reuse 5.1 Conclusions Annex 1: Additional Definitions 4.2 Roadmap for National and Annex 2: Market Mechanisms State Governments for Reuse 4.3 Roadmap for Municipalities Annex 3: Case Studies and Utilities Annex 4: Past and Ongoing World 4.4 Roadmap for the Private Bank Reports on Reuse Sector Annex 5: Current and Potential 4.5 Role of the World Bank Group Markets for Reuse Annex 6: References Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 7 TOC LIST OF ABBREVIATIONS BOD Biological Oxygen Demand IPR Indirect Potable Reuse BOOT Build–Own–Operate–Transfer ISTP Independent Sewage Treatment Plant BOT Build–Operate–Transfer JV Joint Venture BRL Brazilian Real kl Kiloliter CO2 Carbon Dioxide km Kilometer DBFOT Design–Build–Finance–Operate–Transfer kWh Kilowatt Hour DBO Design–Build–Operate l/s Liters per Second DPR Direct Potable Reuse M 3 Cubic Meters DWS National Department of Water and Sanitation (South Africa) ML Megaliter EFR Environmental Flow Requirements MIGA Multilateral Investment Guarantee Agency EIP Eco-Industrial Park NHFO Non-Honoring of Financial Obligations EPC Engineering–Procurement–Construction O&M Operations and Maintenance ESG Environmental, Social, and Governance PCG Partial Credit Guarantee ETS Emissions Trading Scheme PFAS Per- and polyfluoroalkyl Substances EU European Union PMR Partnership for Market Readiness GDP Gross Domestic Product PPP Public–Private Partnership GW Gigawatt SLF Sustainability-Linked Financing GWI Global Water Intelligence SPV Special Purpose Vehicle HAM Hybrid Annuity Model STP Sewage Treatment Plant IBRD International Bank for Reconstruction and Development UPW Ultra Pure Water ICAP International Carbon Action Partnership US$ United States Dollar IDA International Development Association WRC Wastewater Reuse Certificate IEA International Energy Association WRG 2030 Water Resources Group IFC International Finance Corporation Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 8 TOC LIST OF FIGURES 1. Portfolio of water security options 23. Solar levelized costs (US$ per kWh) and installed capacity for 2000–23 2. Cost per m3 of water (US$) (GW) 3. Global installed reuse capacity (million m3/day) 24. Wind levelized costs (US$ per kWh) and installed capacity for 2000–23 (GW) 4. Reuse as a % of freshwater withdrawals for the municipal sector (million m3/day) 25. Common principles across investments in renewable energy, desalination, and reuse 5. Reuse potential by 2040 (in million m3 /day and as a % of municipal freshwater withdrawals) 26. Number of plants set up for potable reuse vs desalination from 1970 to 2020 6. Solar levelized costs (US$ per kWh) and installed capacity for 2000–23 (GW) 27. Evolution of purified water projects by settlement size (1960s to 2030s) 7. Categories of water reuse 28. Cost factors specific to reuse 8. Breakdown of installed reuse capacity across different categories in 2024 29. Five tipping points for the creation of new water from used water at scale (million m3 per day) 30. Reuse potential by 2040, in million m3/day 9. Sources of used water and application and definitions of purified used 31. Total reuse in 2024 vs future reuse potential in 2040 of 50% as a fraction water ('new' water) of total freshwater withdrawals for municipal use (million m3/day) 10. Share of global GDP from regions of high water risk 32. Potable and industrial reuse in 2024 vs future reuse potential in 2040 11. Share of the population living in urban areas of 25% as a fraction of total freshwater withdrawals for municipal use (million m3/day) 12. Number of cities with population over 1 million exposed to water risks 33. Current reuse investment landscape 13. Reuse as insurance against climate and water stress 34. Future reuse investment landscape with cost transition through scale 14. Reuse in a portfolio of water security options 35. Reduction in seawater desalination costs with market maturity 15. Reuse reduces return flows to freshwater systems in inland areas 36. Price disclosure for used water treatment in Saudi Arabia (levelized costs 16. Cost per m3 of water (US$) per m3) 17. Total global installed reuse capacity (million m3/day) 37. Investment opportunity for 430 million m3 per day of reuse capacity by 18. Reuse as a % of freshwater withdrawals for the municipal sector (million 2040 – capital expenditure estimates (US$ billions) m3/day) 38. Factors influencing the choice of financing 19. Corporate water risks 39. Funding and financing options for reuse 20. Freshwater tariffs and corporate revenues – the role of water reuse in 40. Global climate finance mobilized (US$ billions) strengthening reputational standing 41. Global adaptation finance flows vs needs (US$ billions) 21. Data center water demand (million m3/day) 42. Structure of the Vietnam Emission Reduction-Linked Bond 22. Water tariffs in Indian cities (US$/m3 for 15 m3), compared to international cities 43. Reuse delivery models  Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 9 TOC LIST OF FIGURES 44. Programmatic approaches to support the mobilization of private financing 65. Roadmap for national and state governments for new water creation 66. Roadmap for municipalities and utilities 45. Options for partnerships with the private sector on reuse 67. Roadmap for the private sector as a water user 46. Key characteristics of different contract types with the private sector 68. Mechanisms to facilitate market creation 47. Possible structure of a joint venture to create and sell new water 69. Water withdrawals by sector (%, 2024) 48. Applicability of reuse models 70. Wastewater Reuse Certificate trading mechanism 49. Installed reuse capacity by major application in the United States (million 71. Marginal abatement cost curves as basis for WRC trading m3 per day) 72. Annual inflows into Perth's dams 50. Pathways to scaling reuse through regulatory and/or pricing reforms 73. Perth's water sources (2022–23) 51. Market mechanisms for reuse 74. Capacity cost (A$ million/000 m3/day) 52. Elements of a programmatic approach 75. Evolution of reuse commitment and regulation in China 53. Interconnected role of cities and utilities with other stakeholders 76. City-level engagements in China (# cities) 54. Reuse as a part of municipal water security strategies 77. Comparison of Payment Flows – DBO vs. HAM 55. A framework for stakeholder engagement 78. Contracted reuse capacity in India (million m3/year) 56. Actions to match demand for new water with the supply of used water 79. Closing the water loop with NEWater 57. Delivery, funding, and financing models for reuse 80. Water sales and tariffs 58. Advantages of incorporating reuse in corporate disclosures 81. Components of water price 59. World Bank Group support to reforms and investments 82. eThekwini Water Reclamation Project 60. Focus areas of Scaling ReWater 83. Total and industrial water demand in Ekurhuleni, 2021 and 2030 (million 61. World Bank Group support to a reuse finance platform liters per day) 62. WRG stakeholder platforms and select innovations 84. Waterval and Olifantsfontein plant capacity vs current treatment (million 63. Programmatic approaches to support the mobilization of private financing liters per day) for new water creation 85. Water Distribution System in Fairfax 64. Reuse delivery models 86. The Water in Circular Economy and Resilience (WICER) Framework Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 10 TOC LIST OF MAPS AND BOXES 1. Current water stress at the sub-basin level 2. Cities in perennial and seasonal water scarce areas 3. Megacities (with a population over 10 million) in 2024 and 2050 4. Untreated used water flows to the environment 5. Water quality, biological oxygen demand 6. Existing used water treatment plants 7. Countries with significant water reuse activity 8. Global new water locations 9. Industrial clusters in the Greater Dhaka Area 10. Water scarcity in China at the sub-basin level 11. Current water stress at a basin scale 12. Current water scarcity in cities in India 13. Current and future purified recycled water locations Boxes 1. New regulations could transform water reuse in India DesiDrew Photography/Adobe Stock Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 11 TOC Executive Summary Piotr Krzeslak/Adobe Stock TOC Executive Summary Used water has tremendous …offering insurance against …and a triple benefit for each unrealized value… water insecurity… cubic meter of water reused. Cities and industry produce a large volume of As a rainfall-independent source, reuse Turning used water into new water offers three used water every day. Turning this used water provides insurance against increasing climate benefits in one: into new water could create a more water- and water stress and should be considered secure future for more than a billion people within a portfolio of water security solutions. 1. Recovery of valuable water, living in cities and facing increasing levels 2. Recovery of energy and other scarce of water stress. Moreover, many industrial FIGURE 1: Portfolio of water security options resources, and facilities globally face water supply insecurity, 3. Recovery of the environment through Water Use reduced freshwater abstraction and which can be mitigated through the use of new Efficiency water. and Non- reduced pollution. Reuse Surface Ground Desali- Revenue Water Water Water nation Reduction Demand-Side Supply-Side Solutions Solutions Reuse has a strong business case… …yet the extent of reuse is low… …at 12% of municipal freshwater Reuse makes good economic sense where Global installed reuse capacity at the end of withdrawals. collection infrastructure is in place and the 2024 was only 183 million cubic meters per day. Moreover, industrial and potable reuse of 53 treatment facility is close to the point of reuse. million cubic meters per day in 2024 amounted In addition, where the cost of alternatives to only 3% of freshwater withdrawals for the reflects full costs, rather than a subsidized price FIGURE 3: Global installed reuse capacity municipal sector. of water, investments in reuse are attractive. (million m3/day) FIGURE 4: Reuse as a % of freshwater FIGURE 2: Cost per m3 of water (US$) withdrawals for the municipal sector (million m3/day) $2.0 $0.50-$1.90 $1.8 200 p. a 183 1800 1532 % $1.6 6.7 1600 $1.4 150 1400 $1.2 1200 4.3% p.a 1000 $1.0 100 $0.8 $0.50-$0.75 800 $0.30-$0.55 =~12% reuse $0.6 600 $0.4 50 400 =~3% reuse 183 $0.2 200 53 $0.0 0 0 Non-potable Potable Desalination 2005 2015 2025 Industrial and Total Withdrawals reuse reuse potable reuse reuse Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 13 TOC Executive Summary Nonetheless, reuse is at a tipping point… …and urgent investments can reduce costs through economies Reuse programs are being actively implemented in 22 countries, with a shift toward higher- value applications, particularly through potable and industrial reuse. The pace of investment of scale, unlocking up to US$340 in reuse has increased from ~4% per year (2005–14) to ~7% (2015–24). billion in investments. FIGURE 5: Reuse potential by 2040 (in million m3/day and as a % of municipal The investment required to achieve impact at scale freshwater withdrawals) is between US$170 billion and US$340 billion over 15 years, representing an annual growth in reuse 840 capacity of 14% until 2040 for potable and industrial Total reuse (installed) 800 ~50% of municipal reuse. This investment could achieve an eightfold Industrial & potable reuse freshwater withdrawals increase in treatment capacity for highly purified (installed) 10% p.a. 600 ~12% of municipal water and result in reuse for industrial and potable 430 use at a scale of 25% of municipal freshwater freshwater withdrawals 400 ~25% of municipal withdrawals from the current level of 3%. 6.7% p.a. 14% p.a. freshwater withdrawals 4.3% p.a. 183 200 53 0 2005 2015 2025 2035 8.1% p.a. 8.7% p.a. ~3% of municipal freshwater withdrawals FIGURE 6: Solar levelized costs (US$ per kWh) and installed This ambition is achievable, as the experience capacity for 2000–23 (GW) of the renewable energy sector highlights. 1000 Installed capacity GW US$ per kWh 0.4 Renewable energy achieved an 18-fold increase in installed capacity over the last 500 15 years. Annual investment in wind and solar—in just one year (2022)—was close to 0.2 US$500 billion. This was achieved through ambitious policy goals and programs, and a dramatic reduction in unit costs, enabled by scaling and leveraging private 0 0 sector innovation and financing. In reuse, cost reductions will also require adopting 2000 2005 2010 2015 2020 fit-for-purpose standards and treatment, combining reuse with resource recovery, Solar installed capacity Levelized costs and shortening the length of distribution to enhance viability. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 14 TOC Executive Summary Five transitions will support the creation of new water at scale. Fully Appreciating the Moving to Higher-Value Normalizing Supporting Programmatic, Mobilizing Private Sector Value of Clean Water Applications New Water Platform Approaches Innovation and Financing Va l u e c l e a n w a t e r Shif t to high-value Normalize the practice of Shift from one-off projects Leverage private sector appropriately, recognizing applications for purified creating new water from to programs at scale to innovation and financing the critical role it plays to new water, matching used water, achieving create new water at low to achieve significant cost Transitions support a livable planet. willingness to pay with widespread acceptance for cost and low risk. reductions through scale, New water cannot compete the cost of creating clean new water. Mainstreaming replicating achievements in against free or heavily water, reducing reliance new water requires core other sectors. Core public subsidized freshwater. on subsidies. investments in used funding may be needed for water treatment in many used water infrastructure, geographies as a first step. which if used efficiently, can crowd in private capital. Instruments Cost-reflective pricing and clear Stakeholder engagement and Programmatic approaches Bankability of projects using regulations trust building drawing on finance platforms appropriate delivery models and market instruments and financing instruments, including blended finance, building on efficient use of public funding for treatment and reuse The main audiences for this report are national and state governments, municipalities, utilities, and the private sector. This report makes a case for why scaling investments in reuse is essential, along with pathways to achieve scale. It highlights practical delivery and financing mechanisms, which—when harnessed programmatically, with appropriate reforms to the regulatory environment and pricing—can support the achievement of ambitious goals. Guidance on scaling reuse investments for the different audiences is articulated in the form of easy-to-implement roadmaps, building on possible World Bank Group support through technical assistance and financing to develop and implement new water programs at national and state levels. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 15 TOC Executive Summary SCOPE OF DOCUMENT AND DEFINITIONS References to ‘total reuse’ in this report include industrial and potable reuse, agricultural irrigation, landscape irrigation, urban non-potable reuse, and recreational or miscellaneous reuse. FIGURE 7: Categories of water reuse Total Reuse Urban Industrial Potable Agricultural Landscape Recreational Non-Potable Focus of this report FIGURE 8: Breakdown of installed reuse capacity across different categories in 2024 (million m3 per day) 200 183 180 160 140 120 100 88 80 60 46 40 21 17 20 7 4 0 Potable reuse Industrial reuse Agricultural Landscape Urban non- Recreational Total irrigation irrigation potable reuse reuse Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 16 TOC Executive Summary SCOPE OF DOCUMENT AND DEFINITIONS FIGURE 9: Sources of used water and application and definitions of purified used water ('new' water)* Source of Treatment of used water Application of purified used water ('new' water) used water Drinking water Indirect Potable Reuse (IPR) Municipal Reservoir treatment Indirect reuse of highly purified reclaimed water as a drinking Sewer Regulated or aquifer Network water source with an environmental buffer (such as a reservoir or aquifer) between the discharge of the purified water and the intake of the drinking water system. IPR is an effective response to the growing frequency and severity of extreme droughts. Used water Potable Network Advanced Potable treatment ** purification (indirect) Direct Potable Reuse (DPR) Direct use of highly purified reclaimed water as a drinking water source without discharging to an environmental buffer. DPR Potable (direct) is highly regulated and typically requires multiple advanced Highly regulated purification technologies to ensure complete removal of Assumes industrial effluents do not flow pathogens. It is typically driven by sustained, extreme water into municipal sewers, availability challenges. which may not always be the case. Non-Potable Industrial Reuse Non-potable Treatment and reuse of municipal used water to regulatory Regulated standards appropriate to application. It requires used water collection, treatment, and transmission of the product water to Industrial where it can be used, with no loss of control in between. Zone Used water treatment ** Industrial Reuse Collection and treatment of used water discharged by one or more Non-potable industries (typically in an industrial zone) and supply of this water to the same or other industries. Industrial reuse can be driven by abstraction limits, reliability of supply, discharge standards (including a zero discharge requirement), cost factors, or a combination of these. * Exclusion: This report does not address: (1) Non-potable reuse for agricultural purposes and landscaping; (2) De facto reuse; (3) Reuse of seawater and brackish water; and (4) Decentralized reuse. See additional definitions in Annex 1. ** Typically called wastewater treatment. This report does not consider used water to be 'waste' water. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 17 TOC Executive Summary ROLES OF THE PUBLIC AND PRIVATE SECTOR The public and private sector have complementary roles in scaling investments in new water. While investments in new water can and do take place in the absence of enabling government policies and regulations, this does not negate the fact that national and state government actions and inaction have a strong influence on new water investments and market creation. On the other hand, municipalities can commission reuse capacity, sell used water, and influence demand through pricing and local regulations. In addition, the private sector can support market creation in its role as a water user, solution provider, and/or financier. National and State Governments Municipalities and Utilities Private Sector Set Regulations Commission Reuse Capacity WATER USERS: Purchase New Water Establish regulations related to water abstraction, Incorporate reuse in city-level water security Support reuse in direct operations and/or indirectly discharge, and water quality, as well as frameworks strategies and commission reuse capacity to meet through supply chains. for trading recovered resources. such goals. Shape Incentives and Markets Support Applications of 'New' Water SOLUTION PROVIDERS: Provide Expertise and Innovation Shape financial and economic incentives through Assess opportunities for the sale of used water and market design and pricing, particularly with the aim of recovered resources to provide revenues for treatment Where appropriate, support the design, construction, delivering water services, and supporting job creation of used water. and operation of advanced used water treatment and and economic development. reuse facilities through public–private partnerships in various forms of design–build–finance–operate– transfer (DBFOT) and/or engineering–procurement– Provide Core Funding Plan Land Use with Reuse in Mind construction (EPC) contracts. Supply public funding and/or undertake direct public Enable industrial zones and parks to be located in the Accelerate innovations in treatment technology and investment in infrastructure that shapes the supply vicinity of used water treatment plants, with the level reuse infrastructure to bring down costs over time and side of the market, including alternatives, and hence of treatment adapted to the type of reuse application. promote the scaling of reuse. changes relative costs between alternatives. Support Programmatic Approaches with Facilitate Stakeholder FINANCIERS: Private Sector Participation Acceptance and Education Finance Reuse Investments Use public resources efficiently to create Engage in stakeholder education and consultations, Support financing for reuse through appropriate programmatic approaches, with bankable projects that including with citizens and industry, to normalize the financing instruments and partnerships with the can attract commercial financing and private sector use of new water. public sector. expertise for delivery. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 18 TOC 1.WHY reuse bereta/Adobe Stock TOC 1. Why Benefits Urgency Economics Business Case 1.1 Benefits of Reuse Increasing water stress and pollution require urgent alternative solutions, which reuse can provide, serving as a much-needed resilience and climate adaptation strategy. Water resources around the world are under increasing stress, affecting livelihoods, the economy, and the environment.1 Four billion people face severe water scarcity for at least one month each year, with half a billion experiencing water scarcity year-round.2 This water stress is projected to increase. Moreover, 10% of global gross domestic product (GDP) comes from regions of high water risk (Figure 10), potentially increasing to 46% by 2050 due to climatic and socioeconomic changes.3 In addition, 430 million cubic meters of untreated ‘waste’ water is discharged into the world’s rivers, lakes, and aquifers every day,4 and poor water quality could reduce economic growth by one-third.5 In this context, water reuse can serve as a climate-proofing approach to mitigate against the risks of water stress, as well as to support fit-for-purpose treatment. • Creating clean water from used water can free up freshwater for other uses Climate Mitigation and Adaptation Scarcity and reduce the pressure on scarce resources, particularly in coastal areas.6 • Moreover, reuse provides a reliable supply in conditions of scarcity and drought. These approaches support resilience and climate adaptation at the city, basin, and national levels against variability in freshwater availability and contamination • Reuse can provide the impetus to treat used water, while generating of freshwater sources.7 Pollution revenues from the sale of new water and resources recovered, which can defray some of the costs of treatment. Reuse is more energy-efficient than desalination. Although overall emissions from reuse systems depend on the energy requirements for pumping and treatment, sludge digestion and biogas captured through the • Reuse improves resource efficiency by increasing the value added per unit process of treatment can reduce methane emissions. Efficiency of water used and can improve cost efficiencies compared to alternatives, such as desalinated water and the construction of new dams. 1 Fan Zhang et al., “ Water for Shared Prosperity,” (Washington, DC: World Bank, 2024). 2 Edward R. Jones et al., “Country-Level and Gridded Estimates of Wastewater Production, Collection, Treatment and Reuse,” Earth System Science Data 13, no. 2 (2021): 237–54. 3 Dalberg Advisors, High Cost of Cheap Water: The True Value of Water and Freshwater Ecosystems to People and Planet (Gland, Switzerland: WWF, 2023). 4 Calculation based on data from Jones et al. (2021). 5 Richard Damania, et al., Quality Unknown: The Invisible Water Crisis (Washington, DC: World Bank, 2019). 6 Not all reuse applications result in additional water available. Where the ‘waste’ water is already being used through de facto reuse, such reuse in effect substitutes de facto reuse with formal reuse. See definition of de facto reuse in Annex 1. 7 City water systems also need to be designed to be resilient. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 20 TOC 1. Why Benefits Urgency Economics Business Case 1.2 Urgency of Reuse FIGURE 10: Share of global GDP Water stress is one of the main drivers for reuse. Most reuse activities take from regions of high water risk2 place in basins with high and extreme water stress. 46% Countries and regions with high levels of water stress are more actively engaged in reuse activities. The United States and China have the largest reuse markets. There is extensive reuse in the Middle East and North Africa, as well as in Southern Europe. Reuse investments are growing fast in India, and there are reuse activities in Mexico, South Africa, 10% and other water-stressed countries. Within countries, reuse is concentrated in areas of high water stress (Map 1), such as the Western and Southern United States and the northern parts of China, and in the water-stressed parts of countries that have abundant water resources, such as Brazil. 2023 2050 MAP 1: Current water stress at the sub-basin level1 1 Water Resources Institute, Aqueduct 4. Baseline water stress for the period 1979 to 2019. 2 WWF Water Risk Filter. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 21 TOC 1. Why Benefits Urgency Economics Business Case Water scarcity and stress provide the most pressing and urgent reason for water reuse at a city level. With an increasing number of cities facing perennial and seasonal water scarcity, reuse can support resilient pathways for reducing the gap between water demand and supply. By 2050, 70% of the global population will be living in cities (Figure 11), driving up demand for water.1 The number of large cities with a population over 1 million exposed to water risks is expected to rise from 193 in 2023 to 284 by 2050 (Figure 12), including 20 megacities (Map 2). In these cities, 2 billion people—half of the global urban population—will be affected by water-related challenges. With an increasing gap between water demand and water supply, cities can support reuse to meet growing municipal and industrial requirements. FIGURE 11: Share of the population MAP 2: Cities in perennial and seasonal water scarce areas2 living in urban areas1 70% 56% 2023 2050 Water scarcity: sub-basin FIGURE 12: Number of cities with Arid and low water use population over 1 million exposed to Non-water scarcity water risks2 Seasonal Perennial 284 City-level (millions of people) 193 Perennial: <1 Seasonal: <1 Perennial: 1–5 Seasonal: 1–5 Perennial: 5–10 Seasonal: 5–10 Perennial: 10 Seasonal: 10 2023 2050 1 World Bank estimates accessed Jan 31, 2025. 2 Chunyang He et al., " Future Global Urban Water Scarcity and Potential Solutions," Nature Communications 12, 4667 (2021). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 22 TOC 1. Why Benefits Urgency Economics Business Case By 2050, the number of megacities with a population over 10 million is expected to increase, putting additional pressure on scarce water resources and enhancing the case for reuse. MAP 3: Megacities (with a population over 10 million) in 2024 and 20501 Population in 2050 10 to 16 million 16 to 32 million 32 to 50 million Population in 2022 10 to 16 million 16 to 32 million 32 to 50 million 1 Oxford Economics, Global Cities, November 2023. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 23 TOC 1. Why Benefits Urgency Economics Business Case With untreated used water harming human health, ecosystems, and economies, water reuse can provide an impetus toward greater treatment. The health consequences of untreated used water are severe, with 395,000 children under five dying each year from illnesses linked to unsafe water, sanitation, and hygiene.1 Meanwhile, used water systems contribute 5–8% of global emissions of methane,2 a potent greenhouse gas with 80 times the warming potential of carbon dioxide (CO2) over 20 years, making it a major driver of near-term warming (Map 4). MAP 4: Untreated used water flows to the environment3 1 World Health Organization, "Executive Summary," in Burden of Disease Attributable to Unsafe Drinking-Water, Sanitation and Hygiene: 2019 Update (World Health Organization, [2019]),. 2 Cuihong Song, et al., "Methane Emissions from Municipal Wastewater Collection and Treatment Systems," Environmental Science & Technology. 57, no. 6 (2023): 2248–61. 3 Jones et al. (2021). Used water is typically referred to as wastewater in this context. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 24 TOC 1. Why Benefits Urgency Economics Business Case High levels of biological oxygen demand—an indicator of polluted water—show the impact of untreated used water on the environment. Jones et al. (2022) report that "a substantial proportion of rivers stretches across populated areas of all continents experience moderate-to-high organic pollution" and that domestic and industrial used water are key sources of this pollution (Map 5).1 MAP 5: Water quality, biological oxygen demand1 Biological oxygen demand (BOD) measures the amount of dissolved oxygen consumed by microorganisms to decompose organic matter in water over five days at 20° Celsius (BOD5). Sources of this type of contamination are sewage, food waste, agricultural runoff, and industrial effluents. 1 E.R. Jones et al., " Global Hydrology and Water Quality Data from 1980–2019,Derived from the Dynamical Surface Water Quality Model (DynQual) at 5 Arcmin Spatial Resolution," Geoscientific Model Development 16 (2022): 4481–4500, Zenodo. The information corresponds to 2019. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 25 TOC 1. Why Benefits Urgency Economics Business Case Existing used water treatment infrastructure offers the potential for accelerated reuse. MAP 6: Existing used water treatment plants1 1 HydroSHEDS, HydroWASTE Database. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 26 TOC 1. Why Benefits Urgency Economics Business Case Reuse is a critical element in a portfolio of water security solutions that cities, governments, and corporates should consider in a context of increasing water scarcity and climate-related water stress. Water security strategies can no longer FIGURE 13: Reuse as insurance against climate and water stress1 afford linear pathways, assessing one solution at a time. A portfolio approach is needed in the context of increasing variability in climate-related risks, Independent Reuse Rainfall- with extreme events such as droughts Proportion of Supply becoming more frequent. In this Groundwater context, investments in reuse are Desalination complementary to other water demand reduction and supply augmentation Dependent strategies and not a substitute. This Rainfall- is because reuse increases reliability Surface Water of supply in cases of scarcity (Figures 13, 14). Low Climate and Water Stress High FIGURE 14: Reuse in a portfolio of water security options Demand-Side Solutions Supply-Side Solutions Water Use Surface Efficiency and Groundwater Reuse Water Desalination Non-Revenue Abstraction Abstraction Water Reduction 1 Authors’ visualization. The relative proportions of supply from different sources are illustrative only. Actual proportions will vary depending on the context. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 27 TOC 1. Why Benefits Urgency Economics Business Case Water reuse needs to be planned within an overall context of water resource management and allocation, adopting a systems approach and ensuring social equity. In coastal areas, water reuse offers a net addition of freshwater into the system from used water that would otherwise flow out to the sea. In inland areas, reuse may result in a substitution in how water is used, moving from de facto reuse to planned reuse. Such reuse may have an impact on downstream water users. Reuse plans need to be integrated within overall water allocation planning at the basin level, taking into account the effect of reuse on return flows to the environment and any existing rights of users to this water, including informal use by small-scale irrigators, which occurs in some part of India, for example. FIGURE 15: Reuse reduces return flows to freshwater systems in inland areas1 Water supply Drinking water Diversion Used water Reuse Drinking Water Advanced water purification Treatment Advanced Water Purification Virgin Industry River Return Flow Communities Water Reclamation 1 Authors' visualization based on Washington County Water Conservancy District, “Regional Reuse Purification System.” Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 28 TOC 1. Why Benefits Urgency Economics Business Case 1.3 Economics of Reuse Reuse can make good economic sense where collection infrastructure is in place and the treatment facility is close to the point of reuse; yet global installed capacity remains low, at 12% of withdrawals for the municipal sector. Where used water collection infrastructure is in place and the treatment facility is close to the location of reuse, reuse may present a strong business case compared to developing new water sources—such as constructing new dams, reservoirs, or desalination plants. The cost per cubic meter of non-potable reuse water, based on levelized water costs for treatment, ranges from US$0.30 to US$0.55, while potable reuse costs US$0.5 to US$0.75—significantly lower than desalination, which ranges from US$0.50 to US$1.90 per cubic meter (Figure 16). Despite its advantages, global installed reuse capacity in 2024 stood at 183 million cubic meters per day. Installed reuse capacity has tripled over the past 20 years and grew at a rate of 6.7% per year over the period from 2015 to 2024, compared to an annual growth rate of 4.3% over the period from 2005 to 2014 (Figure 17). Even with this growth, however, reuse was only 12% of total municipal freshwater withdrawals in 2024 (Figure 18), highlighting the untapped potential for scaling up. FIGURE 18: Reuse as a % of freshwater withdrawals for the municipal sector FIGURE 16: Cost per m3 of water (US$)1 FIGURE 17: Total global installed reuse capacity (million m3/day)2 (million m3/day)3 $2.0 1800 1532 $0.50-$1.90 200 $1.8 1600 183 $1.6 p. a % 1400 6.7 $1.4 150 1200 $1.2 1000 $1.0 $0.50-$0.75 100 4.3% p.a 800 $0.8 =~12% reuse $0.6 $0.30-$0.55 600 =~3% reuse 183 $0.4 50 400 $0.2 200 53 $0.0 0 0 Non-potable Potable Desalination 2005 2015 2025 Industrial Total Withdrawals reuse reuse and potable reuse reuse 1 Levelized water costs from World Bank and IFC treatment plant project data and GWI project data; excludes collection and distribution infrastructure costs. Levelized water costs include the cost of capital and depreciation, as well as operating costs. 2 Global Water Intelligence, IDRA Desalination and Reuse Handbook 2024–2025 (Oxford: GWI, 2024). Excludes water reuse labelled as environmental enhancement in the dataset. 3 Municipal freshwater withdrawal from AQUASTAT, 2021 data escalated to 2024 at 2% annual growth, and GWI data for installed reuse capacity. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 29 TOC 1. Why Benefits Urgency Economics Business Case 1.4 Business Case for the Public and Private Sectors The business case for reuse is strongest where water is valued, costed, and priced appropriately. When the price of water reflects its full Investments in reuse will be financially attractive costs, including the cost of displacement and to both governments and businesses when the contamination of water from its natural state, reuse marginal cost of reuse is less than the alternatives. will present a compelling case in many situations, especially in the context of water-scarce and Reuse investments are more favorable where: polluted environments. Price of • Used water collection and treatment The cost of reclaimed water should be compared infrastructure is already in place to meet Water to the true lifecycle costs of alternative sources, standards for environmental discharge, and only not the price of subsidized water. These costs incremental treatment costs need to be incurred Business should include: to facilitate reuse. Case for • Abstraction costs • Used water is available close to the point of use, which tends to be the case for urban centers and • Treatment costs Reuse • Pollution abatement costs industrial parks, lowering costs for distribution • Energy costs infrastructure. Cost of • Opportunity cost (scarcity) • The cost of alternatives reflect full costs, and Water • Capital costs, depreciation, and renewal costs not a subsidized price of water. • Operations and maintenance costs • Environmental externalities • Reuse applications have high value, combined with a willingness to pay. This is the case for Value of Reuse is an economically and socially compelling industrial as well as potable water use. In addition, option when the value of water incorporates these Water where water scarcity risks are pronounced, important dimensions: stakeholders may have a higher willingness to • Economic: Growth of agriculture, industry, urban pay for assured supply. development • Treatment of used water is combined with • Social: Universal right to access clean and safe resource recovery (for example, phosphorus, drinking water and sanitation nitrogen, metals, and energy), as well as biosolids • Environmental: Ecological flows and protection management. of water sources for current and future generations • Cultural and spiritual: Values placed on water by different sections of the community and cultures Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 30 TOC 1. Why Benefits Urgency Economics Business Case Corporates can support reuse to address a combination of water-related risks: physical, regulatory, and reputational. Among listed equities, 69% are exposed to water risks, estimated at US$225 billion.1 Water scarcity, evolving regulations, and stakeholder expectations are increasing pressure on businesses to manage water more sustainably. Reuse offers a practical approach to mitigating physical, regulatory, and reputational risks while enhancing resilience and operational efficiency (Figure 19). Furthermore, global companies may choose to signal more sustainable production practices to their customer base, making reuse applications an attractive option. FIGURE 19: Corporate water risks2 O pe r ati o n s D i re c t Physical Risk: Reputational • Lack of water availability or reliability for business operations, with the risk of stranded Risk: Threats to a company ’s Physical assets. social license to operate through • Excessive pollution leading to higher energy, reduced stakeholder esteem (real water, insurance, and other costs. or perceived), arising from negative water-related impacts, for example: Opportunity: Reclaimed water as an assured source of water supply of consistent quality • Abstraction of water from a water- Corporate for operational and supply chain use, where stressed basin. Water available in close proximity to business • Perception of environmental pollution by consumers. Risks operations. Opportunity: Demonstration of Reputational Regulatory Regulatory Su p sustainability-focused strategy ts ke through reuse. ply Risk: Imposition of caps on water allocation and r Ma Ch s in a set discharge standards. Opportunity: Reuse as a mechanism to reduce the need for freshwater as intake water and to meet discharge requirements. 1 CDP disclosure, as reported in CDP, High and Dry: How Water Issues Are Stranding Assets (London: CDP, 2022). 2 Authors’ visualization; built on BlueRisk’s articulation of risks. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 31 TOC 1. Why Benefits Urgency Economics Business Case While freshwater costs as a percentage of corporate revenues remain low, the high level of water disclosure by the top companies across most sectors indicates the importance of good reputational standing, which reuse can reinforce. This trend underscores the growing recognition that sustainability practices, including water reuse, can reinforce public trust and align with stakeholder expectations in an increasingly water-stressed world. High water withdrawal intensity in sectors like chemicals, pulp and paper, and apparel and textiles highlights their reliance on water for revenue generation, while their comparatively low economic efficiency points to significant opportunities for improvement. When direct costs to businesses from water tariffs are low, the primary drivers for adopting reuse strategies often stem from addressing physical water risks, regulatory risks, and reputational risks (Figure 20). FIGURE 20: Freshwater tariffs and corporate revenues – the role of water reuse in strengthening reputational standing1 Freshwater withdrawals for the top Water intensity for the top companies by industry sector2 CDP water security disclosure companies by industry sector2 for top companies2 Freshwater expense # companies #A (millions of KL per year) (liters/US$ of revenues) (US$ of revenues/KL) (% of revenue) 3 disclosing scores Chemicals 4,645 13 76 1.31% 8 6 Pulp and paper 3,184 30 33 3.02% 7 3 Apparel + textiles 2,807 4 232 0.43% 4 1 Mining 2,236 7 137 0.73% 9 3 Pharmaceuticals 1,842 1 1,482 0.07% 2 1 Food + beverage 1,348 2 522 0.19% 10 5 Petroleum 203 0.4 2755 0.04% 9 4 Automobiles 196 0.1 9012 0.01% 9 8 0 2000 4000 6000 0 50 0 5000 10000 1 Figures are based on authors’ own estimates; these build on CDP disclosure reporting, supplemented with company-level environmental, social, and governance (ESG) reporting; selection of industries is based on annual revenues. In many cases, actual abstraction costs will be lower, especially for water intensive industries such as pulp and paper. Companies also incur costs for the treatment and discharge of used water. 2 Top 10 companies per sector, except for chemicals and pulp and paper, which cover the top 8 companies. 3 Freshwater expenses calculated with an abstraction cost of US$1 per cubic meter. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 32 TOC 1. Why Benefits Urgency Economics Business Case The rapid growth of data centers is placing increasing pressure on water resources in water-stressed regions, which could be alleviated through reuse. Global power use from data centers is forecast to double to 945 terawatt-hours in the period between FIGURE 21: Data center water demand 2025 to 2030, with the United States and China accounting for the largest share of this increase.1 Data (million m3/day)1 centers will account for nearly half of electricity demand growth between 2025 and 2030 in the United States and by 2030 will consume more electricity than the production of aluminum, steel, cement, chemicals and all other energy-intensive goods combined.1 3.3 The International Energy Association (IEA) estimates that data centers use about 1.5 million cubic meters of water per day on average and that this could more than double to 3.3 million cubic meters per 1.5 day by 2030 (Figure 21). According to the IEA, an average 100 megawatt hyperscale data center in the United States consumes around 2 million liters per day for both direct and indirect use. Direct water use varies significantly by data center, depending on the cooling technology and the local climate. Indirect water use also depends on the source of electricity supply and the manufacturing location 2023 2050 of semiconductors. In Malaysia , for example, there are concerns around the adequacy of water resources and the Malaysian water regulator has proposed to raise water tariffs significantly for data centers.2 Requiring data centers to use non-potable water sources has also been suggested.3 A partnership between a private company and the state-owned company Johor Special Water was recently announced to jointly develop a recycled water supply facility to supply data center campuses in the state of Johor. This will be the largest reuse plant of its kind in Malaysia.4 Production Perig/Adobe Stock 1 International Energy Association (IEA), "Energy and AI," (Paris: IEA, 2025). 2 Kamarul Azhar, " Nationwide Water Tariff Hikes in the Works, with New Category for Data Centres," The Edge Malaysia (March 24, 2025). 3 Zunaira Saieed, "Malaysia Water Regulator to Set Strict Water Rules for Data Centres as Number Grows," The Straits Times (February 10, 2025). 4 Vaughan O'Grady, " C an Malaysian Water Reuse Scheme Address the Challenges of Data Centre Growth? " Developing Telecoms (April 7, 2025). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 33 TOC 2.WHEN is the tipping point for reuse? samael334/Adobe Stock TOC 2. When Constraints Lessons Tipping Points Countries 2.1 Constraints to Reuse Even with compelling benefits, reuse remains low due to weak pricing incentives and the ready availability of cheap freshwater. The Case for Reuse Constraints to Reuse Failed Attempts to Support Reuse Reuse investments are hard to finance where Cost Competitiveness Free Access to Freshwater tariffs are low and where regulations are either Freshwater, even where limited, is made readily available for not reuse-friendly or not enforced. Reuse is economically municipal and industrial use in many geographies, undermining favorable relative to various the move toward used water. sources of new water, India particularly desalination Installed reuse capacity in India of 4.3 million and long-distance water cubic meters per day is less than 3% of transfers Lack of Regulations and/or Enforcement municipal freshwater withdrawals. Even though Regulations linked to freshwater abstractions and discharges of many of India's states have regulations requiring used water in many markets are either missing or not enforced. industries to use ‘new’ water, enforcement is In addition, there is often an absence of appropriate regulations weak. Water tariffs in India's cities are among Insurance Against Water and standards enabling the use of new water and lack of clarity the lowest in the world (Figure 22). Scarcity around the rights to such water. As a hydrologically Brazil independent source, reuse The absence of hard abstraction limits offers a steady source Weak Pricing Incentives for industries means that it is cheaper for of water from treatment Freshwater supply in municipal and industrial contexts is often industries to abstract freshwater than to use facilities heavily subsidized, curtailing the growth of the reuse market. new water. Consequently, some attempts to implement industrial reuse have failed. Weak Institutional Coordination FIGURE 22: Water tariffs in Indian cities (US$/m3 Valuable Resource Different line ministries are often involved in water and used for 15 m3), compared to international cities1 Used water that flows out water investments, with limited coordination across them. to the sea is essentially a $3 wasted resource, which $2 could otherwise be tapped Cultural and Behavioral Constraints for valuable social and Public acceptance of reuse, particularly potable reuse, remains $1 economic purposes challenging in many contexts. $0 571 global cities Indian cities 1 Authors’ assessment based on Global Water Intelligence, Global Water Tariff Survey 2022 (Oxford: GWI, 2022). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 35 TOC 2. When Constraints Lessons Tipping Points Countries 2.2 Lessons from the Renewable Energy Sector The renewable energy market has scaled rapidly through supportive policies and cost reductions arising from innovation, scale, and competition, offering lessons for reuse. Clear Ambition Increase in Investments Reducing Costs Governments have implemented ambitious Investment in renewables Solar photovoltaic and wind installed capacity grew renewable energy policies and targets, which have has accelerated as a result of at 24% per year since 2000, linked to substantial played a crucial role in driving investment. supportive policies and lower reductions in cost, driving large-scale adoption costs. The share of renewables (Figures 23, 24). For instance, China's renewable energy targets under in global electricity generation its 14th Five-Year Plan have significantly boosted has increased significantly By 2023, 81% of new renewable capacity additions solar and wind installations, with China accounting since 2010, reaching close to were producing electricity at costs lower than fossil for a substantial portion of global renewable 30% by 2023.3 fuel alternatives, making them an attractive option.4 capacity additions in recent years.1 Similarly, the European Union's REPower EU Plan and the Green Deal Industrial Plan have accelerated solar and wind deployment in Europe.2 By 2023, 28 countries had developed gigawatt-scale solar markets. FIGURE 23: Solar levelized costs (US$ per kWh) and FIGURE 24: Wind levelized costs (US$ per kWh) and installed capacity for 2000–23 (GW)5 installed capacity for 2000–23 (GW)5 Installed capacity GW Installed capacity GW 1000 1000 0.4 0.1 US$ per kWh US$ per kWk 500 500 0.2 0.05 0 0 0 - 2000 2005 2010 2015 2020 2000 2005 2010 2015 2020 Solar installed capacity Levelized costs Wind installed capacity Levelized costs 1 See 14 th F ive-Year Plan: Modern Energy System Planning (2021-2025) . 2 European Commission, "REPowerEU at a Glance.” 3 International Energy Agency, "Global Overview," Chapter 1 in Renewables 2024: Analysis and Forecast to 2030 (Paris: IEA, 2024). 4 Energy Institute, Statistical Review of World Energy, 73rd Edition (London: Energy Institute, 2024). 5 Authors’ visualization based on International Renewable Energy Agency, Renewable Power Generation Costs in 2023 (Abu Dhabi: IRENA, 2024). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 36 TOC 2. When Constraints Lessons Tipping Points Countries While cost reductions for reuse are not expected to be as dramatic as those achieved for renewable energy, certain common principles still apply as investments in reuse scale. FIGURE 25: Common principles across investments in renewable energy, desalination, and reuse Competitive pressure Renewable energy has been developed and financed by the private sector based on long-term supply contracts. This has through price discovery of the advantage of enabling competitive bids based on a levelized cost of energy. A similar approach has been adopted for levelized treatment costs in desalination, with the structuring of long-term contracts through various forms of design-build-operate (DBO) contracts long-term contracts becoming common practice. Price disclosure for reuse investments can create similar competitive pressures on costs. Clear policy goals Renewable energy investments were driven by a carbon constraint and clear policy goals related to this. Freshwater faces a similar supply constraint, together with reliability and quality challenges. These warrant governments setting clear policy goals, particularly in water-stressed contexts. Reduced risk premiums The potable reuse market is still immature, with a small number of projects, high costs, and large cost variance (Figure across the full project and 26). Risk premiums associated with projects will decline as the market for reuse matures. Risk premiums can make up financing lifecycle as the 30% of total costs. The maturing desalination market had reduced this risk premium to 10–20% of total costs by 2012 market matures and has achieved even greater reductions in recent years.1 Project optimization through There are significant cost efficiencies to be gained through a programmatic approach, with reduced transaction costs a programmatic approach and greater speed of implementation, in a similar way to that achieved for renewable energy. FIGURE 26: Number of plants set up for potable reuse vs desalination from 1970 to 20202 25,000 20000 20,000 15000 15,000 9205 10,000 Desalination 1 WateReuse Association, “ Seawater Desalination Costs 5439 White Paper,” (Alexandria, VA: WateReuse, September 478 2384 Reuse - Purified drinking water 5,000 2011, revised January 2012); Mordor Intelligence, 16 30 “Desalination System Market Analysis: Industry Report, 1 3 4 6 Size, and Forecast (2025–2030).” 0 2 Pacific Institute, “The World’s Water. 2006-07 Data. Table 1970 1980 1990 2000 2010 2020 22.”; GWI desalination project tracker data; Water360, “WSAA Purified Recycled Water Maps Package 250315.” Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 37 TOC 2. When Constraints Lessons Tipping Points Countries The market for purified drinking water is still small. Scaling of this market could support standardization of technologies and processes, and thereby the optimization of costs. FIGURE 27: Evolution of purified water projects by settlement size (1960s to 2030s)1 Large > 1m Planned Medium Under construction Small < 100k Operating 12 Large 25 Medium 23 Small 1960s 1970s 1980s 1990s 2000s 2010s 2020s 2030s 1 Authors’ visualization, based on Water360 data. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 38 TOC 2. When Constraints Lessons Tipping Points Countries In addition, reuse investments present certain unique factors, linked to technology, energy use, process optimization, and resource recovery. FIGURE 28: Cost factors specific to reuse • Reuse is expected to follow a similar market-maturing trajectory to that achieved in desalination, which Market maturity cur ve for now has more than 20,000 plants in operation (Figure 26) and has experienced significant cost reductions infrastructure intensive services through contract design, learning by doing, and higher prevalence of larger-scale projects (Figure 25).1 Lower energy intensity • Moreover, reuse is much less energy-intensive and does not have expensive sea-intake infrastructure compared to desalination requirements. All things being equal, reuse is expected to be significantly less costly than seawater desalination.2 Process innovation3 • The market for reuse membranes is small, offering room for innovation and scale to reduce costs, particularly with respect to biofouling. • Reducing membrane costs • Breakthroughs in real-time, low-cost water quality monitoring, which reduce quality risks, could be a • Breakthroughs in real-time, low- game changer for reuse. cost water quality monitoring • Improving energy recovery efficiencies and the use of renewable energy—while also reducing costs—can • Lower energy costs through make reuse more cost-effective. energy recovery and reducing renewable energy costs • Unit costs for reuse can reduce further through the standardization and optimization of processes, as the • Lower unit costs through industry scales, and through the application of artificial intelligence. standardization and process optimization, and application of artificial intelligence Resource Recovery • Mineral and metal recovery through reuse offers opportunities to improve the viability of reuse and promote the circular economy. 1 Beatriz Mayor, “Multidimensional Analysis of Nexus Technologies I: Diffusion, Scaling and Cost Trends of Desalination,” International Institute for Applied Systems Analysis Working Paper WP-18- 006 (June 2018). 2 See case studies on Singapore and Cape Town. 3 For a summary description of some recent innovations in used water treatment, see Aquacycl, “13 New Technologies That Are Changing the Wastewater Treatment Landscape,” (December 22, 2023). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 39 TOC 2. When Constraints Lessons Tipping Points Countries 2.3 Tipping Points for Reuse Transitioning through five tipping points will accelerate reuse investments at scale. FIGURE 29: Five tipping points for the creation of new water from used water at scale Current Status Tipping Point Desirable Future Clean freshwater is appropriately Freshwater is overexploited Available freshwater is Clean water is valued, incorporating its scarcity value, and polluted without any Value of Clean Water undervalued appropriately valued and polluters bear the cost of polluting consequences for users. freshwater. Used water is only reused in Use of new water is considered normal exceptional circumstances, Reuse is supported in Reuse is normalized as Market Penetration & Size and routinely included in municipal and such as severe water special circumstances a routine application industrial water security strategies. scarcity. Each project is considered All projects comprise standardized Standardized to be uniquely challenging, Bespoke applications Market Scale & Maturity components with well-defined delivery and applications with high risks. pricing models, and with well-managed risks. Most treated used water Preferential use of new water in high-value is allocated to low-value High-value Low-value applications Application applications, particularly for industrial and applications, such as applications potable use. landscaping. Reuse costs are reduced through Reuse is publicly funded, Reuse is subsidized & Private innovation competition and price disclosure, and and new water is heavily Delivery & Financing publicly funded & financing private financing is unlocked through the subsidized. design of bankable projects. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 40 TOC 2. When Constraints Lessons Tipping Points Countries The pace of investments in reuse is accelerating globally. • More than 20 countries have active reuse programs in the form of supportive policies, regulations, and/or 22 countries are implementing reuse investment initiatives. • Installed reuse capacity grew at a rate of 6.7% per year over the period from 2015 to 2024, a significant increase over the annual growth of 4.3% between 2005 and 2014 (Figure 30). • Reuse investments are shifting toward high-value applications, which are more sustainable and easier Reuse investments are growing at a to finance. While low-value reuse applications, such as agricultural irrigation and urban non-potable faster pace use dominate the existing installed capacity base, industrial reuse is growing rapidly, driven largely by legislation in China and India. • Potable reuse has greater acceptability and the potential to be mainstreamed. Potable reuse is expanding, as utilities face the impact of worsening water scarcity. This is particularly evident in the United States. There is a shift toward higher-value Indirect potable reuse, in particular, appears to be gaining wider acceptance. The number of projects applications producing potable water is growing rapidly (Map 8). • Reuse is less energy-intensive and lower cost compared to desalination, making it attractive from both cost and climate perspectives. FIGURE 30: Reuse potential by 2040, in million m3/day1, 2 Total reuse (installed) 840 ~50% of municipal 800 freshwater withdrawals Industrial & potable reuse Annual growth of 10% in total water reuse until ~25% of municipal (installed) 2040 can meet 50% of municipal freshwater and industrial water withdrawals combined withdrawals and 25% of municipal and industrial 600 ~12% of municipal freshwater withdrawals combined, amounting freshwater withdrawals 10% p.a. 430 to 840 million m3 per day of capacity. ~25% of municipal 400 freshwater withdrawals 6.7% p.a. ~13% of municipal 183 14% p.a. and industrial water 4.3% p.a. Annual growth of 14% in industrial and 200 withdrawals combined potable reuse until 2040 can meet ~25% 53 of freshwater withdrawals for municipal use and 13% of municipal and industrial 0 withdrawals combined, amounting to 430 2005 2015 2025 2035 million m3 per day (Figure 30). ~3% of municipal freshwater 8.1% p.a. 8.7% p.a. withdrawals Notes: Installed capacity from GWI data; municipal freshwater withdrawals assumed to grow at 1% per year. 1 Authors’ estimates. 2 In addition to industrial and potable reuse, total reuse includes agricultural irrigation (amounting to 88 million cubic meters per day in 2024), landscape irrigation (amounting to 21 million cubic meters per day in 2024), urban non-potable reuse (17 million cubic meters per day in 2024), and recreational/miscellaneous reuse (4 million cubic meters per day in 2024). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 41 TOC 2. When Constraints Lessons Tipping Points Countries 2.4 Countries with Significant Water Reuse Activity Several countries are mainstreaming reuse in their water security strategies. China, the United States, and India represent the three largest markets for reuse. In addition, there is significant reuse activity in the Middle East and North Africa region, particularly in Egypt, Israel, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. Various other countries, such as Brazil, Chile, France, Malaysia, Mexico, Peru, the Philippines, Singapore, South Africa, Spain, and Taiwan are investing in new water infrastructure. MAP 7: Countries with significant water reuse activity1 Areas with Significant Water Reuse Activity MENA Largest reuse markets Other countries 1 Authors’ analysis, based on GWI and other data. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 42 TOC 2. When Constraints Lessons Tipping Points Countries The United States represents one of the largest markets for potable reuse, with significant activity in other countries, such as South Africa. MAP 8: Global new water locations1 Washington County, Oregon United States South Africa Québec City, Canada EMalahleni, Mpumalanga Big Sky, Montana Anne Arundel County, Maryland Bloemfontein, Reno, Nevada South Jordan, Utah Westminster, Maryland Free State Province Loudoun County, Aurora Virginia Ballito, Washington Castle Rock Beaufort West, KwaZulu-Natal County, Utah Upper Occoquan, Colorado Springs Virginia Western Cape Pietermaritzburg, Bartlesville, Oklahoma KwaZulu-Natál Scottsdale/ Hampton Roads, Norman, Oklahoma Virginia Scottsdale, Arizona Atlantis, Gwinnett County, Western Cape Georgia Cape Town, George, Clayton County, Western Cape Western Cape Phoenix, Georgia Arizona Cloudcroft, CALIFORNIA New Mexico Cambria (Small) CURRENT PLANNED FUTURE Yucalpa (Small) Medium Small Large East San Diego (Small) El Segundo (Small) TEXAS Global Santa Cruz (Small) El Paso (Small, two) Los Angeles (Medium) Abilene (Medium) Santa Monica (Small) Colchester, UK Oland, Sweden Conejo Valley (Medium) Big Spring (Medium) Highland (Medium) Minworth, UK South Orange (Medium) Wichita Falls (Medium) Wulpen, Belgium Monterey (Medium) Langford, Essex, UK Vendée, France Antelope Valley (Medium) Tarrant (Large) Hampshire, UK Oceanside (Medium Roses, Spain Pure Water Southern North Texas (Large) Rous, San Diego (Large) (Large) León, Mexico Barcelona, Spain Parañaque City, New South Wales Orange County (Large) Philippines FLORIDA Lower Hunter, Pico Rivera (Large) Bangalore, India Camp Pendleton (Small) Jacksonville (Small) Long Beach (Large, Two) New South Wales Laguna (Small) Palm Beach (Small) Singapore Carpinteria (Small) Tri-Valley (Medium) Hillsborough (Medium) Central Coast, Morro Bay (Small) Los Angeles (Medium) Windhoek, Namibia South East Queensland New South Wales Clear Water (Small) Central Coast (Small) Rancho California Perth, Sydney, Inland Empire (Small) (Medium) Polk (Small) Western Australia New South Wales Burbank (Medium) Santa Clara (Large) Clay county (Small) Ventura (Medium) San Francisco Altamonte Springs (Small) Orange, Auckland, San Jacinto (Medium) (Large, three) Plant City (Medium) New South Wales New Zealand Notes: Current refers to operating or in construction plants, planned to planned locations, and future to exploring or educational locations. Small are plants that serve less than 100,000 people, medium serve between 100,000 and 1 million people, and large serve more than 1 million people. 1 Authors’ visualization based on work by Water Services Association of Australia Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 43 TOC 3.WHAT is the investment opportunity? ENGINEER - STUDIO/Adobe Stock TOC 3. What Market Size Financing Instruments Delivery Models 3.1 Market Size for Reuse Facilitating potable and industrial reuse of 25% of municipal freshwater withdrawals represents approximately an eightfold increase in reuse over current levels. Expanding water reuse presents a major investment opportunity. Increasing total reuse from the current 12% to 50% of freshwater withdrawals1 for municipal use by 2040 represents a 4.6-fold increase (Figure 31). On the other hand, the expansion of potable and industrial reuse from the current 3% to 25% of total freshwater withdrawals for municipal use represents an 8.1-fold increase (Figure 32). FIGURE 31: Total reuse in 2024 vs future reuse potential in FIGURE 32: Potable and industrial reuse in 2024 vs future 2040 of 50% as a fraction of total freshwater withdrawals reuse potential in 2040 of 25% as a fraction of total for municipal use (million m3/day)1 freshwater withdrawals for municipal use (million m3/day)1 900 60% 500 30% 840 800 450 430 50% 50% 25% 25% 400 700 ~5x increase 350 600 40% 20% 300 ~8x increase 500 30% 250 15% 400 200 300 20% 10% 183 150 200 100 53 12% 10% 5% 100 50 3% 0 0% 0 0% 2024 2040 2024 2040 1 Authors’ estimates. The Global Commission on the Economics of Water advocates for a reuse ambition of 50%. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 45 TOC 3. What Market Size Financing Instruments Delivery Models Market maturity is needed to optimize reuse costs. The current reuse market has limited price disclosure, resulting in wide variance in reuse costs. When more competitive bids are structured on a levelized cost basis with price discovery, the market opportunity will become more defined (Figure 34 and Section 2.2). Investments will scale as reuse opportunities become cost-competitive relative to the alternatives on account of reducing costs, creating a reinforcing positive investment cycle (Figures 33 and 34). FIGURE 33: Current reuse investment landscape FIGURE 34: Future reuse investment landscape with cost transition through scale1 Limited Price Discovery y The scale of investments in triple-barrier a cit treatment is small, with limited price cap Cost of reused water se disclosure. There is both limited data and a eu dr wide distribution in reuse costs for existing Unit costs alle projects, characteristic of a nascent st In global market. High Costs High costs are a barrier to scaling investments because the marginal cost for reuse is often higher than the Immature market at Scaling Reuse Mature market at available alternatives. low scale larger scale Current context Ambition 1 Authors' conceptual framing. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 46 TOC 3. What Market Size Financing Instruments Delivery Models Investments to meet the reuse ambition will depend on economies of scale and cost reductions achieved and could range from US$170 to US$340 billion. Learning from experience in renewable energy (Section 2.2), the desalination market (Figure 35), and the impact of price disclosure for used water treatment (Figure 36), an appropriate ambition could be to reduce the cost of reused water to 50% of that for desalination, which is much more energy-intensive. Investment estimates are uncertain because of the immaturity of the market and the high variance in costs. Assuming unit capacity costs in the range of US$400 to US$800 per cubic meter per day of capacity added for triple barrier treatment, and excluding collection and distribution costs, the investment opportunity to scale reuse is of the order of US$170 to US$340 billion (Figure 37). These estimates will be refined as the market develops. Knowledge transfers from one country to another can also help with market maturity and technological improvements. FIGURE 37: Investment opportunity for 430 million FIGURE 35: Reduction in seawater desalination FIGURE 36: Price disclosure for used water m3 per day of reuse capacity by 2040 – capital costs with market maturity1 treatment in Saudi Arabia (levelized costs per m3)2 expenditure estimates (US$ billions)3 90 $3.00 $400 $340 Unit cost of water in US$ per m3 Installed desalination capacity $350 (million m3 per day) 60 $2.00 $300 0.5 $250 30 $1.00 $200 R² = 0.9497 $150 $170 0 $0.00 0 $100 1990 2000 2010 2020 2017 2018 2019 2020 2021 2022 Investment opportunity 1 GWI data (low bids). 2 Public data on contract bid prices, from GWI. 3 Authors’ estimates. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 47 TOC 3. What Market Size Financing Instruments Delivery Models 3.2 Financing Instruments for Reuse Unlocking investments in reuse requires a combination of upstream sector reforms and the design of bankable projects with derisking. Higher risk Lower risk 1 Upstream Midstream Support for Sector Reforms 2 Leveraging Private Sector Downstream Expertise and Innovation 3 Finance Facilitation with De-Risking Strengthening Regulations, Pricing, and Incentives: Improving Operational Efficiency and Financial Sustainability: Delivering Reuse Ser vices and • Establishment of clear goals for Infrastructure , including Private reuse, with associated institutional Capital Mobilization: • Mobilization of private sector expertise accountability and innovation to support efficiency • Transparent financial management and innovation for 'new' water (tariff-subsidy reforms), allocation • Creation of blended models • Optimization of operating costs of funding to reuse, and strategic of financing and hybrid PPPs, and facilitation of investments in use of public resources to crowd combining public and private capital the circular economy (for example, in the private sector (for example, • Use of programmatic PPPs and biosolids management, resource guarantees, contingent financing) platform approaches for financing recovery for additional revenue) • Focus on improved sector planning • Strategic use of guarantees for de- • Utility turnaround strategies to support for collection and treatment systems risking creditworthiness for tapping private for used water, including utility-level • Development of risk sharing facilities capital for infrastructure investments master plans • Assessment of investor interest for • Application of different private sector green, blue, and sustainability-linked models for used water treatment financing and reuse, adapted to the context • Use of new financing solutions to (for example, performance-based unlock additional capital (for example, contracts, concessions) asset recycling to monetize the • Project preparation and capacity capital in existing infrastructure for building of municipalities new infrastructure creation) • Price discovery and derisking under public–private partnerships (PPPs) Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 48 TOC 3. What Market Size Financing Instruments Delivery Models Water reuse may require core public funding to incentivize investments and get to scale. Considering the multiple benefits of reuse, governments need to allocate core budget to support reuse programs to enable them to get to scale, including investments in used water collection and treatment. Such funding could stem from different sources: Financing backed by revenues from tariffs and user charges, including: • Water and used water tariffs that recover costs; • Abstraction fees and water resources fees that reflect the scarcity value and opportunity costs of water; and • Discharge fees that include the full cost of pollution. Funding from taxes: In the absence of revenues from customer fees for used water treatment and reuse, there may be a need for tax revenues to be contributed from central or local government. Public funding could incentivize reuse programs through viability gap funding, where needed, in order to make reuse projects viable, as the case of Fonadin in Mexico highlights. For the Atotonilco wastewater treatment plant project, Fonadin subsidized 49% of the initial PPP project costs, reducing perceived risks for investors.1 Limited public funding should aim to create conditions in which private finance can be mobilized to enable scaling. Anton/Adobe Stock 1 World Bank, Wastewater: From Waste to Resource - The Case of Atotonilco de Tula, Mexico, (Washington, DC: World Bank, 2018). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 49 TOC 3. What Market Size Financing Instruments Delivery Models Private capital mobilization for reuse projects remains low to date. Financing for reuse investments may be undertaken through traditional debt instruments (bonds and loans) , drawing upon a Considering the size of investments needed to facilitate 25% reuse of municipal suite of infrastructure finance options. freshwater withdrawals, public funding may be insufficient to support the scaling of reuse, necessitating the mobilization of concessional and commercial financing. For example, municipal bond issuances present a standard instrument to support infrastructure investments and upgrades Nonetheless, private investment in the treatment of used water and creation of at the municipal level. purified new water is hindered by a number of factors: Traditional debt financing for reuse requires formalization of governance and either: (1) long-term offtake agreements and/ or enforceable guarantees from a creditworthy entity (public or Affordability: private); or (2) hybrid approaches, which combine private water • Multiple jurisdictions suffer from the lack of willingness to charge for the purchase agreements with public guarantees. treatment of used water; collection and treatment charges could be covered in water bills. The choice of financing is influenced by a number of factors • Willingness to pay for the treatment of used water is another constraint, often lower (Figure 38). than for water supply, with resultant tariffs unable to cover even operating expenditure. FIGURE 38: Factors influencing the choice of financing Bankability: • Low tariffs and the subsidized price of water impact the bankability of projects. Alignment between project • In addition, the low creditworthiness of utilities constrains the ability to revenues and raise capital, coupled with a currency mismatch between the local currency- debt profile denominated water tariffs and hard currency financing of international lenders in many markets. Risk factors, Governance including framework demand risk and Capacity Constraints: financing risk • Absence of capacity, efficiency, and scale in local governments to develop and Financing for Reuse negotiate PPPs limits market and investor interest. Project-Specific Factors: • Difficulty in developing long-term water purchase agreements with larger Regulatory Value for offtakers impacts the development of bankable reuse projects. certainty money • Moreover, the lack of reliability in raw water quality affects the possibility of supporting reuse projects. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 50 TOC 3. What Market Size Financing Instruments Delivery Models Multiple financing instruments could be applied to reuse. Various financing mechanisms could be applied to reuse investments (Figure 39). As a first step, public and concessional resources should be prioritized for reuse, while ensuring efficiency in their use to crowd in private capital. Where missing, public funding may be needed for investments in used water collection and treatment to enable reuse. Private capital may be mobilized through traditional infrastructure (debt) financing; joint ventures; blended finance instruments that make use of climate finance; a variety of green, blue, and sustainability-linked financing and outcome bonds; as well as asset recycling.1 The specific financing instrument chosen will depend on a number of factors: FIGURE 39: Funding and financing options for reuse • Underlying Risk Profile of the Investment: Where reuse investments are not fully commercial, there may be a need to apply blended finance approaches, which make use of climate finance, considering the core contribution of Core Public Investments in Reuse reuse to adaptation and resilience. • Asset Ownership: Where the public and private sector intend to pool equity Infrastructure Debt Financing and expertise, joint ventures may be preferred. • Investor Preferences and Potential Premiums: Certain capital market Joint Ventures players may offer premiums for green and blue financing, where such investments meet core investment strategies. Others may prefer Blended Finance, including Use of Climate Finance outcome bonds and sustainability-linked financing, which align with their sustainability vision. • Presence of Existing Treatment Infrastructure: In cases where there is Green, Blue, Sustainability-Linked Financing and Outcome Bonds an existing used water treatment plant, the capital in such infrastructure may be monetizable through asset recycling, supporting additional reuse Asset Recycling infrastructure and associated revenue streams. tuastockphoto/Adobe Stock 1 PPPs and concessions offer another route for capital mobilization. This is covered under Section 3.3 on Delivery Models for Reuse. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 51 TOC 3. What Market Size Financing Instruments Delivery Models Joint ventures between public and private companies, with strategic offtake of the treated water by a large player as one of the core enablers, can support the mobilization of capital. In the face of growing water scarcity and increasing environmental concerns, the development of reliable water sources has become a critical priority for industrial companies, making them a natural partner of water utilities for the development of water reuse projects. By leveraging the strengths and resources of both private and public sectors, these collaborations can create robust platforms for the development and implementation of water reuse projects. A key component of these partnerships is the joint investment of equity and the collaborative effort to raise finance. Both private and public partners can contribute capital, sharing the financial burden and risks associated with large-scale water reuse projects. This joint investment not only enhances the financial viability of the projects but also fosters a sense of shared responsibility and commitment to their success. The private sector partner, typically an industrial entity, plays a crucial role by offering a guarantee of offtake, committing to purchasing a specified amount of the treated water and thereby providing a reliable revenue stream for the project. This guarantee of offtake is essential for securing financing, as it assures investors of a steady demand for the water produced, thereby reducing financial risk. On the other hand, the public utility guarantees the supply of raw water to the treatment facilities, ensuring that the water reuse project has a consistent and reliable source of water to treat and recycle. The public utility's involvement is vital for the operational stability of the project, as it leverages its existing infrastructure and expertise in water management to support the initiative. By pooling resources and expertise, both sectors can optimize the use of available water resources, reducing waste and enhancing sustainability. Private Entity Contributes (1) financial resources for development; (2) asset operation and Revenue Generation maintenance Potential Special Purpose Vehicle (SPV) • Sale of new water Water Treatment and Reuse • Sale of minerals and metals recovered Municipality • Energy generation Contributes (1) treated used water supply; (2) infrastructure assets for water treatment Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 52 TOC 3. What Market Size Financing Instruments Delivery Models While the treatment and reuse of used water addresses climate change mitigation and adaptation, current levels of global climate finance flowing to reuse remain low. FIGURE 40: Global climate finance mobilized Overall, annual climate finance has more than doubled between 2018 and 2022, from US$674 (US$ billions)1 billion to US$1.46 trillion. Nonetheless, this falls short of the US$7.4 trillion required per year through 2030 under a 1.5° Celsius scenario (Figure 40), with current climate finance representing only 1% of global GDP.1 Moreover, 90% of climate finance goes to mitigation, with 8000 7,400 very low levels of adaptation finance.2 6000 Adaptation finance reached US$76 billion in 2022, more than doubling from US$35 billion in 4000 2018. In addition, the water and 'waste' water sector received 44% of all adaptation finance, directed toward projects for enhancing water supply and used water treatment. Nonetheless, 2000 ~2.2x 1,459 674 current levels of adaptation finance remain insufficient. Developing countries alone have 0 estimated needs of US$212 billion per year in adaptation finance up to 2030, and US$239 billion 2018 2022 Annual requirement per year between 2031 and 2050 (Figure 41). through 2030 The private sector contributes 40% of overall climate finance for both mitigation and adaptation in emerging markets and developing economies, a figure that must rise to 80% to meet climate investment needs in these geographies.3 With respect to adaptation finance, the public sector accounts for 98% of all such finance, indicating the possibility of tapping much higher levels of private capital. FIGURE 41: Global adaptation finance flows vs needs The treatment and reuse of used water can make an important contribution to climate (US$ billions)1 change mitigation and adaptation but does not yet attract the levels of climate finance commensurate with this contribution. With appropriate structuring of climate finance, the 300 investment gap to support higher levels of reuse can be closed, while mobilizing private capital. 250 239 212 200 150 100 76 56 61 50 35 42 0 2018 2019 2020 2021 2022 2024-2030 2031-2050 (annual avg) (annual avg) 1 Baysa Naran et al,. Global Landscape of Climate Finance 2024: Insights for COP 29 (San Francisco, CA: Climate Policy Initiative, October 2024). 2 International Monetary Fund, Global Financial Stability Report: Financial and Climate Policies for a High-Interest-Rate Era (Washington, DC:IMF, October 2023). 3 Barbara Buchner et al., Global Landscape of Climate Finance 2023 (San Francisco, CA: Climate Policy Initiative, November 2023). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 53 TOC 3. What Market Size Financing Instruments Delivery Models Climate finance could be used for structuring blended finance solutions, in turn making reuse projects viable, where needed. Unlocking blended finance for water reuse requires a multi-pronged approach, including deepening capital markets and improving sector fundamentals to lower the cost of capital. Blended finance uses grants, concessional resources, and development finance strategically to crowd in additional capital, particularly commercial finance. Such solutions can help: • Leverage limited public and philanthropic capital with private capital • Reduce costs to make projects financially viable • Ensure affordability • Enhance impact by using public resources to meet core development objectives for the poor and vulnerable, while leveraging the private sector to bring in efficiency, innovation, and scalability. Blended finance can provide quick-win solutions and support to create long-term sustainable markets. In particular, blended finance instruments can make reuse projects viable while the market is still developing and ensure that such investments are affordable. Such blended finance solutions can in turn make use of climate resources. Blended finance for reuse projects should assess the following factors: Risk-Return Profiles: Financial Case for Blended Commercial Sustainability: (1) Combining different Finance: Justification for Climate types of capital, including Finance: Assessing the ability of the Supporting projects where concessional resources, project to crowd in private investments would not be debt, equity, and Demonstrating scientific capital and pave the way for viable in the absence of guarantees, to optimize evidence of climate impact commercial sustainability. blended finance. risk-return profiles and (2) aligning financial incentives. Programmatic approaches could include a one-stop shop to help interested municipalities with support on regulations, guidelines, transactional support, as well as blended financing models, which make use of climate finance. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 54 TOC 3. What Market Size Financing Instruments Delivery Models Sustainability-linked financing and outcome bonds can support specific results and outcomes tied to water reuse. Green and blue financing adopts a use-of-proceeds approach linked to climate outcomes that qualify for a green or blue label. Green or blue loans, typically facilitated through private transactions, are somewhat smaller in size than green and blue bonds. Sustainability-linked bonds and loans (sustainability-linked financing, or SLF) are debt instruments structured to incentivize issuers to achieve certain sustainability targets, independent of the specific use of proceeds. These are typically structured with a coupon step-up as a penalty against the achievement of agreed targets, and a coupon step-down in case of over-achievement of set targets. Given its outcome focus, as opposed to a use-of-proceeds focus, SLF rewards implementation of multifaceted approaches to achieve ESG goals. Such financing can be tied to key performance indicators linked to reuse. Outcome bonds provide investors the opportunity to support specific development outcomes, harnessing private capital and transferring project performance risk to investors, who are rewarded if the underlying activities are successfully concluded. Such outcome bonds could be adapted to the reuse space, linked to the generation of carbon credits for mitigation outcomes, as well as potentially used water reuse credits. The Vietnam Emission Reduction- Linked Bond offers a possible template for financing climate-friendly solutions (Figure 42). FIGURE 42: Structure of the Vietnam Emission Reduction-Linked Bond The Vietnam Emission Reduction-Linked Bond raised financing for a climate-friendly project. Key features included: • 100% principal protected bond, with investors receiving the return of principal plus a minimum return at maturity • Use of foregone ordinary bond coupons (monetized through an interest rate swap) to make upfront financing available to a climate- friendly project that will generate carbon credits in the future • By securitizing the future carbon credit sales revenue, bond investors earn coupons linked to the number of verified carbon credits generated by a project The bond was privately placed with three institutional investors and the structure has the potential to serve as a model for replication to support other climate-friendly projects, including reuse investments. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 55 TOC 3. What Market Size Financing Instruments Delivery Models Asset recycling can monetize the capital in existing infrastructure to support new infrastructure creation. Promotion of reuse investments may be supported through asset recycling as a way of unlocking the value of capital invested in existing infrastructure (brownfield assets), including investments in the treatment of used water, without increasing the government’s debt levels and/or taxes. The proceeds from asset recycling can be reinvested into the development of new infrastructure (greenfield projects), covering the operations and maintenance costs of existing infrastructure and supporting solutions such as reuse. Asset recycling can support better utilization of assets through the creation of additional revenue streams and risk mitigation associated with design, development, and construction, thereby attracting more investors. Generally, three monetization models can be applied: (1) direct contractual arrangements, such as brownfield concession agreements, operations and maintenance concession agreements, or long-term public–private lease agreements; (2) divestment, where the public sector sells its interest in the asset to the private sector; and (3) structured finance instruments like pooled investment vehicles, which enable asset owners to monetize their assets by integrating various revenue-generating assets under a single entity via a trust structure. Asset recycling can generate revenues in a number of different ways. Under direct contractual agreements, where public sector entities monetize brownfield infrastructure assets without losing ownership of the underlying asset, a private sector concessionaire may engage to provide the public service for a specified period against payment of an upfront concession fee. In such situations, the concessionaire may further develop or expand the asset to enhance its revenue generation capacity. Private sector participation could also support operational efficiency gains, along with improved service delivery resulting in new revenue streams. In the case of used water treatment assets, private sector participation may support the sale of treated used water, metal and mineral recovery, as well as energy co-generation, which could offer additional revenues. Pavel Babic/Adobe Stock Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 56 TOC 3. What Market Size Financing Instruments Delivery Models 3.3 Delivery Models for Reuse Water reuse projects can be delivered through various combinations of public and private sector participation FIGURE 43: Reuse delivery models  The choice of instrument deployed for water reuse 1 (Figure 43), particularly between public procurement and private sector participation, could include the e.g., eThekwini, Ganga, Windhoek following considerations: • Upfront Costs by Authority: While in public PPPs procurement, the government incurs the entire capital cost up front, in a PPP, capital expenditure may be financed in part by the private sector, recovered through performance-linked payments over the concession 2 4 period. In a joint venture, the private entity may bring the majority of the capital requirement for the Special Purpose Vehicle (SPV). Direct Delivery Models Negotiations • Operational Efficiency: In a PPP and joint venture, the Joint Venture operator’s incentives could be designed to support for Reuse between Utility and Industry quality and efficiency of operations and maintenance, as payments may be linked to performance. • Lifecycle Costing Approach: A private sector operator may be incentivized to consider lifecycle costs in the design, construction, and maintenance of the asset, e.g., Aquapolo (Brazil) ensuring efficient and long-lasting assets. Public e.g., Chennai, Arequipa, Delivery San Luis Potosi Model 3 e.g., Orange County Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 57 TOC 3. What Market Size Financing Instruments Delivery Models The private sector can play an important role in the treatment of used water and creation of new water, as both solution providers and financiers. The financing, development, and operation of facilities to treat used water and create 'new' water are well-suited to long-term PPPs, considering the long-life, capital-intensive asset base, with the potential for ring-fenced responsibilities removed from retail service provision, and performance- linked payments. Understanding the appropriateness of a PPP to support used water treatment and reuse requires an analysis of value for money, affordability, fiscal commitments and contingent liabilities, and commercial viability for the transaction to attract developers and lenders. In addition, it requires an assessment of which components of the project are best suited to be delivered through the private sector, covering design, construction, operation, maintenance, and financing across a number of infrastructure assets, including greenfield or brownfield used water treatment plants, the water reclamation facility, and the reclaimed water storage, conveyance, and distribution infrastructure.1 Advancing reuse projects may require additional measures to enhance bankability. For example, payment security may be improved through the ring-fencing of revenues for corporatized entities and escrow arrangements, and the use of fiscal transfers in cases where tariffs fall below costs and do not yield sufficient returns to recover investments.2 cherryandbees/Adobe Stock 1 Rochi Khemka, et al., Scaling up Finance for Water: A World Bank Strategic Framework and Roadmap for Action (Washington, DC: World Bank, 2023). 2 Ibid. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 58 TOC 3. What Market Size Financing Instruments Delivery Models Governments can enable scale through the development of national programs and structured long- term partnerships with the private sector that support price discovery. Individual new water projects can be transaction-intensive. Governments can reduce time and costs, achieve scale, and attract international investor interest through a programmatic approach (Figure 44), structuring long-term partnerships with the private sector in the form of PPPs. A programmatic platform approach can create price discovery on the unit costs of creating new water, bring down costs, and achieve scale, similar to the trajectories of the desalination and renewable energy sectors. This also offers economies of scale to investors, lowering the cost of finance. Where granting authorities and intermediaries are creditworthy, commercial financing can be mobilized in various ways, including through programmatic or project-based SPVs. In other cases, the mobilization of commercial financing might require one or more of the following elements: (1) concessional financing for the financial intermediary to support viability gap funding, along with commercial financing for the project SPV, and/or (2) potential payment guarantees to the private sector. FIGURE 44: Programmatic approaches to support the mobilization of private financing for new water creation Programmatic Approach through a Creditworthy Intermediary Programmatic Approach with Uncreditworthy Authority Commercial or Blended Concessional Government Support Financing Financing Granting Authority/ Granting Authority Financial Intermediary Availability payments + Viability Gap Funding Finance Platform for New Water Finance Platform for New Water (treatment of used water and creation of purified water) (treatment of used water and creation of purified water) Commercial Commercial financing to SPV, Project Project Project Project Project Project Financing to potentially with Company Company Company Company Company Company SPV blended finance Guarantees and Offtake Offtake Offtake Offtake Offtake Offtake credit enhancement for the private sector Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 59 TOC 3. What Market Size Financing Instruments Delivery Models There are various ways in which partnerships with the private sector can be structured. PPP contracts are procurement models that enable the effective harnessing of private sector expertise, stimulate innovation, and achieve cost reduction through competitive price disclosure of the full levelized costs of new water creation. The actual choice of PPP contract model (Figure 45) will depend on many factors. These include, for example, the extent to which governments and industrial players intend to mobilize private or off-balance-sheet financing, the availability of public funding, and the degree of risk transfer. FIGURE 45: Options for partnerships with the private sector on reuse Select Examples of PPP Structures Used for Mixed or private ownership Water Reuse: (examples: joint ventures or Contracts to design, build, finance, industry-to-industry reuse with • Hybrid Annuity Model: operate, and transfer assets (examples: privately owned SPV) Clean Ganga DBFOT/BOT/BOOT/Hybrid Annuity Model) • BOT End User Contract: Nagpur and MahaGenCo Extent of private sector contribution • BOOT Contract: Contracts to lease assets1 eThekwini Water (e.g., Affermage contracts) Recycling • DBOT: Windhoek Water Reclamation Plant Contracts to design, build and operate Contracts to design, build, and privately-owned assets, with offtake operate public assets (DBO) agreement (DBOO) Public ownership of assets Public-private partnerships Asset ownership Private or mixed With private sector ownership of assets Duration of partnership commitment Notes: O&M: Operations and Maintenance; DBO: Design–Build–Operate; DBOO: Design–Build–Own-Operate; DBFOT: Design–Build–Finance–Operate–Transfer; BOT: Build–Operate–Transfer; BOOT: Build–Own–Operate–Transfer; SPV: Special Purpose Vehicle; DBOT: Design-Build-Operate-Transfer. 1 Lease contracts are primarily applied for used water treatment infrastructure. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 60 TOC 3. What Market Size Financing Instruments Delivery Models The key characteristics for contracts with the private sector will depend on the contracting goals and source of finance. The DBO, DBOO, DBFOT, and BOT models (Figure 46) have the advantage of price disclosure of the full levelized cost of treated or sold water. In the context of transparently tendered projects, this can create competitive price pressures, driving innovation and efficiency. The Hybrid Annuity Model has the advantage of being able to mobilize public and private capital for the development of capital-intensive infrastructure, in contexts where end-use tariffs do not recover costs and/or affordability is a primary concern. FIGURE 46: Key characteristics of different contract types with the private sector Lease1 Design-Build-Operate- Design-Build-Finance- Hybrid Design-Build-Operate (Affermage) Own Operate-Transfer Annuity Design, construction, Major contribution by the Financing, innovation and levelized-cost price discovery in addition to DBO Operational expertise and operational private sector contribution expertise Source of funds for Public Private Public and capital expenditure sector sector private sector O&M Partial risk transfer risk transfer Full transfer of O&M risk (dependent on assets) Lowest operator tariff Lowest levelized cost of water Primary bid parameter Lowest annuity or viability gap funding per m3 per m3 Revenue Operator tariff times Availability charge for fixed costs; variable payments to private partner Construction-linked volume of water linked to volume of water treated/sold. Could be Annuity payments/annuity treated/sold supported by a minimum payment guarantee. If tariffs are less than operator’s tariffs, government pays the Tariff can be independent of what the government pays to the PPP. The bid tariff recovers the full levelized cost Tariff gap, and if greater of water. than operator’s tariff, government receives revenue share 1 Lease contracts are applied primarily for used water treatment infrastructure. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 61 TOC 3. What Market Size Financing Instruments Delivery Models A joint venture between municipal government and private sector can support the establishment of companies that deliver 'new' water from used water. Municipalities or their utilities can partner with a private operator through the establishment of a joint venture company to undertake the treatment of used water and creation of 'new' water. The joint venture could be structured so that a municipality would receive: (1) income from the sale of used water to the joint venture (JV) company and (2) dividends from profits of the JV company. The JV company or private operator could raise debt from commercial banks, with the JV company guaranteeing payment through revenues from the sale of new water, structured as a take-or-pay agreement. The JV company's mandate could extend to the rehabilitation and operation of existing used water treatment plants and/or construction of a new plant for the treatment and sale of new water to industrial users. This model (Figure 47) builds on the experience of Aquapolo (Annex 3) and is currently under exploration in Chihuahua, Mexico; Malaysia; and other geographies around the world. FIGURE 47: Possible structure of a joint venture to create and sell new water Partnership with a private operator Payment for new water to the JV through a joint venture company (offtake agreement) Used and New Water Treatment Infrastructure Joint Venture Municipality Industrial User(s) Sale of used water Municipality Private Operator Banks grant credit to build the used water and new water treatment infrastructure Banks Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 62 TOC 3. What Market Size Financing Instruments Delivery Models Direct negotiations between utilities and industry can customize the level of treatment required based on the reuse application and respective capacities. Industrial water reuse can be implemented through various models that depend on the level of treatment provided and the capacity of municipal utilities or private industries to manage further treatment (Figure 48). These models highlight the collaboration required between utilities and industries to promote sustainable water management. Long-term water purchase agreements with offtakers can support project bankability, similar to those used in renewable energy projects, which rely on power purchase agreements. FIGURE 48: Applicability of reuse models Model Example Applicability Demand Creation E.g., San Luis Potosi, Mexico Strong capacity at the municipal Sale of Tertiary Treated Water by with new water used for cooling level to operate tertiary treatment Utility to Industrial End User purposes in a thermal power plant facilities The core driver of industrial demand for reuse in these Sale of Secondary Treated E.g., Chennai, India, with provision Financial capacity of the private contexts is: (1) water scarcity, Water by Utility to Industrial End of 30 megaliters per day of sector to facilitate further driving a move toward resilience User with Further Treatment by secondary-treated used water for treatment on site through the use of municipal used Industry Onsite 3 petrochemical industries water, and (2) water security, ensuring reliability of supply. E.g., Arequipa, Peru with the Locations with a large industrial Provision of Raw Sewage to mining company, Cerro Verde, water user with the ability to pay Industry for Treatment and Reuse operating the used water for treatment of used water treatment plant Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 63 TOC 3. What Market Size Financing Instruments Delivery Models Where the public sector has adequate capacity, it can support the delivery of new water projects through public funding, ownership, and operation. Key Considerations for Public Sector Delivery Technical Capacity Financial Capacity Ability to Serve End Users Capacity to design, build, own, operate, Adequacy of public funding to meet Capacity for structured engagement with and maintain treatment and reuse investment requirements users (e.g., major industrial users) and infrastructure citizens (e.g., for potable reuse) Creditworthy utilities may tap commercial financing to fund reuse projects. Examples Orange County, California, USA Beaufort West, South Africa Indirect Potable Reuse Direct Potable Reuse The State of California provided 54% of capital cost through grants Implemented by the Beaufort West municipality during a severe (US$10 million) and low-interest public loans (US$481 million). The drought, with the entire construction paid for with South African remainder was funded by local water agencies (Orange County government emergency funds. The national treasury provided Water District and Orange County Sanitation District) via their own roughly R24 million (about US$1.3 million) to cover construction costs public funds and bonds. in 2010. Implementation was through a long-term PPP contract. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 64 TOC 4.HOW can investments in reuse be scaled? gokturk_06/Adobe Stock TOC 4. How Mechanisms National & State Municipalities Private Sector WBG 4.1 Mechanisms to Support Reuse A wide array of mechanisms and instruments are available to support investments in reuse. This section outlines roadmaps for national and state governments, municipalities and utilities, and corporates and industries Cross-cutting to support reuse. The mechanisms to accelerate reuse available to different stakeholders vary, as highlighted under the various elements roadmaps, with a few cross-cutting themes, as included below. National/State Governments Municipalities/Utilities Corporates/Industries Reuse ambitions, strategies and goals, integrated planning Regulation through discharge & Land-use planning and bylaws Internal water fee abstraction licenses (and limits) Pricing and resource charges Taxes and local pricing Internal water markets Cap and trade instruments Industrial zone management Disclosure Baseline and credit instruments Stakeholder engagement Cap and trade instruments (voluntary settings) Tax credits Multi-project pipelines (programs and programmatic PPPs) Reuse in industrial parks and economic zones Financing instruments Public–private platform approaches Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 66 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG 4.2 Roadmap for National and State Governments National and state governments can support reuse through a clear strategy, market creation, and programmatic approaches. Implement through Support clear, Develop a reuse Provide core funding a programmatic enforced regulations Develop the market strategy with a clear for reuse and leverage approach to achieve and cost-reflective for reuse ambition private capital scale and cost pricing reductions STEP STEP STEP STEP STEP 1 2 3 4 5 Roadmap for National and State Governments Note: Activities can proceed in parallel. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 67 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG STEP 1: DEVELOP A REUSE STRATEGY WITH A CLEAR AMBITION The first step in driving reuse is to define a clear reuse strategy, articulating the core drivers for reuse and the desired outcomes, as part of an integrated national water strategy. Countries and regions that have achieved high rates of reuse capacity have done so through the development and implementation of water reuse strategies, articulating a well-defined ambition. This should be part of Intended Outcome a broader and integrated water resources strategy that addresses the overall allocation of water resources, balancing economic, social, and environmental interests and associated rights.1 The strategic goal and drivers for reuse may vary depending on the context, for example: Elements of a Reuse Strategy Elements of a Reuse Strategy • Water Security: In the case of Singapore, water security was a key driver of reuse. Singapore had limited internal freshwater resources and was reliant on imported water. The need to reduce dependence on imported water led to the development of reuse capacity as part of a comprehensive water strategy. Singapore had an Strategic Goal initial goal to supply 40% of its water needs from reused water and subsequently increased this target to 55%. • Water Scarcity: The United Arab Emirates , with extremely limited water resources, developed a comprehensive water security strategy that included a target of reusing 95% of their ‘waste’ water by 2036. • Water Pollution: In the State of Haryana, India, a combination of scarcity and pollution is driving the reuse agenda. The Haryana State Government issued a policy in 2019 on the treatment and reuse of used water, with the goal of achieving 50% reuse of treated wastewater by 2025 and 80% by 2030. Pathways to The strategy should also address the question of “how“ reuse can be implemented by outlining the policies, Implement Strategy institutional arrangements, legislation and associated regulations, plans, funding, financing, and implementation mechanisms to support reuse. FIGURE 49: Installed reuse capacity by major application in the United States Potable reuse is being actively explored in the western (million m3 per day)2 United States (including California) as insurance against an increasingly unpredictable freshwater supply, and 30 in the context of growing competition for freshwater 20 resources. In a context of constrained surface water resources, the cost of reuse for coastal cities should be 10 compared to the next best alternative, desalination. All 0 things being equal, reuse projects are expected to be less 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 costly compared to desalination. IPR, DRP and ground recharge Industrial and non-potable urban reuse Irrigation and landscape Other 1 For discussion on water allocation, see Zhang et al. (2024). 2 Data from GWI project tracker database (as of March 2025). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 68 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG STEP 2: SUPPORT CLEAR, ENFORCED REGULATIONS AND COST-REFLECTIVE PRICING Regulations and pricing are central pillars for reuse investments. With weak pricing, investments are constrained by public funding, and with weak regulations, scalability is hampered. FIGURE 50: Pathways to scaling reuse through regulatory and/or pricing reforms Investments in reuse are strongly influenced by the regulatory environment and the cost of water abstraction/ Strengthen regulation purchase and discharge, relative to the alternatives. This means that regulatory frameworks need to be fit-for- strong purpose and enforceable, matched to the local context and capacity, and that water prices need to reflect costs. Unclear/unenforced rules but Clear, enforced rules These actions can support a conducive environment for prices reflect costs and risks & prices reflect full costs expansion of reuse through private investment. Can harness private Optimal reuse outcomes • Where the regulatory environment is weak and (extent to which prices reflect full costs) investment, but decision and conditions water is underpriced (bottom left quadrant) , Financial and economic incentives making may be dominated by for full contribution investments in reuse will depend on government funding and voluntary mechanisms by industry. private interests by the private sector Reform pricing • Where the regulatory environment is weak, but prices reflect actual costs, perhaps because self-investment is the only way to secure reliable water (top left quadrant), investments in reuse could be financed Reliance on voluntary Reliance on and by the private sector. However, these investments mechanisms (industry) constrained by may be transactional and may not achieve scale. & public investment public investment (government) (government) • Where the regulatory environment is strong, but prices don’t reflect costs (bottom right quadrant), Unclear or unenforced rules Clear, enforced rules investment is reuse will be heavily reliant on public & undervaluing/underpricing but undervaluing/underpricing funding and may be constrained by the availability of of the water resource of the water resource such funding. In these cases, the pathway to scaling reuse in a sustainable way is to improve regulation and/or move weak strong towards cost-reflective pricing, depending on the starting Enabling regulatory environment point, to get to the upper right quadrant. (appropriateness, clarity, and enforceability of the rules) Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 69 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG STEP 2: SUPPORT CLEAR, ENFORCED REGULATIONS AND COST-REFLECTIVE PRICING Pricing reforms can create revenue flows and incentives for reuse, while clarity and enforcement of regulations can support the achievement of intended reuse outcomes. Pricing-related actions that governments can take to get results: Water or Matching Willingness to Abstraction Fees Discharge Fees Pricing Reforms Used Water Tariffs Pay and Value of Use Recovering the costs Setting abstraction fees Setting discharge fees To achieve better and Enable the mobilization of treatment through to reflect the scarcity of to incorporate the full more sustainable of private capital by a water and/or used water and its opportunity cost of pollution on the allocative outcomes , it improving the bankability water tariff will support cos t (value in nex t environment will result in is not viable to provide of projects and the greater investments in best alternative use) increased investment by rel ativel y hig h - c os t credit wor thiness of collection and treatment will influence industry industry in pretreatment treated used water for water utilities and service of used water, which is investment decisions before discharge and/ free as this is dependent providers. Such reforms an important first step and make water reuse or in water reuse, as is on ongoing government need to be coupled with and key enabler of water more attractive relative demonstrated in the case subsidies. It is more a focus on improving the reuse. to the alternatives. of Mongolia. efficient to sell this operating and financial water closer to where efficiency of service it is treated for potable provision to ensure and industrial water use willingness to pay on the where willingness to pay part of consumers. is much higher. Monica/Adobe Stock Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 70 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG STEP 2: SUPPORT CLEAR, ENFORCED REGULATIONS AND COST-REFLECTIVE PRICING Regulatory actions that governments can take to improve impact: Set clear and enforceable abstraction and Adopt fit-for-purpose guidelines Cluster industries discharge limits to facilitate reuse and standards for reuse Where freshwater resources are limited and where there is a possibility Standards should address the main Industries should be clustered for reuse of water, freshwater availability should be curtailed to promote applications of used water. according to the nature of effluent the market for reuse. to ease the management and A one-stop shop can offer capacity regulation of discharges. Abstraction quantity and conditions should be clearly defined, with the to set and manage standards. onus on the abstractor to measure and report on compliance (using a third party), with periodic random auditing and strong consequences for false reporting, and with all data accessible to the public. In addition, discharge quantity and conditions should be clearly defined and measurable. Mobilization of private finance through regulation Municipalities and national governments play a crucial role in promoting the adoption of water reuse practices among industrial and commercial clients. By implementing a combination of incentives and regulations, they can create demand for municipal water reuse facilities or encourage businesses to develop their own facilities to treat effluent from municipal treatment plants. Moreover, government can implement financial incentives to make private projects that use municipal treated water bankable, thereby facilitating the mobilization of financing. arhendrix/Adobe Stock Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 71 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG STEP 3: DEVELOP THE MARKET FOR REUSE Market creation for reuse can build on innovative approaches, ranging from stakeholder engagement platforms to baseline-and-credit and cap-and-trade instruments. Governments can facilitate reuse market development through a number of mechanisms (Figure 51, Annex 2). FIGURE 51: Market mechanisms for reuse Introduce limits to water abstraction and allocation to provide the impetus for stakeholders to invest in water recycling and reuse. Capping Locate industrial parks and economic water allocations can lead to a market for zones in the vicinity of municipal used reclaimed water, where new water is sold for water treatment plants to enable reuse. industrial processes or other uses. Promote Public-Private Enable Reuse in Industrial Support Baseline and Use Cap-and- Facilitate Platform Approaches Parks and Economic Zones Credit Instruments Trade Instruments Tax Credits Facilitate market creation Build on the learnings from carbon markets to facilitate baseline- Introduce tax credits, where appropriate, through ‘pre-competitive’ and-credit market-based instruments such as Wastewater with dollar-for-dollar reductions in federal discussions under a public- Reuse Certificates (WRCs) .2 The mechanism supports the income taxes linked to investments in private platform, ensuring establishment of a water reuse target for each user. Those users water reuse, or through accelerated stakeholder engagement, that exceed their target earn credits in the form of WRCs, which depreciation allowances. Through such trust building, as well as can be traded with users that fall short of their targets. In addition, mechanisms, industrial facilities reusing the creation of enabling the reduced methane emissions from used water systems can municipal used water could lower their conditions for reuse.1 support the generation of carbon credits. operating costs as well as tax liabilities, thereby spurring private investment. 1 The World Bank’s 2030 WRG (www.2030wrg.org) has extensive experience with public–private platform development and success factors associated with establishing such platforms. 2 Rochi Khemka et al., Wastewater Reuse Certificates as Tradeable Permits: A Handbook for Roll-out, ( Washington, DC: World Bank, 2023), http://documents.worldbank.org/curated/en/099062823132542170. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 72 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG STEP 4: PROVIDE CORE FUNDING FOR REUSE AND LEVERAGE PRIVATE CAPITAL Scaling reuse requires core funding from the government, which can be used strategically to crowd in private capital. Government funding is unlikely to be sufficient to support investments in reuse at a scale necessary to achieve the desired goals. Therefore, public funding should be structured in a way to crowd in rather than crowd out private capital, making use of existing debt instruments, as well as other credit enhancement and financing options, as outlined in Section 3.2. The mobilization of private capital for reuse investments requires a focus on certain elements: • In view of high upfront capital expenditure requirements for used water infrastructure Mobilizing Public Subsidies for Bankability and the absence of full cost recovery through tariffs in many contexts, public subsidies may be required to make projects bankable through the provision of viability gap funding. • Institutional investors such as pension funds and wealth funds are increasingly investing Tapping Institutional Investors directly in used water and new water projects, as well as indirectly through capital markets, considering the risk-return profile of such projects. Several examples are under implementation in Peru, Chile, and Brazil. For example, pension funds from the United States and Canada serve as shareholders of Brazil’s SABESP. Structured approaches with stable governance frameworks and clear financing requirements may unlock this capital base. • Public or concessional resources in the form of loans may also be provided to finance Results-Based Financing through a Fund Structure reuse projects under a fund structure, with the initial capital returned to the fund as the loan is repaid by the borrower. Such financing options are suited for projects which are viable in the long run, but which have large capital outlays in initial phases, such as for water treatment and reuse. • PPPs could support partial or total financing of treatment and reuse projects as off-balance PPP Models for Off-Balance Sheet Transactions sheet transactions for the public agency. Such projects may require the strategic use of public resources in the form of guarantees or credit enhancement instruments. • Risk sharing facilities and hybrid models with public and private financing may also be supported. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 73 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG STEP 5: PROMOTE PROGRAMMATIC APPROACHES TO REDUCE COSTS AND ACHIEVE SCALE Programmatic approaches can provide economies of scale and bankability, while reducing costs. FIGURE 52: Elements of a programmatic approach Set a clear policy goal which promotes a programmatic approach to reuse at the national or state level. Support capacity creation on reuse at Develop standardized bidding the municipal level for the preparation Clear policy documents, templates for reuse and structuring of reuse projects. goal project development, structures for bankable projects, and other resources under a one -stop shop resource center to facilitate Capacity One-stop shop municipal and industrial reuse creation across for reuse project (see also the World Bank Group’s municipalities preparation ‘Scaling ReWater’ package of support under Section 4.5). Facilitate platform approaches to enable the bankability of projects Programmatic across multiple cities, with the Approach to Develop industrial zone guidelines provision of viability gap funding Reuse to enable water reuse through: and the structuring of guarantees • Location of industrial zones and credit enhancement, as needed. Reuse across closer to municipal used water Bankability of all industrial treatment plants projects and clusters and • Clustering of industry with economies of for potable homogeneous effluents to scale purposes enable reuse Promote potable reuse through Reduce transaction costs for clear goals and the establishment Fit for of relevant capacity. individual projects and promote price discovery, which helps to purpose bring down costs over time. treatment Enable fit-for-purpose treatment through policy and regulatory measures, with the aim of optimizing costs and treatment capacity creation. Programmatic approaches require adequate resources for preparation, which could be supported through a funding facility. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 74 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG 4.3 Roadmap for Municipalities and Utilities The role of local governments and water utilities in reuse is closely linked with that of national and state governments, industrial users, and citizens for potable reuse. FIGURE 53: Interconnected role of cities and utilities with other stakeholders National and state-level policy, legislation, regulations, standards, and investments have an important influence on the approach National to water reuse that can be adopted by city governments and and State their utilities. Of particular importance are: (1) abstraction and Governments discharge-related regulations, (2) water quality standards, and (3) pricing policies (Section 4.2). Cities and The location, volume, and nature of industrial water use Utilities and used water discharge in the city-region, and how these relate to the city’s used water treatment works, will determine strategies to promote industrial reuse Citizens for Water-Using in cities. Multinational corporations with local offices, Potable Reuse Industries as industrial facilities, and markets may have incentives Offtakers to invest in reuse from a reputational, operational, or supply chain and market perspective, and these should be considered in city reuse strategies (Section 4.4). Citizen perceptions on direct and indirect potable reuse also shape the market for potable reuse. Local governments need to support stakeholder engagement to create demand for potable reuse. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 75 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG Municipalities and utilities can support reuse infrastructure through planning, funding, financing, and matching of demand and supply of wastewater. Use tariffs and local taxes Include reuse Explore new Plan land use and strategically to Build trust and Match demand within municipal financing and implement bylaws invest in used engage with and supply for water security partnership to advance reuse water collection, stakeholders used water strategies options treatment, and reuse STEP STEP STEP STEP STEP STEP 1 2 3 4 5 6 Roadmap for Municipalities and Utilities Note: Activities can proceed in parallel. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 76 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG STEP 1: INCLUDE REUSE WITHIN MUNICIPAL WATER SECURITY STRATEGIES Cities and utilities need to incorporate a clear focus on reuse in their water security strategies, which can guide resource and infrastructure planning. FIGURE 54: Reuse as a part of municipal water security strategies Cities in water-stressed regions would be well advised to develop a water security strategy together with the government agencies responsible for regional or national water planning. Water reuse could be an explicit component (Figure 54) within this broader strategy (see, for example, Cape Town's water strategy, "Our Shared Water Future).1 Define a water security strategy A reuse strategy would clarify the market for reuse and set clear targets, linked to the core driver for reuse. In the case of Singapore, Perth, Cape Town, and Orange County, for example, water security has been the key driver. Incorporate reuse in city-level water Reuse then needs to be integrated into regional, city, and local level plans. This planning would strategy, with a encompass long-term water resource planning, land-use planning, and infrastructure planning. specific reuse goal Perth offers an example of an integrated planning approach. When developing a water reuse strategy, a municipality could consider the following potential drivers of reuse from a municipal perspective: Integrate reuse • A secure and reliable water supply for households, businesses, and industries is fundamentally into city plans important as a foundation to support investments, economic growth, job creation, and the well- being and livelihoods of a city’s citizens. The importance of this is highlighted in its absence. Cape Town faced an existential crisis when it nearly ran out of water in 2018. Other cities, including São Paulo, Chennai, and Bogota have faced similar crises, and more are likely to follow. • Reuse can make an important contribution to a city’s water security agenda. Reuse offers a largely climate-independent supply of water and is increasingly being considered as an important component of a portfolio of options to increase water security for cities. • Reuse improves resource use efficiency and can provide revenues to the city through the sale of used water, and/or reduce costs by substituting treated used water for more expensive alternatives such as desalination of freshwater from distant geographies. In Cape Town, for example, reuse is proceeding before desalination for reasons of cost efficiency. • Investments in treatment and reuse will improve the quality of water in the environment. Polluted water bodies and rivers have a negative effect on the economy and people’s livelihoods. 1 City of Cape Town, "Our Shared Water Future: Cape Town's Water Strategy," (2020). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 77 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG STEP 2: PLAN LAND USE AND IMPLEMENT BYLAWS TO ADVANCE REUSE Local governments can influence land use management and associated regulations, which are key to reuse. Separation of Industrial Separation of industrial and domestic used water and the prevention of toxic waste entering the domestic and Domestic Effluent used water system can reduce water treatment costs and risks, influencing the market for reuse. Zoning Laws and Location Local governments can locate water-using industries within industrial zones in close proximity to of Water-Using Industries treatment facilities, which reduces infrastructure costs. As the case of Singapore highlights, the supply within Industrial Zones of non-potable new water to industries can form a key part of a city-level water reuse strategy. Infrastructure Planning This incorporates the collection, treatment, and distribution of used water. Such approaches might for Water Reuse require reuse-sensitive infrastructure planning, aligned with the proposed reuse application. Curioso.Photography/Adobe Stock Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 78 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG STEP 3: USE TARIFFS AND LOCAL TAXES TO SUPPORT INVESTMENTS IN USED WATER COLLECTION, TREATMENT, AND REUSE Cities and/or their utilities are typically responsible for the collection and treatment of used water and have two primary sources of revenue to support investments: taxes and tariffs, in addition to possible transfers from national or state governments. Reuse is typically only feasible where there is a used water collection network and treatment facility. While national or state governments can, and often do, provide grants to support investments in these facilities, these are seldom sufficient to meet the investment requirements. Appropriate pricing of water (which could include a used water collection and treatment surcharge), or separate tariffs or charges for used water collection, are therefore an important building block to enable reuse. In addition, differentiated tariffs for freshwater and used water can encourage industry to use new water, as the experience in Malaysia highlights. The sale of used water can be used to defray the costs of treatment. Pricing of used water may need to take into account the relative price of treated potable water. See examples below. In Singapore, the cost of the sewer collection network and used water In Cape Town , the cost of the sewer collection and used water treatment is paid from government tax revenues. treatment infrastructure is covered largely through wastewater tariffs that are related to the volume of water purchased by customers. The national water agency offers new water at a discount to treated potable water to encourage industries to use this water. New water is sold to industry at a discount compared to the price of potable water. Pictures? THINK b/Adobe Stock Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 79 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG STEP 4: BUILD TRUST AND ENGAGE WITH STAKEHOLDERS Municipalities and utilities need to build trust with industry and citizens to support industrial and potable reuse, respectively. User acceptance is a critical element for successful reuse investments, as demonstrated by the experiences of Singapore, Orange County (United States), and Cape Town (South Africa). FIGURE 55: A framework for stakeholder engagement Trust Building with Industry Trust Building with Citizens Reliability of supply of used water, both from a volume and For potable reuse, particularly direct potable reuse, Reliability of quality standpoint are key concerns for industry. Where trust in the quality of drinking water supplied Volume and Quality there are variations in either, there may be limited appetite is a core consideration for citizens. Oftentimes, Key Considerations for Stakeholder Acceptance of Reuse from industry to offtake used water. this trust is linked to the capacity of the utility or agency providing such reuse. Relative cost of reuse versus freshwater supply is a core Where direct or indirect potable reuse may add to Relative Cost consideration for industrial demand for used water. Industrial the cost of service provision, and if there are tariff Considerations reuse projects have failed where cheaper alternatives are implications for such solutions, these need to be readily available (for example, Brazil, India). communicated to stakeholders upfront. Building industrial demand for used water may require Initiatives to implement potable reuse schemes, Clear and communications around increasing water risks and the both successful and unsuccessful, have shown Transparent potential for used water to provide assurance of water that trust, capability, and a sense of urgency Communications supply. In addition, any variations in volume and quality are important ingredients in achieving public require transparent communication, if possible, with real- acceptance. Clear communications can help to time data provision through dashboards and other tools. articulate all three. Cities and utilities need to establish regular channels of engagement with industry and citizens on used water Regular programs. This may be achieved through targeted stakeholder engagement strategies and/or platforms, along Stakeholder with communications campaigns, awareness building through reuse resource centers, and so on. Engagement Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 80 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG STEP 5: MATCH DEMAND AND SUPPLY FOR WASTEWATER Cities and utilities can play a key role in market creation through a systematic assessment of reuse opportunities and the structuring of long-term contracts with industries. FIGURE 56: Actions to match demand for new water with the supply of used water Supply of used water Demand for new water • Assess location and reliable volumes of used water • Assess potential demand for new water by water-intensive • Develop contracts for the long-term assured supply of used industries water • Assess demand close to the source of used water (used water • Assess opportunities to sell new water as an additional treatment plants) to minimize investments and costs revenue stream for the municipality and utility • Assess willingness to pay for new water • Structure long-term purchase contracts through take-or-pay agreements with industrial clients Attend to the regulatory environment and price incentives to ensure that they support reuse, for example, zoning schemes, bylaws, treatment standards, and permitted uses of used water. The eThekwini Water Reclamation Project was anchored on 20-year water supply agreements with two industrial clients: MONDI, a paper facility, and SAPREF, a refinery (Annex 3). Picture? ENGINEER - STUDIO/Adobe Stock Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 81 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG STEP 6: EXPLORE NEW FINANCING AND PARTNERSHIP OPTIONS Depending on the type of reuse application and the bankability of projects, municipalities and utilities can support a range of financing and partnership options. The choice of delivery and financing instrument will depend on the fundamentals of the project and the interest of the private sector as solution providers and financiers to engage on the project. Section 3.3 provides further detail on the delivery models and financing options outlined below. FIGURE 57: Delivery, funding, and financing models for reuse Delivery Models Funding and Financing Options Core Public Funding Infrastructure Debt Financing Public-Private Partnerships Joint Ventures Between Public and Private Companies Public Sector Delivery Blended Finance, including Use of Climate Finance Green, Blue, Sustainability-Linked Financing Direct Negotiations between Utility and Industry and Outcome Bonds Asset Recycling Note: Can serve as both a delivery mechanism and a financing instrument. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 82 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG 4.4 Roadmap for the Private Sector Corporates and industrial players can support reuse as users of new water, as well as by facilitating internal reuse market creation and establishing industry benchmarks. Establish a clear Disclose information reuse strategy as Assess viable Create internal Set or match industry on reuse investments a part of corporate reuse options markets for reuse benchmarks for reuse and practices water goals STEP STEP STEP STEP STEP 1 2 3 4 5 Roadmap for the Private Sector Note: Activities can proceed in parallel. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 83 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG STEP 1: ESTABLISH A CLEAR REUSE STRATEGY AS A PART OF CORPORATE WATER GOALS Corporates can commit to a clear program on reuse in their water strategies and goals. Global Reuse Goal Setting Corporate actions and strategies for reuse can encompass two levels: 1. Global Level – Goals for Sustainable Sourcing through Reuse Investments: At the global level, corporates could support clear commitments to reuse, where technically and financially feasible, in direct operations and supply chains, articulated in corporate water strategies and goals. Currently, reuse does not feature in the majority of corporate water goals as a mechanism to support improved water management, nor is it seen as a core solution in water replenishment strategies. Investments Corporate in reuse are more cost-effective than primary supply augmentation in many instances, yet reuse Reuse Goal is not evaluated as a core solution unless mandated by regulation, as in China. Such investments also offer reputational benefits. 2. Local Level – Strategies for Reusing Water as Offtakers: In addition, in specific cities and industrial parks, industrial players could establish goals that support the reuse of water, mitigating risks to business continuity and providing a source of assured water supply in conditions of climate variability, particularly droughts. Local Reuse as Offtakers of Used Water Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 84 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG STEP 2: ASSESS VIABLE REUSE OPTIONS The private sector can assess relevant reuse options by engaging with the public sector and other private sector partners in pre-competitive dialogues. Source of Used Water Municipal Source Industrial Source Corporate options for substituting freshwater with new water may arise through two options: 1. Municipal sources, where industries are located in the vicinity of urban centers and municipal treatment plants for used water 2. Industrial sources, where facilities are located in industrial parks Depending on the volume of new water available and the volume of intake water required by the private sector company, such reuse projects may involve individual offtake agreements with a single industrial partner, or multiple such agreements with different players. Enabling reuse in this way requires pre-competitive leadership of individual corporates with other partners to assess reuse options. The constitution of a multi-stakeholder platform at the city, industrial park, or catchment scale, which involves the participation of city governments and utilities, and/or economic zone authorities, could serve as the vehicle to develop and decide on appropriate collective reuse arrangements (see also Section 4.5 on the Role of the World Bank Group and associated country and city platforms). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 85 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG STEP 3: CREATE INTERNAL MARKETS FOR REUSE Corporates can develop an internal water fee mechanism, based on the water footprint of business units, to incentivize reuse and improve water management, serving as a market creation strategy. Multinational corporates and large private sector companies could create the business case for reuse through internal reuse markets. Such markets could enable reuse transactions through an internal water fee (shadow price for water) which internalizes the cost of contamination and displacement of water from its natural state, and/or wastewater reuse certificates and credits. Internal Carbon Fee Internal Water Fee Companies, such as Microsoft, have developed an internal carbon fee A similar approach to the carbon fee could be adopted for water, based on the company’s carbon footprint to support decarbonization whereby companies assess the water footprint of different business efforts and raise funding for initiatives to reduce and/or remove units and levy a water fee to support improved water management. carbon emissions. The water footprint could assess the water footprint across direct Such a carbon fee covers various aspects: operations, supply chain, and product use, similar to the carbon experience across scope 1, scope 2, and scope 3. 1. Scope 1 emissions: Direct emissions from sources owned and controlled by the organization The water footprint could cover both: 2. Scope 2 emissions: Indirect emissions from purchase of electricity, • Freshwater use, with a higher fee charged for freshwater use in steam, heat, etc. water-scarce basins 3. Scope 3 emissions: Indirect emissions from the value chain and • Used water discharge, with the fee linked to the volume and load product use of discharge Each year, this information on emissions is aggregated across Both elements of the fee could create an incentive for reuse within the company to charge business groups a carbon fee, aimed at the corporate entity, as business units work towards minimization of incentivizing a shift toward more carbon-friendly outcomes. the payment of the fee. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 86 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG STEP 4: DISCLOSE ON REUSE PRACTICES AND INVESTMENTS Corporate disclosure on reuse can support trust building with partners, facilitate access to capital, and provide reputational benefits to corporate sustainability efforts. Corporate water disclosure refers to companies’ reporting to stakeholders on the state of their current water management, along with the implications for business, and strategic responses. Currently, prevailing water disclosure questionnaires do not prioritize reuse, with reuse seen predominantly as a measure to reduce demand. For improved water management as well as clear and transparent communication with investors, customers, suppliers, and others, disclosure on reuse can support corporates outline their approach to reuse and provide details on reuse investments supported (Figure 58). FIGURE 58: Advantages of incorporating reuse in corporate disclosures Disclosure on reuse can surface inherent In addition, it can support Disclosure can raise additional capital, as water-related risks, both related to benchmarking of water use with it is used by investors to assess corporate scarcity and pollution, and facilitate other water users and enable performance and commitment to measures to address these collaborative approaches transparent governance Transparency Improved water Risk Reputational Finance and trust management mitigation advantages facilitation building Through disclosure, corporates may improve Disclosure can demonstrate Disclosure helps build trust their own understanding of different water- the implementation of good and accountability related risks and opportunities practices to stakeholders Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 87 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG STEP 5: SET OR MATCH INDUSTRY BENCHMARKS FOR REUSE Establishing industry benchmarks for reuse can support a move towards more sustainable water management across industrial subsectors. Corporates could engage with relevant partners and stakeholders to shape industry standards on reuse for each industrial sub-sector (e.g., chemical, pulp and paper, technology companies), thereby defining best practices and benchmarks in industrial reuse and ensuring the achievement of these standards across their own operations and supply chains. Such engagements may offer additional benefits as outlined below: Industry partners could work together to develop a common vocabulary on reuse, specific to water reuse Development of a practices in that sub-sector. This would help clarify terminology and align stakeholder perspectives on reuse Common Vocabulary for that industrial subsector. Benchmarking could also support private sector investments and collaboration on research to advance water Research and Innovation reuse technologies and practices, making them more economically feasible and efficient. Companies can contribute to the development of best practices for water reuse and participate in knowledge- Sharing of Best Practices sharing initiatives. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 88 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG 4.5 Role of the World Bank Group A combination of IBRD/IDA, IFC, and MIGA instruments and solutions can support reforms and investments to promote greater water reuse. FIGURE 59: World Bank Group support to reforms and investments • Technical assistance for policies, institutions, and regulatory frameworks to promote reuse • Support for the structuring of market mechanisms for reuse • Analytical support to assess reuse potential Foundational • Strategic and efficient use of public and concessional resources to crowd in private capital for Reforms and treatment and reuse investments Analytics • Support for strengthening of environmental regulations and their implementation, structuring of systems approaches, and subsidy reforms to promote reuse • Capacity building and learning events on reuse Sector Turnaround • Support for financial sustainability and creditworthiness of utilities with Private Sector • Structuring of performance-based contracts for water and used water investments Participation • Structuring of blended finance solutions , combining IBRD and IDA concessional Private Capital funding, IFC investments, commercial debt financing, with MIGA guarantees and credit enhancement instruments Mobilization for • IBRD and IFC support for the development of projects that mobilize private capital (such Reuse Investments as PPPs, joint ventures, and market mechanisms) to promote water reuse • Structuring of green, blue, and sustainability-linked financing for water reuse Support for programmatic approaches, with a focus on enabling countries and cities to tap private sector expertise and capital to meet reuse ambitions, where possible Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 89 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG The World Bank Group’s Scaling ReWater offers a standardized package of support to mobilize public funding and private capital for reuse initiatives, while ensuring affordability. FIGURE 60: Focus areas of Scaling ReWater Areas of Support Creating supportive • Support to reuse-related policies, institutions, and regulatory frameworks, along with the policy, institutional, and creation of actionable roadmaps regulatory incentives • Assessment and support for the development of PPP frameworks • Identification of reuse opportunities Supporting project • Alignment of reuse programs and projects with national strategies planning, preparation, • Assessment of affordability, value for money, and commercial and financial viability and design to • Market sounding and identification of investor interest Standardized incorporate circularity • Development of technical, economic, environmental and social, financial, and legal and institutional due diligence and structuring of projects for market-readiness package of support, combining Supporting balanced • Development of a financial plan, along with identification of concessional financing and World Bank, risk allocation and credit credit enhancement mechanisms IFC, and MIGA enhancement • Support for balanced risk allocation and the use of credit enhancement instruments to lower instruments financing costs, deliver sustainable projects, and ensure affordability in tariffs Providing transaction • Use of template documents for the tender process and concession agreements to reduce advice and streamlined negotiation delays and to facilitate timely financial closure tendering • Financing for public investments through SLF, green financing, and blended financing models Providing financing and • Facilitation of private capital through blended finance structures, viability gap funding, insurance solutions first-loss provisions, and guarantees Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 90 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG The World Bank Group could support a platform approach to accelerate private capital for reuse investments. FIGURE 61: World Bank Group support to a reuse finance platform In countries looking to advance reuse investments across multiple states and Indemnity Agreement municipalities, an innovative finance Government platform might mobilize private and GUARANTEES | MIGA commercial finance at scale. (only for IBRD PCG First Loss Guarantee) IBRD PCG* First Loss + MIGA While the structure of finance facilitation NHFO Second Loss Guarantee** will vary depending on the context, large volumes of financing might be mobilized International Commercial through a financial intermediary, with Lenders (Guarantee Holders) on-lending to state and municipal governments. Portfolio Loans and Debt Service Such a financial intermediary should Financial Intermediary (e.g., be rated on par with the sovereign, public sector bank/national with adequate resources and technical Majority Ownership development bank) capacity. Multi-Tranche Financing for The platform could be supported with State-Owned Enterprises World Bank Group credit enhancement Used Water Treatment and instruments , for example, which Ring-fenced Account: Each tranche Reuse Finance Platform combine IBRD partial credit guarantee of the loans will be allocated to a first loss (minimum of 20%) with MIGA’s group of municipal governments with On-lending to State/Municipal non-honoring of financial obligations defined use of proceeds Governments second loss guarantee (remaining 80%). This could help: (1) minimize sovereign guarantee needs, (2) reduce transaction State/Municipality 1 State/Municipality 2 State/Municipality 1 State/Municipality 2 costs, and (3) diversify risks across states and municipalities. IFC can State/Municipality 3 State/Municipality N State/Municipality 3 State/Municipality N provide lending at the municipal level to support reuse investments. IFC lending at the municipal level Notes: PCG: Partial Credit Guarantee; NHFO: Non-Honoring of Financial Obligations. Under this product, MIGA can cover sovereign, sub-sovereign, and state-owned enterprise payment risk, provided the borrower meets credit rating requirements (BB - and above) and passes the creditworthiness test. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 91 TOC 4. How Mechanisms National & State Municipalities Private Sector WBG In addition to finance platforms, the World Bank Group could support stakeholder engagement platforms, bringing together the public sector, private sector, and civil society. The World Bank’s 2030 Water Resources Group has significant experience in designing stakeholder engagement platforms that promote innovations in financing models, economic instruments, and delivery mechanisms for water security (Figure 62). FIGURE 62: WRG stakeholder platforms and select innovations WRG Engagement Steps 4. Enabling scale Scaling of impact through alignment with World Bank lending operations and World Economic Forum convening 3. Supporting implementation Design of scalable solutions at the interface of technology, markets, and financing 2. Facilitating country and city platforms Structured platforms to translate stakeholder priorities into impact Tailored upstream assessments supporting public-private collaboration at the 1. Providing evidence for decision-making country level Platforms and Select Innovations Chaired by government Select Innovations Emerging from WRG Country Government Platforms Co-chair from private sector • PPPs for Municipal Used Water Treatment and/or civil society and Reuse in the Ganga Basin through a new Country Hybrid Annuity Model Cross-sectoral, bringing together • Mongolia Water Pollution Fee Law, and City stakeholders from water, climate, supporting investments in used water Private Platforms agriculture, urban, finance, rural, treatment and reuse Sector, Civil environment etc. including Society • Conceptualization of Wastewater Reuse Certificates as a baseline-and-credit financiers PreBalanced participation competitive space instrument (no single stakeholder type with majority) Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 92 TOC 5.CONCLUSIONS MAGNIFIER/Adobe Stock TOC 5. Conclusions 5.1 Conclusions Reuse is a core element of …and is at a tipping point. Core public resources the circular economy… may be needed to support The speed of investments in reuse is accelerating, driven by the attractiveness treatment and reuse… Reuse investments offer triple value of higher-value applications of reuse, through: (1) the recovery of valuable increasing water scarcity, and the business Public and concessional resources should freshwater, (2) the recovery of energy and case of circularity. be prioritized for reuse , while ensuring scarce resources, and (3) environmental efficiency in their use to crowd in private restoration through pollution abatement and Reuse becomes increasingly attractive capital. reduced freshwater abstraction. and cost-competitive as water stress and scarcity increase. In addition, as reuse In addition, an acceleration in reuse scales and the market for reuse investments investments may require reforms to matures, costs will come down further. the enabling environment to create the conditions for private sector participation. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 94 TOC 5. Conclusions …which can unlock private capital through relevant financing instruments and programmatic approaches. Private capital may be mobilized through several options, including traditional infrastructure debt financing; joint ventures; blended finance instruments that make use of climate finance; a variety of green, blue, and sustainability-linked financing and outcome bonds; and asset recycling. Programmatic approaches to reuse can reduce time and costs and attract investor interest. The resultant economies of scale can also reduce the cost of finance. Creditworthy granting authorities may be able to tap commercial financing under such approaches, while uncreditworthy entities may require the use of concessional financing and/or payment guarantees to attract private sector interest. FIGURE 63: Programmatic approaches to support the mobilization of private financing for new water creation Programmatic Approach through a Creditworthy Intermediary Programmatic Approach with Uncreditworthy Authority Commercial or Blended Government Concessional Financing Support Financing Granting Authority/ Granting Authority Financial Intermediary Availability payments + Viability Gap Funding Finance Platform for New Water Finance Platform for New Water (treatment of used water and creation of purified water) (treatment of used water and creation of purified water) Commercial Commercial financing to SPV, Project Project Project Project Project Project Financing to potentially with Company Company Company Company Company Company SPV blended finance Guarantees and Offtake Offtake Offtake Offtake Offtake Offtake credit enhancement for the private sector Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 95 TOC 5. Conclusions Moreover, various delivery models can be applied to reuse. The choice of delivery model depends on various factors: (1) the respective capacities of the public and private sector, (2) affordability considerations, (3) the extent to which stakeholders wish to mobilize private or off-balance-sheet financing, (4) the availability of public funding, and (5) the allocation of risk between parties. For example, PPP structures, such as DBFOT and BOT models, may support price disclosure of the full levelized cost of treated or sold water. In the context of transparently tendered projects, this can create competitive price pressures, driving innovation and efficiency. Joint ventures between the public and private sector may support the joint investment of equity and a collaborative effort to raise finance. Where the public sector has adequate technical and financial capacity, public sector delivery models may be preferred. At the municipal level, there may be direct negotiations between the utility and industrial offtakers through long-term water purchase agreements, which also support bankability. FIGURE 64: Reuse delivery models 1 e.g., eThekwini, Ganga, Windhoek PPPs 2 4 Direct Delivery Models Negotiations e.g., Chennai, Arequipa, Joint Venture for Reuse between Utility San Luis Potosi and Industry e.g., Aquapolo (Brazil) Public Delivery e.g., Orange County Model 3 Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 96 TOC 5. Conclusions Scaling reuse requires synergistic collaboration across various levels of government and the private sector… While national and state governments, and municipalities and utilities, need to set clear reuse goals as a starting point, the different instruments and levers at their disposal to facilitate reuse vary. National and State Governments Municipalities and Utilities Federal and state agencies can influence pricing and regulations, which Local government and water utilities can support land use planning can address two of the main constraints to reuse in most contexts. with reuse in mind, locating industrial parks in the vicinity of municipal The subsidized and unregulated availability of freshwater has been the used water treatment infrastructure. Tariffs and local tax instruments single biggest bottleneck to the scaling of reuse globally. In addition, can promote investments in used water collection, treatment, and national governments can support programmatic approaches, which reuse. Stakeholder acceptance and communications is a core role can enable economies of scale and cost reductions over time. Public that municipalities can support, which can enable the development of resources can also facilitate the mobilization of private capital. a market for reuse. FIGURE 65: Roadmap for national and state governments FIGURE 66: Roadmap for municipalities and utilities Use tariffs Implement and local Support clear, Include Plan land Provide core through a taxes Explore new enforced reuse within use and Build trust Match Develop a reuse Develop the funding for programmatic strategically financing regulations municipal implement and engage demand & strategy with a market for reuse and approach to to invest in and and cost- water bylaws to with stake- supply for clear ambition reuse leverage achieve scale used water partnership reflective security advance holders used water private capital and cost collection, options pricing strategies reuse reductions treatment, and reuse STEP STEP STEP STEP STEP STEP STEP STEP STEP STEP STEP 1 2 3 4 5 1 2 3 4 5 6 Roadmap for National and State Governments Roadmap for Municipalities and Utilities Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 97 TOC 5. Conclusions …with private sector water users shaping the demand side of the reuse market. The private sector, as a water user, can influence reuse through both: (1) global corporate water strategies, and (2) local offtake of new water in specific geographical locations. The establishment of internal water fees based on the water footprint of business units can support the creation of reuse markets. In addition, corporate disclosure on reuse practices and investments can foster trust and support finance facilitation, besides offering reputational benefits. Moreover, corporate efforts to set or match benchmarks for reuse can promote best practice adoption and encourage more research and innovation in the sector. FIGURE 67: Roadmap for the private sector as a water user Establish a clear Disclose information reuse strategy as Assess viable reuse Create internal Set or match industry on reuse investments a part of corporate options markets for reuse benchmarks for reuse and practices water goals STEP STEP STEP STEP STEP 1 2 3 4 5 Roadmap for the Private Sector as a Water User Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 98 TOC 6.ANNEXES savantermedia/Adobe Stock TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Annex 1: Additional Definitions Non-potable reuse for agriculture and landscaping: Treatment and reuse of Recirculation: On-site reuse of industrial process water without treatment. municipal used water to regulatory standards for agriculture and landscaping. Some industrial water users refer to recirculation as reuse, to distinguish it It requires collection and treatment of used water, and transmission of the from recycling, or reclamation. After a certain number of cycles, the used product water to where it can be used, with no loss of control in between. water (blow down) is treated and discharged. Most industrial water users aim to maximize water recirculation—particularly in cooling systems—for economic reasons. Informal water reuse: Direct application of used water without treatment, typically in contravention of regulations. It is considered a public health risk. Industrial water recycling: Use of some of the rejected water from one industrial process to another on site, with treatment to deliver the required water quality. The used water is eventually treated and discharged. An example of industrial recycling might be condensate polishing in a power plant. It is often driven by economics. Gray water recycling: On-site reuse of domestic wash water for non-potable domestic use. Can be promoted through the building code. More contaminated water is discharged to the sewer for treatment and disposal. Key: Potable freshwater Used water treatment Non-potable freshwater Gray water Gray water treatment De facto reuse: Discharge of treated or untreated used water into the Used water environment, with downstream abstraction for a variety of uses, including for treatment to potable standards. Frequently unregulated. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 100 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Annex 2: Market Mechanisms for Reuse A number of market mechanisms can support the creation of reuse markets. With the right regulatory framework in place, governments can support reuse market creation through different instruments, creating demand for treated water, and in turn enabling investments (Figure 68). FIGURE 68: Mechanisms to facilitate market creation • Greenfield industrial parks could be promoted in the vicinity of urban centers to facilitate the 1 Reuse in Industrial Parks and Economic Zones reuse of new water from municipal sources by industry. • Brownfield industrial parks could be encouraged to establish central effluent treatment plants, where appropriate, to drive reuse. • Baseline and credit instruments, such as wastewater reuse certificates, are a compliance+ 2 Baseline and Credit Instrument Wastewater Reuse Certificates instrument to create a market for reuse. In regulatory contexts, this is linked to reuse targets set by the regulator/water authority. Cap and Trade Instrument • Caps to water allocation can also spur reuse markets and technological innovation. These 3 Water Rights Regimes can be coupled with existing water rights regimes and allocation frameworks, creating the demand for municipal reuse. and Caps to Water Allocation • Tax credits can support reductions in taxation, commensurate with investments in reuse. 4 Tax Credits Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 101 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References 1. REUSE IN ECONOMIC ZONES AND INDUSTRIAL PARKS Governments can locate industrial parks in the vicinity of municipal used water treatment plants to enable reuse; in addition, industrial park authorities can encourage reuse through central effluent treatment plants for homogeneous industrial clusters. Industrial parks and economic zones offer the potential for market making through: (1) aggregation of industries, and (2) intermediation by industrial associations and government authorities responsible for such zones. Overall, industrial water constitutes just under 20% of global freshwater withdrawals (Figure 69).1 On the other hand, water demand is projected to increase 20-25% globally by the year 2050.2 In this context, reuse can provide assured water supply to industry to meet its growth plans. Industrial parks and economic zones offer a strong potential for reuse due to: FIGURE 69: Water withdrawals by • Clustering of industry, leading to lower costs of water distribution and associated energy requirements. sector (%, 2024)1 • Potential for co-location of homogeneous industrial sectors, with potentially similar water quality requirements. The circularity of solutions can strengthen the competitiveness of industrial parks and economic zones through innovative business models and technological upgrades. In particular, eco-industrial parks (EIPs) can 20% promote a combined focus on circularity in:3,4 • Water (business models for improved water and wastewater management) • Energy (renewable energy use, CO2 recovery plants, and cogeneration using biogas) • Material and waste heat (utilization of recovered material or waste heat from the production process of one 10% plant as raw material or fuel for production processes in another plant). The industry park developers and authorities could support common solutions, such as: • Water and used water performance monitoring systems 70% • Access to finance for tenant firms to invest in common green infrastructure, including central effluent treatment plants for reuse • Joint testing of new solutions and technologies. Industrial Use In addition to efficiency in water use, solutions that support advanced biological treatment and recovery of Domestic Use metals can minimize used water generation and facilitate greater reuse. In addition, there is evidence suggesting Agricultural Use that matching a water reuse system to its location can support savings in water and energy.5,6 1 United Nations, The United Nations World Water Development Report 2024: Water for Prosperity and Peace (Paris: UNESCO, 2024). 2 Samantha Kuzma, et al., “25 Countries, Housing One-Quarter of the Population, Face Extremely High Water Stress,” (World Resources Institute, August 16, 2023). 3 World Bank, Circular Economy in Industrial Parks: Technologies for Competitiveness (Washington, DC: World Bank, 2021). 4 Xuefeng Li, et al., Green Development Model of China’s Small and Medium-Sized Cities, (Singapore: Springer, 2018). 5 Jonathan R. Bailey et al., “Renewable Energy Generation and GHG Emission Reduction Potential of a Satellite Water Reuse Plant by Using Solar Photovoltaics and Anaerobic Digestion,” Water 13, no. 5 (2021): 635. 6 Pablo K. Cornejo et al., “Carbon Footprint of Water Reuse and Desalination: A Review of Greenhouse Gas Emissions and Estimation Tools,” Journal of Water Reuse and Desalination 4, no. 4 (2014): 238–52.   Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 102 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References 2. BASELINE AND CREDIT INSTRUMENTS: Wastewater reuse certificates represent a market-based instrument to promote reuse, which governments and private sector can adapt to both municipal and industrial contexts. Wastewater Reuse Certificates • The trading of WRCs is based on differing marginal abatement cost curves for each participating firm or entity (Figure 71). • The World Bank’s WRG conceptualized the WRC, an innovative baseline- • The difference in cost curves provides the basis for trading among firms. and-credit market-based instrument to promote reuse. • Entities with higher marginal abatement cost curves can buy credits • A target-based system, it is designed to support reuse for large water from those with lower costs. consumers, such as industrial entities and municipalities, as well as across economic zones and industrial parks. For example, as illustrated below, it is assumed that a regulator distributes • The mechanism supports the establishment of a water reuse target for 100 units of allowances equally across two firms, with 50 allowances per each user. Those users that exceed their target earn credits in the form firm. Each allowance represents the right to pollute one unit. In this case, of WRCs, which can be traded with users that fall short of their targets the firms will trade their allowances until their marginal abatement costs are (Figure 70). equal, represented by point Z in the figure below. Firm A would implement • This mechanism is being piloted in the textile sector in India. pollution reduction measures and trade surplus allowances in the market • Step by step guidance on the implementation of this approach across up until the point where the cost for abatement equals the selling price different use cases is included in the Handbook on Wastewater Reuse of the allowance in the market—that is, at 80 units of abatement—with a Certificates.1 surplus of 30 units, which it will sell to Firm B. The area XYZ represents the total cost savings under the WRC trading system. FIGURE 70: Wastewater Reuse Certificate trading mechanism FIGURE 71: Marginal abatement cost curves as basis for WRC trading 60% Trading mechanism Exceeded target 50% between over- and under-achievers 40% 30% Target improvement Under-achieved target 20% 10% 0% Current New target City/industry 1 City/industry 2 1 Rochi Khemka et al. (2023). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 103 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References 3. CAP AND TRADE INSTRUMENTS: Cap-and-trade instruments can be applied to the water sector by capping the extent of freshwater abstraction permissible. Cap-and-trade instruments, such as Emissions Cap-and-trade can support water Trading Schemes (ETS), are widely used for the reuse as follows: reduction of carbon emissions1 Cap the amount of freshwater abstraction • Cap-and-trade policy instruments, such as emissions trading schemes, permissible. represent a form of direct carbon pricing that provides a clear price A similar approach could be applied to freshwater signal for supporting reductions in greenhouse gas emissions. abstraction through water rights and entitlements. • An ETS imposes a cap on total emissions in chosen sectors of the A water rights system is a framework indicating economy, with the regulator issuing tradeable allowances within the which users have the right to use water from specific limit of the cap. sources. By capping the overall allocation of water • Relevant entities covered by the system trade such allowances , in a context of increasing demand, the water rights which determines the market price for the allowances. framework can encourage greater reuse and the • For example, the European Union’s (EU) ETS, launched in 2005, is one adoption of innovative technological solutions. of the world’s first carbon markets, aimed at reducing emissions, while providing revenues to finance the green transition. It covers approximately 40% of the EU’s greenhouse gas emissions. aerial-drone/Adobe Stock 1 Partnership for Market Readiness (PMR) and International Carbon Action Partnership (I CAP), Emissions Trading in Practice: A Handbook on Design and Implementation (Washington, DC: World Bank, 2016). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 104 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Water rights regimes and caps to water allocation could support water reuse. In addition to the development of reuse targets, the introduction of limits to water abstraction and allocation can provide the impetus for stakeholders to invest in water recycling and reuse. Capping allocations can lead to a market for reclaimed water, where new water is sold for industrial processes or other uses. This not only generates revenue for utilities but also reduces the demand for freshwater. Caps to water allocations are often combined with strict used water discharge regulations, encouraging reuse. Setting Abstraction Limits Periodic Adjustment Regular Monitoring of Caps Based on Data This requires the establishment Changes in environmental Standardized protocols for data of clear limits to freshwater conditions, technological collection, coupled with smart abstraction, based on usage advancements , and shifting metering and digital technology patterns, freshwater availability, demand patterns require to monitor consumption patterns climate change scenario planning, adjustments to the imposed caps. and anomalies, such as leaks and and ecological needs. excessive usage, would ensure adherence to the caps, as well as monitoring of reuse. Tucson, Arizona1 California2 The City of Tucson, Arizona, plans to build a new DPR facility. It aims to Due to drought conditions, and aligned with its Sustainable Groundwater do so by trading 69 million cubic meters of its Central Arizona Project Management Act, the state of California has imposed caps on water entitlements, covering the period 2026 to 2035, in exchange for up to allocations, encouraging water reuse with the goal of recycling 1.8 million US$86.7 million in federal funds for establishing the facility. acre-feet of water annually by 2040. This is encouraging municipalities to invest in recycled water projects as an alternative source of supply. 1 GWI, “Tucson Joins Rush for Reuse under Colorado River Deal,” (January 13, 2025). 2 California Water Boards, “Water Supply Strategy Implementation: Planned Recycled Water Projects,” (Division of Water Quality, December 2023). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 105 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References 4. TAX CREDITS Taxation can also be used as an incentive in the form of investment tax credits. Tax credits represent dollar-for-dollar reductions in federal income taxes linked to investments in water reuse. Through such mechanisms, industrial facilities reusing municipal used water could lower their operating costs as well as tax liabilities, thereby spurring private investment.1 Examples In the energy sector in South Africa, a 125% first-year tax deduction for renewable energy projects (wind, solar, hydropower) commissioned by businesses in South Africa led to an acceleration in private-sector grid contributions, addressing the twin goals of greening energy production and reducing generation constraints. The United States expanded tax credits for wind and solar projects, electric vehicle charging infrastructure, and green hydrogen production, aiming to cut emissions by 40% by 2030. An Advancing Water Reuse Act, recently introduced in the United States congress, aims to catalyze the use of recycled water by manufacturers, data centers, and other industrial entities by establishing an investment tax credit for industrial water reuse.2 PhotoImage/Adobe Stock 1 WateReuse, “Investment Tax Credit for Industrial Reuse.”  2 WateReuse, “ WateReuse Association Applauds Introduction of Industrial Water Reuse Tax Credit Bill.” Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 106 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Governments and cities can use water and used water fees as a means to prevent polluting behavior and encourage water reuse. Water fees can internalize polluter-pays principles, similar to carbon taxes.1 A carbon tax provides a price on carbon by defining a tax rate on greenhouse gas emissions or on the carbon content of fossil fuels. This is kozorog/Adobe Stock usually expressed as a monetary unit per ton of carbon dioxide equivalent. It is grounded in the polluter pays principle, indicating that entities responsible for the generation of pollution should bear the costs. Fees for high water use and pollution can influence consumption patterns, while internalizing the environmental costs associated with Such taxes offer various lessons for water reuse: such abstraction and contamination.1 • Behavior change: Carbon taxes send a price signal to emitters to shift In the used water sector, such solutions are based on the imposition to less emissions-intensive ways of production. The actual amount of of a predetermined price, which users pay for every unit of pollution. reduction in emissions is linked to the response of the emitting entities to the price set. With respect to water reuse, the core lesson which To minimize the payment of fees, water users work towards reducing emerges is to establish the fee structure such that it internalizes the their water footprint and evaluate alternative solutions, such as reuse. cost of contamination of water from its natural state and supports a shift towards less polluting behavior. Moreover, any fees collected generate revenues for the water authority, providing capital for environmental protection measures. • Use of revenues: The use of fee revenues can support different outcomes. In general, governments use carbon tax revenues to Water pollution-related fees are similar to a carbon tax, providing an support programs for climate mitigation, as an offset to lower taxes economic signal and allowing polluters to decide whether to: in other domains, or as general government income. With respect to water reuse, such revenues could support the operation of used water 1. Discontinue the polluting activity treatment plants or other water infrastructure. 2. Decrease pollution 3. Continue polluting by paying the requisite fees and taxes 1 PMR and ICAP (2016). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 107 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Annex 3: Case Studies Explore case studies at the national, city, and corporate levels. Mongolia Water pollution fees United States Rapid growth in potable water reuse Fairfax, United States China From unplanned to Regulation Orange County, planned indirect United States potable reuse Bangladesh Indirect potable Industrial parks and reuse economic zones India Programmatic PPPs Singapore Diversifying water Peru Brazil sources PPP through industry Scaling water reuse operating the used through industrial water treatment plant partnerships Ekurhuleni, South Africa Industrial parks and economic zones Cape Town, South Africa Direct and indirect eThekwini, South Africa Perth, Australia potable reuse Reuse PPP Indirect potable reuse Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 108 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Australia City of Perth Indirect Potable Reuse The city of Perth, Australia, has invested in IPR through groundwater replenishment as part of its strategy to respond to water scarcity and mitigate climate risks. In response to an 80% reduction in streamflow into its surface water reservoirs, FIGURE 72: Annual inflows into Perth's dams the city adopted its Water Forever strategy in 2009, focusing on diversifying water sources (Figure 72). The city's water utility, Water Corporation, has since reduced reliance on surface water by expanding both desalination and groundwater replenishment initiatives (Figure 73). In 2017, Perth became the first city in Australia to implement a groundwater replenishment scheme, where highly treated used water is purified and recharged into deep aquifers for future potable use. Located in the city’s northern suburbs, the project expanded in 2022, doubling the capacity of the Advanced Water Recycling Plant from 14 billion to 28 billion liters per year. This approach, with a capacity cost of A$2,700 per m3 per day compared to A$4,300 per m3 per day for desalination, provides a more cost-effective solution (Figure 74), enhancing Perth’s long-term water security while mitigating climate-related risks. FIGURE 74: Capacity cost FIGURE 73: Perth's water sources (2022–23) (A$ million/000 m3/day) Groundwater 2.7 replenishment… Desalination (2011) 4.3 0 2 4 Source: Australia Water Corporation. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 109 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Bangladesh Industrial Parks and Economic Zones Replicable Models of Industrial Reuse Bangladesh’s 100 economic zones offer the potential for supporting replicable models of reuse at scale. Bangladesh faces major water challenges including unsustainable freshwater withdrawals and seriously deteriorating water quality. Industrial water demand has grown rapidly, and untreated industrial effluent is a major source of pollution, impacting rivers and posing health risks to nearby communities. Water pollution costs Bangladesh an estimated US$2.8 billion annually, with the textile sector a major contributor. By 2040, the funding gap for managing water pollution is expected to reach US$6.6 billion, far exceeding the capacity of public funding. The National Water Policy (1999), Bangladesh Water Act (2013), and MAP 9: Industrial clusters in the Greater Dhaka Area Bangladesh Water Rules (2018) offer a framework for regulating both abstraction and discharge, but enforcement capacity is weak and public Gazipur Jamalpur funding limited. A draft Industrial Water Use Policy sets out a clear vision of water-secured industrial growth with two primary policy objectives: optimize industrial water use and reduce water pollution from industrial effluents. Fortunately, industries in Bangladesh are clustered into one hundred Ashulia economic zones and these offer the opportunity for cost-effective Tongi interventions to increase industrial used water treatment and reuse (Map 8), especially where zones have industries with similar used water Savar characteristics, such as clustering within the apparel industry. Bangladesh is among the world’s largest exporters of ready-made garments with a global market share of about 5%. The sector currently accounts for more than 80% of Bangladesh’s export earnings and more than 10% of the GDP. Global corporates are sensitive to reputational risks and are willing to work with Tejgaon governments to find more sustainable water treatment and reuse solutions. Dhaka WRG is collaborating with the Bangabandhu Sheikh Mujib Shilpa Nagar Tarabo Economic Zone to develop a hybrid annuity PPP model for the first centralized effluent treatment plant in an industrial zone. Successful implementation could pave the way for the replication of this model across the 100 economic zones in Bangladesh. Narayanganj Industrial clusters Urban areas Sources: Thomas Sagris et al., “An Analysis of Industrial Water Use in Bangladesh with a Focus on the Textile and Leather Industries,” (Washington, DC: World Bank, 2015); Rebel, “Options Study for Implementation of Industrial ETPs in Urban Areas through PSP/Circular Economy Options [in Bangladesh] (2021); World Bank, “ Bangladesh Water Sector Diagnostic: Priorities for the New Decade,” (Washington, DC: World Bank, 2020). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 110 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Brazil Aegea Scaling Water Reuse through Industrial Partnerships Public-private partnerships to secure industrial water supply. Aegea, Brazil’s largest private water concessionaire, has achieved a significant breakthrough in water reuse through a long-term partnership with Braskem, a leading petrochemical company. The agreement, signed in early 2025 through Aegea’s industrial water subsidiary Apura, will supply Braskem’s Duque de Caxias plant in Rio de Janeiro with 100% of its water demand— around 20,390 cubic meters per day—using new water. This 30-year offtake deal not only secures a sustainable water supply for Braskem but also aligns with both companies’ circular economy and climate resilience goals. The partnership marks a critical step toward sustainable industrial water management in Brazil, a country where climate change has had a growing impact on water resources in populous states like São Paulo and Rio de Janeiro. A global mapping of Braskem’s operations identified the Duque de Caxias plant as particularly vulnerable to water risk, making this reuse project vital to its long-term viability. The treated industrial effluent will be blended with municipal used water at Aegea’s treatment plant, which will be supported by an additional purification plant using ultrafiltration and reverse osmosis technologies, expected to become operational by 2029. This project also supports Aegea’s goal of meeting Brazil’s sanitation law targets ahead of schedule. In 2021, Aegea secured two concession blocks in Rio de Janeiro, where used water collection in Duque de Caxias was just 13%. The additional revenue from the Braskem partnership will enable Aegea to achieve 90% used water coverage by 2029—four years ahead of the mandated 2033 deadline. Aegea has demonstrated a similar approach with Petrobras, signing an agreement in 2023 to supply 86,400 cubic meters per day of new water. These initiatives showcase the potential of integrating industrial and municipal water reuse to enhance resilience while meeting critical infrastructure targets. By leveraging synergies between public and private sectors, Aegea is setting a precedent for Ekaterina Belova/Adobe Stock scaling water reuse across Brazil. Source: Mariana Quaresma, "Aegea Secures Brazilian Reuse Breakthrough in Braskem Deal," (GWI, March 18, 2025). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 111 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Brazil Aquapolo Financing Instruments Aquapolo represents a form of joint venture between the public and the private sector. Aquapolo is one of the largest industrial reuse projects in Latin America and one of the world’s largest, with the capacity of producing up to 1,000 liters per second (l/s) of recycled water for industrial purposes. Located inside SABESP’s sewage treatment plant in the ABC Paulista region, Aquapolo is the result of a partnership between SABESP and GS Inima. Aquapolo collects secondary treated sewage from SABESP, which then treats it to the standards required by petrochemical industries and others and delivers it through a 17-kilometer (km) pipeline. A critical element ensuring success of the project is a long-term treated water purchase agreement between Aquapolo and industry, providing assurance that industry will buy the treated water up to 2054. The project is ensuring the collection of sewage goes up, industrial water demands are met through sustainable mechanisms, and the supply of drinking water for households is secured. 17 km – 650 l/s SABESP Aquapolo Offtakers Reuse Plant Used Water (petrochemical + Treatment Plant Supply price SABESP GS Inima Purchase price other industries) 0.04 BRL/m3 49% 51% 6 – 11 BRL/m3 17 km pipeline built by SABESP and operated by Aquapolo Kalyakan/Adobe Stock Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 112 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References China Nationwide Regulation Government commitment, together with a clear regulatory framework, can accelerate reuse at the national, city, and corporate scales, as the experience of China shows. A large and fast-growing reuse market in China: China’s market for reuse accounts for 40% of all installed capacity worldwide, and 80% of this capacity has been awarded within the last decade. The market is growing three times faster than the rest of the world due to aggressive government targets and regulatory pressures supporting reuse by both utilities and industries (Figure 75).1 FIGURE 75: Evolution of reuse commitment and regulation in China Reuse Drivers in China Water Scarcity (Figure 76): 2024 National 2021 National Water • National Level: The primary underlying growth driver for reuse is water scarcity 2015 Action Plan 14th Five Year Conservation and the need to curtail water use within an absolute water resource limit. Plan Regulation • City Level: Up to 300 cities suffer from varying degrees of water shortages. • 145 national water-saving cities established, where reuse is strongly promoted. Set water reuse Specified a Provides quotas • 116 cities have supported pilot projects for reclaimed water, with an average rates by 2020 of:2 reduction of for water use reuse rate achievement of 29 percent. • 20% in water 16% in net water for industry, • 90 cities have promoted the “sponge city" concept, which emphasizes flood scarce cities consumption, services, and management through green infrastructure, achieving natural purification of • 30% in Beijing- driving industrial various crops3 rainwater and enhancing local rainwater resource utilization. Tianjin-Hebei region reuse • 15% in other cities Water Resources Tax to Increase Allocative Efficiency: • Starting from December 1, 2024, China is implementing a water resources tax FIGURE 76: City-level engagements in China (# cities) nationwide, replacing the current water fee charging mechanism, designed to 400 “strengthen the management and protection of water resources and promote 300 the conservation, intensive and safe use of water resources.” 300 • The tax is levied on abstraction volume. Higher tax rates are required for 200 145 116 groundwater extraction and water use in areas with severe water shortages. 100 90 • Although the introduction of this tax does not increase the overall tax 0 burden, for high water-consuming industries and enterprises operating in Water Water saving Pilots for Sponge city shortages schemes reclaimed water concept over-exploited areas, the shift from water fees to water taxes may increase faced established launched adopted their water usage costs. 1 GWI, “Market Focus Deck: Desalination and Reuse,” (October 2023), GWI (2024). 2 “The Action Plan for Prevention and Control of Water Pollution,” as reported in Zhuo Chen et al., “Water Reuse in China: Current Status, Policies, and Experience,” in Handbook of Water and Used Water Purification, edited by Josef Lahnsteiner (Cham: Springer, 2024): 1239–54. 3 National Regulation on Water Conservation, Order No. 776  (March 2024).   Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 113 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References China Nationwide Water Stress Water stress is a significant driver of water reuse in China’s major cities, particularly in the north. MAP 10: Water scarcity in China at the sub-basin level1 Source: He et al. (2021). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 114 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References India Ganga Basin Programmatic PPPs Used water treatment and reuse projects in the Ganga basin, which have unlocked US$650 million in private capital to date, represent an example of programmatic PPPs. Context: FIGURE 77: Comparison of Payment Flows – DBO vs. HAM • The Ganga basin is the world’s most populous river basin, covering 860,000 square kilometers across Design-Build Operation and Maintenance 11 states in India. More than 600 million people— close to half of India’s population—live within its DBO boundaries, and the region generates over 40% of Revenue CF the country’s GDP. • Along the river’s mainstem—home to about 50 major cities—an estimated 3 billion liters of untreated sewage flowed into the river every day. Domestic sewage accounted for the majority of the pollution Hybrid Annuity Revenue Annuity load, with industrial effluents and poorly managed CF O&M solid waste adding further pressure. Many existing treatment plants were not functioning effectively or lacked adequate maintenance. Programmatic PPP Approach: • The World Bank-supported National Ganga River Basin Project began strengthening institutions and financing infrastructure investments in the five mainstem states—Uttarakhand, Uttar Pradesh, Bihar, Jharkhand, and West Bengal. The project focused on building and upgrading sewage treatment plants, laying new sewer networks, improving environmental governance, and establishing reliable water quality monitoring systems. • Within this broader initiative, the World Bank Group—including the World Bank, IFC, and 2030 WRG—conceptualized and developed a hybrid annuity model (HAM) as a public-private partnership structure for used water treatment in the Ganga basin. • Under HAM, the government pays 40% of the project’s capital costs tied to construction milestones, and the remaining 60% over 15 years, contingent on the treatment plant’s performance. As a result, the private sector recovers part of the project costs over 15 years, subject to the achievement of set water quality parameters, thereby driving performance (Figure 77). • This approach incentivizes the private sector to maintain long-term operational standards and shifts some of the financial risk away from the public sector. It sought to address a persistent challenge: ensuring that treatment plants, once built, continue to function effectively over their entire lifespan. • The initial pilots, launched in Mathura and Vrindavan, as well as Varanasi, and Haridwar, tested the feasibility of this model, which was then scaled across 30+ towns in the basin, unlocking US$1.5 billion in project costs, with US$650 million in private capital. • Mathura was one of the projects under this initiative that supported reuse through offtake by the Indian Oil Refinery, with the costs split 50-50 between the refinery and central government. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 115 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References India Nationwide Reuse Market India's reuse market is small but growing fast with huge potential, particularly for industrial reuse. Industrial reuse is the largest application of new water in India and is growing fast. While coming off a small base, water reuse capacity has more than doubled over the last five years from 7 to 15 million cubic BOX 1: New regulations could meters per year (Figure 78).1 transform water reuse in India Regulation is driving the increase in industrial reuse. Within the National Framework on Safe Reuse of The Government’s proposed “ Liquid Treated Water, growth in reuse is primarily for industrial use, driven by federal initiatives and state regulations Waste Management Rules ” (October (related to water scarcity and water pollution), court actions (typically related to river pollution) and industry 2024) regulate the generation, collection, clustering with centralized treatment and zero liquid discharge objectives. New, more stringent rules are treatment, reuse, and disposal of used proposed (Box 1). Various states and cities are investing in reuse and some examples are presented below:1,2 water and incentivize the reuse of new water by imposing penalties on failure to • Indore was declared as India’s first ‘water plus city’ and is consequently mandated to reuse a minimum meet minimum reuse targets. 25% of used water as per the Swachh Bharat Mission Water Plus Protocol. The rules will require urban local bodies • In Maharashtra, the State Water Resources Department requires all local governments (and their utilities) to develop and implement action plans to ensure 100% treatment of used water by 2023, reuse of at least 30% of the recycled water by 2023, and addressing all aspects of used water reuse of 100% recycled water by 2030. management. The rules underscore • Gujarat’s reuse policy mandates industrial parks and large industrial units to reuse new water. The financial sustainability through user fees requirement for individual industrial units applies to all industries consuming more than 0.1 megaliters and the adoption of digital technologies to per day and at a distance of less than 50 kilometers from used water treatment plants. improve the efficiency and transparency of • The Supreme Court of India has issued specific orders since 1999 to prevent the discharge of untreated liquid waste management in cities. industrial effluents into the heavily polluted Yamuna River. In 2021, it recognized that pollution-free water is a basic right under the constitutional framework, prompting increased focus on the reuse and recycling of used water. FIGURE 78: Contracted reuse capacity in • In the state of Haryana, the government’s textile park must upgrade the existing centralized treatment India (million m3/year)1 works, with only secondary treatment, to a zero liquid discharge treatment facility to meet the supreme court directive of banning the discharge of effluent into the Yamuna River. 20 • 32 cities practice reuse, and 15 cities have more than 50% reuse.3 15 15 10 7 5 0 1 GWI (2023a). 2019 2024 2 KPMG, India Wastewater Reuse Opportunity Mapping (2021). 3 Kirti Goyal et al., "A Comprehensive View of Existing Policy Directives and Future Interventions for Water Reuse in India," Water Policy 24, no. 7 (July 5, 2022): 1195–1207. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 116 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References India Nationwide Reuse policies & regulations in selected states Reuse in India is driven by state policies and regulations… Haryana targets 80% reuse by 2030, focusing on industrial The Uttar Pradesh Urban Wastewater Treatment and construction sectors Maharashtra State Water Policy (2019) requires a (recycle, reuse, disposal) policy aims to address minimum of 30% reuse to reduce freshwater water scarcity and promote sustainable water demand in the next 5 years. The state requires management by prioritizing new water as a Rajasthan requires 50% reuse resource. It aims to achieve 100% reuse of treated industries within 50 km of STPs to use new water by 2026, focusing on industrial used water in all cities and municipal applications Odisha encourages Gujarat mandates 100% reuse of used water by In Tamil Nadu, industries within 50 industries to adopt zero 2030, requiring industries within 50 km of sewage km of STPs must use new water effluent discharge treatment plants (STP) to use new water Andra Pradesh aims to reduce freshwater West Bengal aims for 80% Karnataka targets 50% reuse of used demand by 30–50% in water-stressed regions by reuse by 2030, focusing on water by 2030, with industrial estates prioritizing industrial and agricultural reuse. non-potable applications within 30 km of STPs prioritized Industrial reuse is mandatory for industries within 20 km of sewage treatment plants Source: Goyal et al. (2022). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 117 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References India Nationwide Water stress and Water Scarcity …and increasing levels of water stress. MAP 11: Current water stress at a basin scale1 MAP 12: Current water scarcity in cities in India2 1 World Bank estimates using information from AQUEDUCT 4, World Resources Institute. 2 He et al. (2021). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 118 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Mongolia Nationwide Water Pollution Fees Water pollution fees, which internalize the cost of degradation of water, can support reuse across sectors, as the experience of Mongolia highlights. 52 entities were producing 76% of the Most industry segments with large Such large units could afford their own Context daily effluent volume in Ulaanbaatar, discharges were found to be highly treatment plants , and could be charged which could be treated before polluting, such as spirits, wool and higher pollution fees and compensation discharge to sewers cashmere, and tanneries rates to incentivize treatment In Mongolia, the World Bank’s WRG developed a new Water Pollution Fee Law to address water pollution from municipal and industrial sources. Grounded in the polluter pays principle, the law requires industrial and commercial entities to pay water pollution fees based on the volume and quality of used water discharged. The fee structure under the law was established to incentivize such large entities to pre-treat their effluent before discharge. Fee Structure All entities discharging water (2) Compensation Fee: If the effluent exceeds (1) Pollution Fee: If the effluent into central sewers must pay discharge standards, with the rate dependent on meets discharge standards two types of fees: volume and pollution load This law was coupled with national standards for reuse across different reuse categories, as well as supporting guidelines on discharge permits and contractual arrangements with basin authorities, among others. The law has resulted in the following impacts: Pre-Treatment of Effluent: Revenue Collection: Acceleration of Reuse Investments: The implementation of the law The revenues collected through • WRG’s assessment of specific projects for reuse of has resulted in pre-treatment of this mechanism are supporting the new water by the central heat and power plants in operating costs of the central used Impacts effluent by eight industrial sectors Ulaanbaatar unlocked US$97.8 million in financing and avoidance of 61.2 million cubic water treatment plants operated by from the Millennium Challenge Corporation under meters of inadequately treated the Ulaanbaatar Water Supply and its Second Compact Agreement. effluent into the Tuul river. Sewerage Authority. • In addition, multiple industrial units are actively supporting reuse to capitalize on the pre-treatment infrastructure they put in place as a result of the law. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 119 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Peru Arequipa PPP through industry operating the used water treatment plant Public-private partnerships between cities and industry can address water scarcity and the quality of water in the environment through reuse projects. The City of Arequipa, Peru, implemented an innovative solution to address water scarcity and expand used water treatment through a public-private partnership between SEDAPAR, the local water utility, and Cerro Verde, a large copper mine. Cerro Verde needed additional water to expand mining production and proposed treating Arequipa’s used water, in exchange for a portion of the treated water. A water resource recovery facility, La Enlozada, was designed, financed, built, and operated by Cerro Verde under a 29-year PPP agreement. The facility, using energy-efficient trickling filter technology, can treat 1.8 m³/ second of used water, with planned expansions to 2.4 cubic meters per second by 2036. Cerro Verde receives 1 m³/second for mining operations, while the remaining treated water is returned to the Chili River for downstream use. This solution brought substantial benefits. SEDAPAR saved over US$615 million in construction and operation costs, while Cerro Verde secured a cost- effective water source. Environmentally, the project improved water quality in the Chili River, leading to the return of aquatic life. Socially, it increased used water treatment coverage to over 95% for Arequipa, reduced waterborne illnesses, and improved irrigation water quality for farmers. The success of the project has been attributed to its economic viability, together with good stakeholder engagement and enabling PPP regulations: the case study shows that reuse is economically viable in water-scarce areas, especially where the cost of tapping the nearest water source is high. It is estimated that for an alternative scenario (desalinization and pumping), the cost of water for Cerro Verde would be in the range of US$2.5 per cubic meter, in comparison with US$0.68–0.80 per cubic meter for reuse. Given the opportunity costs, Cerro Verde was ready to pay the capital and operation Aerial view of La Enzolada wastewater treatment plant. costs of the used water treatment plant in full. Source: Cerro Verde, 2018. Source: World Bank, Wastewater: From Waste to Resource - The Case of Arequipa, Peru (Washington, DC: World Bank, 2019). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 120 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Singapore NEWater Diversifying Water Sources Singapore is a world leader in building water resilience by employing a strategy of diversifying sources and reusing water. WHY? Singapore’s Water Security Imperative Water security is a national priority for Singapore. Despite high rainfall, the country lacks sufficient space for natural storage and imports water from Malaysia. The country’s rapid economic and population growth after independence heightened the urgency of securing a sustainable and secure water supply. WHAT? A Diversified Water Strategy with NEWater To address its water security needs, Singapore developed an integrated water management system with diversified water sources known as the Four National Taps: local freshwater, imported freshwater, desalinated water, and NEWater. NEWater is highly purified water reclaimed from used water. NEWater’s genesis dates back to the 1970s, when the Singapore Government commissioned a study to determine the feasibility of producing reclaimed water. While the technology at the time had not yet matured and remained expensive, FIGURE 79: Closing the water loop with NEWater the national water agency, PUB, continued to conduct research and monitor the landscape as technology evolved. The reverse osmosis membrane technology eventually became cost-effective, efficient, and reliable in the 1990s. Following a successful demonstration plant, PUB opened the first two NEWater factories in Bedok and Kranji in 2003. Today, NEWater represents a key pillar of Singapore’s water security system, enabling the country to close the water loop and reuse water sustainably. Slated for completion in 2027, the 206-kilometer Deep Tunnel Sewerage System (DTSS) is a massive underground superhighway that will use gravity to convey all used water from industries and households to centralised water reclamation plants. After treatment at the water reclamation plants and further purification at NEWater factories, the high-grade reclaimed water will be distributed through a dedicated pipe network for non-potable industrial use (Figure 79). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 121 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Singapore NEWater Because NEWater is ultra-clean, its biggest users are fabrication plants for semiconductor wafers, which require water quality at even more stringent standards than those for drinking water. In addition, during dry spells, a small amount is blended into reservoirs for indirect potable reuse. A weather-independent water source, NEWater strengthens water security in the face of exacerbating climate change. PUB currently operates NEWater factories at Kranji, Ulu Pandan, and Changi. From 2016 to 2023, NEWater sales averaged 142 million cubic meters per year, or 21% of total water sales of 662 million cubic meters per year.1 The country’s NEWater production capacity will expand with the completion of Changi NEWater Factory 3 in the next three years and Tuas NEWater Factory by 2027. Singapore’s long-term planning and water management strategy, incorporating NEWater and three other National Taps, aims to strengthen the country’s ability to meet current and future growth in water demand. This approach has supported economic growth while bolstering water resilience. Between 1965 and 2019, per-capita GDP increased 40-fold, while total water consumption grew sixfold,2 reflecting the success of this strategy in securing supplies, together with measures to increase water use efficiency and manage demand. The advantages of NEWater Why has Singapore pursued a strategy to develop NEWater as a National Tap? Producing NEWater is more energy-efficient and cost-effective than desalinated water. The energy consumed in producing NEWater amounts to between 0.6 and 0.8 kilowatt hours per cubic meter in the same plant—less than a quarter of the 3.5 kilowatt hours per cubic meter used in desalination.3 PUB reports that there are ongoing efforts to further enhance energy efficiency in NEWater production, including the development of biomimetic membranes for municipal applications. The technology uses nature-based protein water channels within a filtration membrane, which facilitates high water flow while minimizing energy consumption. Demonstration plant trials have shown promising results, achieving a 20 percent reduction in energy consumption.4 1 Plant capacity data and dates of commissioning and decommissioning from Michele Y.C. Chew et al., “The Challenges in Singapore NEWater Development: Co-evolutionary Development for Innovation and Industry Evolution,” Technology in Society 33, no. 3: 200–11 (2011). PUB press releases (for example, on Singapore’s NEWater Journey), PUB Annual Reports, and the Legislative Council Secretariat’s NEWater Fact Sheet. Water sales data from Singapore Government Data Portal and Ministry of Sustainability and Environment. 2 United Nations Conference on Trade and Development (UNCTAD), Aligning Economic Development and Water Policies in Small Island Developing States (Geneva: United Nations, 2021). 3 PUB Singapore, “ Desalinated Water.” 4 PUB Singapore, “Singapore NEWater Journey,” Press Release (September 27, 2024). See also PUB Singapore, “Virtual Introduction on PUB Water Reclamation Process & Technology Outlook.” Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 122 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Singapore NEWater HOW? Key Factors Behind NEWater’s Success 1. Political Leadership 5. Public-Private Partnerships and Industry Engagement • Water security is of national significance, and Singapore’s water strategy • PPPs have been essential in scaling Singapore’s water reuse program. is anchored in strong governance and management. PUB manages the While early investments were made in-house, large plants were contracted entire water cycle, from collection to treatment and supply. Long-term through DBOO models and 25-year concessions. These have enabled private investments in large-scale infrastructure, including the DTSS, ensure that investment in Singapore’s water infrastructure to supplement investments all used water can be collected and treated for reuse. by both the government` and PUB, the latter from tariff revenues. Singapore’s water industry includes 350 companies, contributing to both domestic and 2. Developmental Approach: Research and Piloting Before Scaling global markets. • Singapore’s water reuse strategy followed an incremental, evidence- 6. Public Acceptance & Stakeholder Engagement based approach, starting with research and pilot plants before full-scale implementation. Universities and private sector partnerships have played • Public acceptance was key to NEWater’s success. Wastewater was reframed a crucial role in advancing membrane technologies, energy efficiency, and as “used water” and NEWater was promoted as a safe, high-quality resource. process optimization. PUB dedicates funding to continuous innovation, Initial skepticism was addressed through education campaigns, branding, ensuring that technological advancements keep pace with evolving and outreach. An extensive public education program helped Singaporeans challenges. PUB has supported more than 770 research and development appreciate the safe technology behind NEWater. In addition, public trust projects, with a total value of about US$918 million over the 22-year period was secured through stringent quality control, transparency, and public from 2002 to 2024.1 engagement, including formally introducing NEWater as Singapore’s third National Tap, with over 60,000 Singaporeans raising a toast to NEWater at 3. Regulation and Wastewater Management the 2002 National Day Parade.2 • Singapore’s regulatory framework ensures that used water is safely 7. Investments in Learning and Partnerships collected, treated, and reused. Strict industrial discharge regulations, backed by the Sewerage and Drainage Act (1999), protect the used water • PUB has collaborated extensively with industries and institutions of higher system. To manage rising non-domestic demand, PUB introduced learning, including setting up the Singapore Water Exchange, a hub that mandatory water recycling in 2024 for new wafer fabrication, electronics, houses local water companies together with PUB to form an ecosystem and biomedical projects consuming more than 60,000 cubic meters each supportive of innovation and investment in water technologies. PUB year. These industries account for 17% of non-domestic water demand, also works closely with the Singapore Water Association, supporting the making recycling mandates key to sustainable water management. development of local industrials in the water sector. 4. Smart Water Management and Digitization • Singapore has fully digitized its water management system, integrating real- 1 PUB Singapore, “Annual and Sustainability Report 2023/4.” time environmental monitoring, predictive modeling, and digital twin technology 2 See, for example, Asian Development Bank, “Harry Seah: Making the Unthinkable Drinkable” to optimize resource allocation, efficiencies, and environmental protection. (December 1, 2009) and George Madhavan, “Beyond Tap Water: NEWater Wins Public Confidence in Singapore.” Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 123 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Singapore NEWater Investment Finance and Pricing Investments in Singapore’s resilient water system have come from both the public and private sectors. Tariffs play an important role in recovering costs. Investments in the early phases of NEWater development were undertaken by the government. Private sector investments, primarily through long-term DBOO contracts, became more important as the technology matured, risks were reduced, and investments were scaled. In Singapore, water is priced to recover the full cost of its supply and production and to reflect the cost of producing the next drop of water. Water pricing in Singapore reflects scarcity, contributes to cost recovery, and funds future infrastructure investments (Figures 80 and 81). FIGURE 80: Water sales and tariffs Potable Water Potable Water (Domestic) NEWater Industrial Water (Non-domestic) Water Sales (2023)* (million m3) 300 209 145 14 Tariffs (2025)** ($ per m3) 0 - 40 m3 > 40 m3 Tariff $1.43 $1.81 $1.43 $1.28 $0.66 Water Conservation Tax $0.72 $1.18 $0.72 $0.13 - Waterborne Tax $1.09 $1.40 $1.09 $1.09 $1.09 Total $3.24 $4.39 $3.24 $2.50 $1.75 * As reported in PUB Annual and Sustainability Report for 2023/2024. ** Singapore Dollars, effective April 2025. See PUB, " Water Price." FIGURE 81: Components of water price * Covers the costs of collecting, treating, and distributing potable water through Singapore’s island-wide pipeline Water Tariff network. It is charged based on water consumption. Introduced in 1991, promotes water conservation by reflecting its scarcity value. Imposed as a percentage of the water Water Conservation Tax (WCT) tariff, it reinforces the importance of saving water from the very first drop. Used water is collected through a separate sewer network and treated at water reclamation plants before being Waterborne Tax (WBT) purified into NEWater or discharged into the sea. The Waterborne Tax (WBT), paid by all water users, helps cover the cost of treatment and maintenance of the used water system. It is charged based on water consumption. * PUB, " Water Price." Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 124 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Singapore NEWater Leveraging Green Finance for Water Reuse PUB has incorporated green finance to support large-scale projects. In 2022, PUB issued a green bond in the amount of S$800 million, fully allocated to financing and refinancing the Tuas Water Reclamation Plant and Tuas NEWater Factory 1.1 The bond finances project expenditures for sustainable water and used water management, specifically water treatment infrastructure. It covered 28.9% of the projected cost for Tuas NEWater Factory 1 and 22.8% for Tuas Water Reclamation Plant. Future outlook: Innovation and scale The DTSS was conceived in the 1990s to transform the country’s used water management system. This vast underground project is designed to meet Singapore’s long-term needs for used water collection, treatment, reclamation, and discharge. It “holds the key to enable PUB to reclaim and recycle water in an endless cycle,” supporting Singapore’s capacity to produce NEWater as a weather-resilient water source.2 With the construction of the DTSS, Singapore’s used water system will eventually be consolidated into three nodes, situated in the Eastern, Northern, and Western ends of Singapore, where a water reclamation plant will be co-located with a NEWater factory. The project involves decommissioning some of the older NEWater plants and making investments in new capacity using the latest available technology. Investments in research and innovation are ongoing. At Singapore International Water Week 2024, PUB signed eight memoranda of understanding to facilitate knowledge exchange and transfer between PUB and other organizations on innovation, energy-efficient water treatment, resource circularity, and climate resilience.3 Wesley Pribadi/Unsplash 1 PUB Singapore, "Green Bond Report for the Financial Year 2023."  2 PUB Singapore, "PUB Completes Tunneling Works for Second Phase of Deep Tunnel Sewerage System," Press Release (August 21, 2023). 3 PUB Singapore Annual and Sustainability Report for 2023/2024. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 125 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Singapore NEWater Scaling NEWater: Industrial adoption as a key driver Industrial adoption has been a cornerstone of Singapore’s strategy to scale water reuse. Since its introduction in 2003, NEWater has provided a high- purity, cost-effective water source for industries with stringent quality requirements, particularly the wafer fabrication sector. Convincing businesses to adopt reclaimed water required rigorous validation, strategic collaboration, and clear financial benefits. From Skepticism to Confidence: Securing Industry Buy-In The wafer fabrication industry, known for its high water consumption and strict purity standards, was among the first to adopt NEWater. Initial concerns centered on water quality, as ultra-pure water (UPW) production requires extremely low organic and mineral content. To address this need, PUB built a pilot UPW plant in consultation with wafer fabs. The plant demonstrated that NEWater could meet the industry’s exacting specifications, with independent assessments confirming its reliability. The Business Case: Lower Costs, Higher Efficiency For industrial users, NEWater offered both quality assurance and economic advantages. Compared to PUB’s potable water, NEWater required fewer treatment steps to reach UPW standards, cutting chemical costs by approximately 20% in the semiconductor industry.1 In addition, it was priced lower than both potable and desalinated water, making it the most cost-effective option for industrial operations. Beyond Semiconductors: Expanding Across Sectors While wafer fabrication led the way, other high-tech industries followed. Today, NEWater is used in electronics, pharmaceuticals, petrochemicals, and data centers, all of which demand high-purity water for precision processes. The availability of a reliable, cost-efficient reclaimed water source strengthened Singapore’s attractiveness as a manufacturing and technology hub. Proving the Model: Sustainable Water Supply for Industries Today, some of Singapore’s key industrial sectors depend on NEWater. The collaboration between PUB and the wafer fabs, along with the demonstrated cost benefits and high water quality, underscore the potential of NEWater to meet the stringent demands of industrial applications while contributing to Singapore's water sustainability goals. 1 P. Tan et al., “Impact of NEWater as feedwater for the production of ultra-high-purity deionised water and manufacturing process,” Future Fab International Issue 16 – Process, Gases, Chemicals, and Materials (as cited in Tan et al., 2009). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 126 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References South Africa eThekwini Reuse PPP with Private Capital Mobilization eThekwini represents a reuse PPP with private capital mobilization, where part of the debt is backed by the French Export Credit Facility. The eThekwini Water Reclamation FIGURE 82: eThekwini Water Reclamation Project Project is a 20-year, US$12 million BOOT concession (Figure 83). Located in the grounds of Durban’s Southern Wastewater Treatment Works, it has a treatment capacity of 47.5 million liters per day of domestic and industrial used water and was commissioned in 2001. The success factors of the project include 20-year water supply agreements with two industrial clients for reuse, namely MONDI, a paper facility, and SAPREF, a refinery. The project mobilized private capital through debt (~81%) from Rand Merchant Bank and Development Bank of South Africa, as well as equity (19%) from a consortium of partners. Part of the debt was backed by the French Export Credit Facility. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 127 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References South Africa Ekurhuleni Industrial Parks and Economic Zones Cities such as Ekurhuleni are looking at consolidating treatment works to support industrial reuse and tackle water supply disruptions. Ekurhuleni’s total water demand is estimated at 500 million liters per day, projected to increase to 700 million liters per day by 2030. Industrial demand constitutes 30% of current water demand at 150 million liters per day. FIGURE 83: Total and industrial water demand in Ekurhuleni, 2021 With increasing disruptions to water supply in Ekurhuleni, the different levels of government—the National Department and 2030 (million liters per day)1 of Water and Sanitation (DWS), Rand Water (bulk water provider), and the municipality—are assessing the possibility of supporting the use of treated municipal used water by industry. The Ekurhuleni Water Care Company (ERWAT) has 1000 been engaged by the City of Ekurhuleni to manage its used water treatment works under a service delivery agreement. 700 ERWAT ensures the sewage network and treatment infrastructure in the city can meet current and future demand. 500 500 ERWAT is currently looking at consolidating 19 used water treatment plants into 10 centralized ones, with 5 bigger 150 210 regional works and 5 smaller ones to facilitate reuse by industry. 0 2021 2030 Total demand Industrial demand Request for an increase in raw water Sale of new water by ERWAT seen as a means of Drivers for abstraction limit for Rand Water declined improving financial sustainability and thereby by DWS, requiring ERWAT and Ekurhuleni to Reuse reducing reliance on municipal and central funding reduce demand to meet future needs FIGURE 84: Waterval and Waterval and Olifantsfontein treatment plants, proposed to be revamped as 2 of the 5 regional plants, Waterval and Olifantsfontein Olifantsfontein plant capacity are both operating over capacity, indicating the availability of flows for reuse. Moreover, both encompass Key Enablers for Reuse in vs current treatment certain enabling factors, as outlined below: (million liters per day) Potential additional enablers for the project under Adequate used water flows to support reuse consideration include: 500 416 • A waste discharge levy to discourage the discharge of 400 Availability of land for the construction of untreated used water 300 reclamation plants • Introduction of reuse targets 200 170 • Reduced tariffs for new water to encourage industrial 65 102 Close proximity to industrial users 100 offtake 0 Waterval Olifantsfontain Financing for the project may come through the Municipal/Regional Bulk Infrastructure Grant, loans from Capacity Current treatment commercial and development banks, bond issuance through the Trans-Caledon Tunnel Authority, or some form of PPP. 1 DWS,"Water Quality and Supply Report, (Pretoria: DWS: 2021)); Ekurhuleni Metropolitan Municipality, "Integrated Development Plan 2021–2026 (2021); Ekurhuleni Metropolitan Municipality, "Future Water Demand Projections" (2022); Ekurhuleni Water and Sanitation Services, "Water Demand Management Report," (2022). Industrial water demand in 2030 is assumed to be 30%. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 128 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References South Africa Cape Town Direct and Indirect Potable Reuse Cape Town is diversifying its supply mix through both direct and indirect potable reuse. Dependence on rain, and water security. Cape Town, with a population of 4.6 million people, experienced a severe drought in the period from 2015 to 2018 and became known as the city that nearly ran out of water. At that time, Cape Town was almost entirely dependent on rainfed sources of water, with 95% coming from a regional surface water system. Early experience with indirect potable reuse. In the 1970s, the national government had implemented a managed aquifer recharge IPR scheme with a capacity of 13,000 cubic meters per day in Atlantis, a satellite settlement north of Cape Town.1 Treated domestic used water was infiltrated into a sandy aquifer, with a retention time of about two years, and from which water for domestic potable use was abstracted. The scheme, which had fallen into disuse due to cheaper freshwater alternatives, was rehabilitated and expanded during and after the recent drought. A strategy to diversify water sources, including potable reuse. In response to the drought, the city developed a water strategy, “Our Shared Water Future,” that committed the city to develop “new, diverse supplies of water including groundwater, water reuse, and desalinated water cost-effectively and timeously to increase resilience and substantially reduce the likelihood of severe water restrictions in future.”2 Guided by this strategy, the city is implementing both direct and indirect potable water schemes with capacities of 70,000 cubic meters per day and 55,000 cubic meters per day, respectively, in the first phase. When built, the Faure New Water DPR scheme will be one of the largest of its kind in the world.3 Further phases of reuse are being evaluated that could generate up to 400,000 cubic meters of potable water per day from used water flows in the City by 2040 from 10 used water treatment plants, including DPR plants in the size range of 20,000 to 100,000 cubic meters per day.4 The city has 25 used water treatment plants in total, posing some challenges for economies of scale. The investments in reuse have been supported by major upgrades to the city's used water treatment facilities. Stakeholder engagement and communications. Cape Town has obtained ongoing advice from an expert panel on its implementation of the DPR and IPR schemes and adopted the view that “context, trust, accessible and transparent communication are critical factors that influence public acceptance of alternative water solutions.” 3 Consequently, the city is implementing an intensive education and awareness program. As part of this effort, the mayor hosted a conversation in 2023 with mayors and officials from seven cities—Perth, Nairobi, Los Angeles, Wulpen, Windhoek, Beaufort West, and George—promoting knowledge exchange on water reuse practices.3 Reuse along with desalination. The city is proceeding with desalination in parallel with reuse for reasons of diversification. The DPR scheme is expected to cost roughly half of that for desalination per cubic meter of capacity, with lower operating costs due to its lower energy intensity. 1 Water360, "Atlantis—Cape Town—Atlantis Water Resource Management Scheme." 2 City of Cape Town (2020). 3 City of Cape Town, "Cape Town Water Outlook 2024 – Edition 11," Water & Sanitation Directorate (2024). 4 "Water Reuse Strategic Study," Presentation to Water Resilience Transversal Committee, City of Cape Town, (December 2022); City of Cape Town, "Where Does My Wastewater Go?" (2025). The Mayor of Cape Town exchanging views on reuse with other cities 3 Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 129 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References United States Orange County Indirect Potable Reuse Orange County’s experience highlights the feasibility of large-scale indirect potable reuse, with consumer acceptance. Southern California is dry and drought-prone. The Orange County Water District (OCWD) was formed in 1933 by an act of the California legislature to manage the Orange County groundwater basin and protect Orange County’s rights to the Santa Ana River water. The basin provides groundwater to 19 municipal and special water districts serving 2.5 million customers in north and central Orange County. It accounts for 77% of this area's water supply. The OCWD manages the Groundwater Replenishment System (GWRS), a large water reuse scheme comprising a 491,000 cubic-meters-per-day advanced water purification facility that takes treated used water that would otherwise be discharged to the ocean, purifies it to near-distilled quality, and then recharges it into the groundwater basin. The system provides a source of water for 1 million people and meets 35% of total water demands. The system has been operational since January 2008, with an initial capacity of 265,000 cubic meters per day that expanded in 2015 and again in 2023. This is the largest potable reuse facility in the world. The purified GWRS water is put back into the groundwater basin to blend with other water supplies. GWRS water is also injected into coastal barrier wells to keep seawater out of the basin. The treatment process includes microfiltration, reverse osmosis, and advanced oxidation. Orange County has made extensive use of an advisory panel, including leading experts in hydrogeology, chemistry, toxicology, microbiology, engineering, public health, public communications, and environmental protection. OCWD implements a proactive, diverse and comprehensive groundwater and surface water monitoring program to continually generate real-time data on water quality. OCWD also has an active communications and education program. The reuse scheme has multiple benefits, in that it: (1) creates a new local water supply; (2) reuses a wasted resource that would otherwise end up in the sea; (3) increases water supply reliability; (4) costs less than alternative freshwater supplies and desalination; (5) uses half the energy of importing water and one-third the energy of desalinating seawater; and (6) improves the quality of water in the basin. Sources: Updated and amended from City of Cape Town, "Water reuse – lessons for Cape Town from Orange County experience," Cape Town Water Exchange, Practice Note #4 (August 2022), prepared by Rolfe Eberhard. See also Orange County Water District, "New Water You Can Count On." Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 130 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References United States Fairfax From unplanned to planned IPR Fairfax, Virginia is an example of transforming unplanned de facto reuse into planned and quality- assured indirect potable reuse. The Upper Occoquan Sewer Authority provides treated used water of FIGURE 85: Water Distribution System in Fairfax suitable quality to the Occoquan Reservoir, which is owned by the water supplier, Fairfax Water. Fairfax Water relies on this contribution of treated used water as a key component of its water supply. These flows are particularly important during periods of low rainfall. The treated used water makes up only 9% of the annual inflows to the reservoir during normal periods, but its contribution may exceed 90% during periods of low rainfall. This arrangement has been in successful operation for four decades. Before that, in the 1960s, unplanned de facto reuse was recognized as a problem, resulting in a deterioration in the quality of water used as a source for the potable water supply. It was proposed that this problem be addressed through a technically sound, planned IPR project. Although water quality was a major driver for the project, it was also recognized that directing treated used water flows to the reservoir would become a significant asset for future water supply needs. Because the plan aimed to improve the quality of the raw water supply, public opposition was much lower than had been experienced with other potable reuse proposals. There was initial concern about the cost implications for rate payers, but this turned out not to be a significant issue. A key lesson here is that, because unplanned IPR is already prevalent in many countries due to the discharge of treated (and often untreated) used water into rivers and lakes, plans to move from an unplanned and unregulated approach to improved and assured water quality is likely to be accepted by citizens if well communicated. This is because a transition from unplanned to planned IPR will safeguard water quality in the future. Source: IFC, "Scaling Re-Water: DRAFT Market Assessment Report," May 15, 2020, prepared by Michael Norton Water Consultancy. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 131 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References United States Nationwide Reuse Market The United States has a large and fast-growing market in reuse. Investments in reuse in the United States have been driven primarily by water scarcity, especially in the drought-prone southwestern states. Water discharge quality regulations, including stringent PFAS standards, may also increase investment opportunities.1 It has been estimated that 27% of public water supply could be supplied from used water discharged to the ocean. Orange County Groundwater Replenishment System in California is the world’s largest indirect potable reuse scheme, with a capacity of close to 0.5 million cubic meters per day. California’s 2022 Water Supply Strategy targets an additional 2.7 million cubic meters per day of recycled water capacity by 2030, and a further 3.4 million cubic meters per day by 2040. Direct potable reuse schemes are under consideration in several states, including Texas, Arizona, Florida, Colorado, California, and Maryland (Map 13). Regulations for direct potable reuse are in place MAP 13: Current and future purified recycled water locations2 in Colorado (2022) and California (2024) and under consideration in several other states. Overly stringent Washington County, Oregon Santa Clara County Tri-Valley (Silicon Valley) USA regulations may dampen demand due to the resulting San Francisco Monterey Québec City, Canada high costs. Santa Cruz County El Segundo (Soquel Creek) (West Basin) Big Sky, Montana Pico Rivera (+ Montebello Forebay) Municipal-owned utilities are key investors in reuse, Morro Bay Antelope Valley Rancho California Westminster, Maryland Reno, Nevada Anne Arundel County, Maryland supported by rate payers and federal funds (e.g., a large- Cambria Central Coast Los Angeles/Los Angeles Inland Empire scale water recycling program with US$180 million Laguna County Burbank South Jordan, Utah COLORADO in initial funding from the Department of the Interior). Carpinteria Highland Loudoun County, Virginia Ventura Orange County Aurora Upper Occoquan, Virginia Municipal-industrial partnerships, in which an industrial CALIFORNIA Washington County, Utah Castle Rock Colorado Springs Bartlesville, Oklahoma Hampton Roads, Virginia user either purchases treated sewage effluent from a Conejo Valley (Las Virgenes-Triunfo) East San Diego County (Padre Dam) Scottsdale/ Norman, Oklahoma Big Spring Gwinnett County, Georgia municipality or funds the expansion or upgrade of Pure Water Southern California Scottsdale, Arizona Abilene Clayton County, Georgia Santa Monica Wichita Falls treatment infrastructure in exchange for a supply of Camp Pendleton San TEXAS North Texas Diego Jacksonville treated effluent, are increasingly common. Long Beach Tarrant (+ Dominguez Gap + El Paso/ Clay County Alamitos Barrier) New Mexico El Paso FLORIDA Altamonte Springs South Orange County Water prices are typically set to recover infrastructure Yucaipa Phoenix, Arizona Clearwater Plant City Polk County Palm Beach County Oceanside costs, but the scarcity value of water is unlikely to be San Jacinto (Eastern Municipal) Hillsborough County reflected in water prices in the absence of recent trades in water allocations. Exploring/Education Planned In Construction Operating/Available Supplies <100,000 people or Supplies Supplies Demonstration/education only 100,000 – 1,000,000 people >1,000,000 people 1 Information on reuse in the United States from GWI (2023a, 2024). 2 Water360, "WSAA Purified Recycled Water Maps Package 250315." Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 132 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Annex 4: Past and Ongoing World Bank Reports on Reuse The benefits of resource recovery and reuse, and its potential contribution toward water security, the Sustainable Development Goals, and climate goals are well documented in several World Bank Group-published reports and ongoing knowledge initiatives. These include guidance and tools for mainstreaming reuse and recovery of resources into water management strategies and policy frameworks. FIGURE 86: The Water in Circular Economy and Resilience (WICER) Summary of World Bank reports: Framework 1. The WICER framework builds on the Waste to Resource report to explain circular economy and resilience principles in the water sector THE WICER FRAMEWORK and provides guidelines for countries to integrate these principles into policies, planning, investment prioritization, and design. 2. The ongoing ‘From Vicious to Virtuous: Climate-Resilient Urban Sanitation Policies and Pathways for People and Prosperity on a Livable Planet’ emphasizes reuse for irrigation, industrial use, and groundwater recharge as a climate-resilient sanitation strategy. 3. The ongoing ‘Governance and Economics of Desalination and Reuse’ knowledge series will help public authorities and development professionals integrate reuse and desalination into water management strategies by providing tools and frameworks for project identification, feasibility assessment, and implementation. This includes volumes on: (i) Policies and Institutions; (ii) Institutional Setups; (iii) Economic Appraisal; (iv) Finance and Delivery Models; and (v) Delivery Models in Remote Poor Areas. For additional World Bank reports on reuse, please see Annex 6. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 133 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Annex 5: Current and Potential Markets for Reuse Countries with Significant Reuse Activity Botswana In Botswana, assessment of bids for the 50,000 m3/d Glen Valley water reclamation plant is still ongoing, amid allegations of corruption against the client. Brazil In Brazil, reuse is hindered by the country’s low rate of used water treatment. A 17,280 cubic-meters-per-day project planned by the utility, Cesan, has secured an offtake agreement with steel maker, Arcelor Mittal. Chile In Chile, municipal reuse has been hindered in the past by disputes between treatment plant owners and downstream agricultural users over the ownership of new water. The 77,760 cubic-meters-per-day Antofagasta reuse project (initial capacity 25,920 cubic meters per day) has been re-tendered. The project is being procured under a BOT contract, and the client is working to secure offtake agreements, likely with the mining industry, to mitigate demand risk. The project could pave the way for other plants in coastal cities, where used water is currently discharged to the sea after primary treatment. China Largest installed reuse capacity (40% of global capacity). China’s 14th Five-Year Plan of 2021 required water-scarce regions to raise the reuse rate to 25% by 2025 and urban areas, such as Beijing, Tianjin, and Hebei, to 35%. These targets have been surpassed, however, by more ambitious ones specified in regional plans released in 2022: Beijing set a target of 70% by 2035, while Tianjin and Hebei are targeting 50% and 45%, respectively, by 2025. Egypt Egypt has quadrupled its contracted reuse capacity in the last five years and now leads the region in installed and contracted capacity. The steep increase is due largely to three colossal treatment plants treating agricultural runoff for reuse in agriculture, of which the most recent—the 7.5 million cubic-meters-per-day Al Hammam plant, awarded in 2021—will be the world’s largest reuse plant when commissioned. The immediate focus of current investment in Egypt, however, is increasing treatment coverage, with a strong pipeline of large-scale treatment plants that do not yet have a defined reuse element. EU The EU’s new agricultural reuse regulation came into force in June 2023 and is expected to drive further uptake of reuse in the EU, particularly in countries like Greece and Italy where current regulations are complex. France In March 2023, the French government released a new national plan to combat drought, which included ambitious targets for reuse: 1,000 new reuse projects are planned, which would lift the rate of reuse of new water from 1% to 10% by 2027. Source: GWI (2023a; 2024). Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 134 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References India This is a large potential market for reuse. Industrial reuse is the main driver of reuse. State-level regulations require large industrial consumers near used water treatment plants to make use of any suitable effluent produced. Other applications for new water are also gaining traction, and the new National Framework for Safe Reuse, released in November 2022, is expected to drive wider uptake. In particular, there has been recent interest in potable reuse, with pilots underway for IPR in Chennai and DPR in Mumbai. Israel Legislation introduced in 2010 required all large treatment facilities to upgrade to tertiary treatment to produce effluent suitable for unrestricted irrigation. Over 90% of treated municipal used water is being reused for agricultural irrigation. Mekorot is investigating the possibility of IPR. Kuwait Kuwait has a significant installed base of reuse capacity serving agriculture and industry, including the 500,000 cubic-meters-per-day Al-Hayman project, awarded in 2020, which is the world’s largest privately financed treatment plant. However, a 1 million cubic-meters- per-day project at North Kabd, announced in 2022, could be set to surpass it. The project is still in its infancy, but is likely to be procured as a BOT, with the new water to be reused for agriculture and industry. Meanwhile, bids were submitted in 2020 for the 400,000 cubic- meters-per-day Al Mutla’a treatment plant, which is being procured as a DBO, but is yet to be awarded. Malaysia Malaysia’s national wastewater group, Indah Water Konsortium, is leaning on municipal-to-industrial reuse, having signed a memorandum of understanding in 2023 to explore the possibility of implementing reuse in the Penang region. It is also in talks with the government to create policies that will encourage industrial reuse. Mexico In Mexico, four projects with a combined capacity of 40,000 cubic meters per day near the Hondo River were expected to be tendered, after an environmental impact assessment was successfully completed in 2023. The projects will be procured as 20-year BOTs with industrial customers as offtakers. Namibia Namibia has pioneered DPR since the 1960s and is continuing to build new capacity. The latest project, the 20,000 cubic-meters-per- day Gammams DPR (often referred to as DPR2) plans to treat used water from two existing treatment plants. Design and procurement details were expected to be finalized by the end of 2023. Oman In 2019, Oman committed to a US$7 billion investment in treatment and reuse by 2040. Peru In Peru, expanding used water treatment coverage is the primary focus of Proinversion’s PPP pipeline, but some projects may also include an element of reuse for agricultural irrigation. Philippines The Philippines is the first country in the Asia-Pacific region to implement DPR. Manila concessionaire Maynilad’s Parañaque NEW WATER plant received its permanent operating permit in June 2023 after a year-long monitoring process to ensure compliance with drinking water standards. Maynilad plans to further increase its DPR capacity, first by tripling the capacity of the Parañaque plant to 30,000 cubic meters per day. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 135 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Qatar The award of the 150,000 cubic-meters-per-day Al Wakra/Al Wukair independent sewage treatment plant (ISTP), Qatar’s first used water PPP, marked a breakthrough for private finance in the sector. It will produce tertiary-treated effluent and is designed to accommodate expansion up to 600,000 cubic meters per day by 2045. The new water produced will be used for landscape and agricultural irrigation and low-level industrial applications, as well as potentially for groundwater recharge. Saudi Arabia The Saudi Irrigation Organization, which was handed responsibility for developing reuse in the Kingdom of Saudi Arabia in 2022, aims to reach 70% reuse by 2030. A major build-out of large-scale privately financed treatment plants (ISTPs) has been ongoing since 2020. These will provide substantial volumes of tertiary-treated used water suitable for reuse if a market for new water can be developed. Singapore In Singapore, reuse is the most important of the "Four National Taps." Potable-grade treated used water, branded NEWater, is used for industry and, in times of shortage, IPR, with 585 million cubic meters per year currently treated by four large-scale water reclamation plants. A fifth, the 800,000 cubic-meters-per-day Tuas Water Reclamation Plant, is under procurement. South Africa A 70-million-liters-per-day DPR program is planned in Cape Town. The National Strategy includes potable reuse. The Development Bank of Southern Africa’s National Reuse Program was boosted by US$235 million in funding from the Green Climate fund, announced in July 2023. A planned 20,000 cubic-meters-per-day DPR unit at an existing plant in Durban is on hold following flood damage. Spain Spain is the dominant market for reuse in Europe, with over 7 million cubic meters per day of capacity installed and steady increases each year, serving mostly agricultural users. In May 2023, the government announced €224 million in funding for reuse projects as part of its long-term strategy to combat water scarcity, while Catalunya is planning €120 million in investment to double its reuse capacity. Taiwan Taiwan has accelerated its municipal-to-industrial reuse program. The latest project, the 105,000 cubic-meters-per-day Futian plant, was awarded in July 2023. The thriving semiconductor industry in Taiwan presents a significant source of demand; in October 2023, a tender was issued for a 70,000 cubic-meters-per-day plant in Nanzih that will supply a semiconductor fabrication plant, among other industrial customers. To encourage wider uptake of reuse among industrial users, which has previously been held back by the higher cost of new water compared to conventional sources, the government has approved an additional water tariff for large water consumers. Türkiye Türkiye achieved its goal of reusing 5% of treated wastewater in the first half of 2023 and aims to increase this to 15% by 2030. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 136 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References United Arab A large share (80%) of used water is reused. In October 2023, bids were submitted for Abu Dhabi’s 700,000 cubic-meters-per-day Al Wathba Emirates water polishing plant, which will produce new water suitable for unrestricted irrigation. Heavy investment in new water infrastructure is also planned in Dubai over the next decade, and an ambitious target was announced in 2023 to reuse 100% of new water by 2030. United States California is home to the world’s largest IPR project, the 492,000 cubic-meters-per-day Orange County Groundwater Replenishment System. There are at least a dozen potable reuse projects at various stages of planning and procurement. The 18,925 cubic-meters- per-day San Bernardino Clean Water Factory IPR was awarded in 2023, as was the demonstration facility for the planned 314,155 cubic- meters-per-day Pure Water San Diego program. In Virginia, procurement is underway for a large-scale aquifer recharge project known as SWIFT, which will treat 454,200 cubic meters per day of used water from seven treatment plants for reinjection into the Potomac aquifer. There is growing interest in DPR in several states, including Texas, Arizona, Florida, Colorado, California, and Maryland. The planned Pure Water Southern California project would be the world’s largest DPR facility to date, at 94,625 cubic meters per day (in addition to a 340,650 cubic-meters-per-day IPR), rising to 227,100 cubic meters per day in Phase 2. As DPR gathers momentum across the United States, regulations are beginning to catch up. In October 2022, Colorado became the first state to publish a statewide DPR rule, and regulations are being developed in several other states. It is expected that these regulations will drive further uptake of DPR. Potable reuse standards were published in California in late 2023. The Department of the Interior announced a large-scale water recycling program with US$180 million of initial funding under the Bipartisan Infrastructure Law. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 137 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References Regions with Significant Reuse Potential In addition to the three largest reuse markets (China, United States, and India, profiled in this report), there is also significant potential for expanding reuse investment in MENA, Europe, and Australia.1 Middle East and North Africa Water scarcity is the driver of large investments in reuse in the MENA region. These investments are for agriculture and non-potable purposes. DPR is not permitted in MENA countries, although de facto Factors inhibiting accelerated and scaled indirect potable use occurs. Egypt dominates the regional reuse market with the largest reuse plants investments in these regional markets anywhere in the world, contracted through a BOT model as well as public-financed traditional EPC models. Water prices are well below cost, limiting the prospects for private financing. In Israel, all used • Regulations prevent the uptake of indirect water from treatment facilities (small ones exempted) must be treated to tertiary standards suitable for and direct potable use in many countries, unrestricted irrigation. The United Arab Emirates Water Security Strategy 2036 includes a commitment based on perceived risk and public to increase the reuse of new water to 95%. In Dubai, massive investment in collection, treatment, and perceptions. For example, in Spain, reuse reuse infrastructure is planned over the next decade, with a target of increasing the reuse of new water for potable purposes is only permitted in to 100% by 2030 and reducing operating expenditures and energy usage through the investment plan. emergencies, and potable reuse is not permitted in MENA countries. Regulations may be overly onerous. Europe • Public perception: In Australia, public perception and risk aversion strongly Water reuse is a growing market, particularly in the drier south. In Spain, for example, there is already influenced political decision-making extensive use of new water for agriculture (water reuse for potable purposes is not permitted except in related to investments in new water emergencies). EU standards for agricultural reuse (effective 2023) are driving investments in upgrading capacity, even during the severe drought, used water treatment in Spain, Portugal, and other countries. Investments are almost exclusively public- based on the so-called ‘yuck’ factor. financed in Spain. However, the case of United States shows that this can change. Australia • Pricing: Public investment dominates in many of these markets, limiting available National guidelines, which are the basis for most state regulations, provide a risk-management framework investment financing which could be for reuse, with quality standards for a range of non-potable applications. There was significant interest unlocked through appropriate pricing and in direct and indirect potable reuse during the millennium drought, but this did not translate into actual PPP structures. investments.2 Investments in (indirect) potable use are still small, influenced by perceptions and risk aversion, but are likely to grow (see the Case Study on Perth, Australia in Annex 3). In addition, Sydney has established a ‘Purified recycled water discovery center’, with the objective to build social acceptance for the introduction of potable reuse schemes.3 1 Sourced from GWI (2023a) unless otherwise indicated. 2 Water360, "Australian Water Recycling Centre of Excellence, https://water360.com.au/11317-2/.   3 Sydney Water, "Purified Recycled Water," https://www.sydneywater.com.au/education/drinking-water/purified-recycled-water.html. Scaling Water Reuse: A Tipping Point for Municipal and Industrial Use 138 TOC 6. Annexes Definitions Mechanisms Case Studies Reports Reuse Markets References There is significant potential for the growth in combined greenfield investments in treatment and reuse in South and East Asia, Latin America, and Sub- Saharan Africa due to the large existing untreated wastewater flows. This offers the advantage of leap-frogging older treatment technologies and putting in place low-carbon facilities efficiently.1 Southeast Asia In addition to China and India, there are large potential markets for reuse in Bangladesh, Indonesia, the Philippines, and Pakistan among other countries in the region. Investments in Bangladesh and Accelerating and scaling investments in Pakistan are driven largely by both water scarcity and water quality concerns, and reputational factors for greenfield developments multinationals active in the apparel industry. The focus here is on reuse for industry, with opportunities for aggregation through industrial zones, supported by appropriate PPP structures, regulation, and • Regulations: Strong enforcement of pricing. Opportunities for direct and indirect potable reuse also exist with the pioneering investment by industrial discharge standards will drive Maynilad Water Services in a direct potable reuse in Manila, Philippines, offering a potential perception industrial reuse, as evidenced in Mexico. breakthrough in public perception in the region.1   • Perception breakthroughs for potable reuse: Large-scale direct potable Latin America reuse projects in South Africa and the Philippines have the potential to shift public perceptions on safety and the ‘yuck’ In Mexico, future investments in reuse are likely to be driven primarily by a combination of scarcity and factor, opening up new markets for reuse. water quality. The National Water Plan for 2024-2030 has a goal of expanding used water treatment to 90% and significantly reducing industrial effluent discharge, offering opportunities to replicate and expand • Pricing and financing: Reuse is more reuse initiatives, such as the Project Tenorio in San Luis Potosí. Countries such as Brazil, Argentina, energy and cost efficient compared to Peru, and Columbia, considered water-rich, also have arid regions or cities (for example, São Paulo and desalination and was prioritized in Cape Bogotá) prone to periodic water shocks, where an investment case for reuse is strong. Town for this reason, as part of a resource diversification strategy to build climate resilience. Public budget constraints Sub-Saharan Africa necessitate private financing and implementation through PPPs, provided The two largest markets in this region are South Africa and Nigeria. 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