WATER GUIDANCE NOTE Wastewater? From Waste to Resource in a Circular Economy Context Latin America and the Caribbean Region Insights for World Water Week 2019 The World Bank with contributions from the CAF - Development Bank of Latin America, is promoting a paradigm shift in the sector, moving away from considering wastewater as a waste and recognizing its inherent ­v alue. Through the initiative “Wastewater: from Waste to Resource,” the World Bank is raising awareness among decision makers regarding the potential of wastewater as a resource. Source: Acciona In a world where demands for on the development of a conceptualization guide for freshwater are continuously growing, wastewater treatment projects, promoting the vision of approach. water basin and the circular economy ­ and where limited water resources are increasingly stressed by over- As part of this collaboration, both organizations have co- abstraction, pollution and climate organized sessions with key stakeholders at the World Water change, neglecting the opportunities Forum and Latinosan, to encourage the water community arising from improved wastewater to move towards a circular economy ­ model. management is nothing less than unthinkable in the context of a circular This joint note summarizes the main findings of this collaborative ­work. ­economy. – UN World Water Development Report A Growing Global Challenge (WWAP 2017) Population and economic growth have driven a rapid rise in demand for water resources (WWAP 2015). Competing The World Bank with contributions from the CAF - demands for water are adding pressure to the allocation of Development Bank of Latin America, is promoting a resources. Governments around the world face freshwater ­ paradigm shift, moving away from considering wastewater an array of water policy options for managing structural value. To kick start as a waste and recognizing its inherent ­ water scarcity, droughts, and floods; improve water quality; the joint effort, an event was co-organized at the World and protect ecosystems and their ­ services. Careful planning Water Forum (WWF) 2018 in Brasilia promoting dialogue promotes long-term water security and resilience to among governments, international organizations, and the climatic and nonclimatic u ­ ncertainties. Water, importantly, private ­sector. connects to wider policy goals of mitigating poverty and ensuring social equity, public health, and macroeconomic As a result, the World Bank launched an initiative performance, among ­ others. “Wastewater: from Waste to Resource,” focusing on the Latin America and the Caribbean (LAC) region, to raise awareness among decision makers regarding the potential Rapid urbanization, especially in low- and middle-income of wastewater as a r ­esource. The initiative has involved countries, has created a host of water-related c ­hallenges. a participatory process, including multiple consultations These include degraded water quality and inadequate water and workshops with key stakeholders working on and sanitation infrastructure, particularly in expanding wastewater management projects in the LAC ­ region. peri-urban and informal ­ settlements. As cities continue to The main report of the initiative From Waste to R ­ esource. grow rapidly, and climate change impacts water resources’ Shifting paradigms for smarter wastewater interventions in availability and distribution, it will become increasingly Latin America and the Caribbean contains the findings difficult and energy intensive to meet the water demands from case studies1 and technical reports developed by the of populations and ­economies. Combined, these problems initiative as well as from the feedback received during the present a challenge for policy makers and municipalities workshops and ­ seminars. The purpose of the initiative is in providing services to their citizens; ensuring that there to encourage a paradigm shift in the sector, recognizing are enough resources such as food, water, and energy; the new value proposition of wastewater and its potential and protecting public health—all while protecting the in a circular economy ­ context. ­ environment. In this context, wastewater becomes a valuable resource from which water, energy, and nutrients CAF - Development Bank of Latin America, as a partner of can be extracted to help meet the population demands for the World Bank in the initiative “Wastewater: from Waste water, energy, and food (WWAP 2017). to Resource”, has analyzed and evaluated the institutional, regulatory and financial challenges in the region to achieve Wastewater can be treated up to different qualities, to the SDG 6.3. Success cases in the region have been studied satisfy the demand from different sectors, including to show the potential of the circular economy approach and industry and ­agriculture. It can be processed to promote innovative financial instruments to ensure the sustainability environmental health, to be reused in irrigation or even to of wastewater management p ­ rojects. CAF is also working be reused as drinking ­water. Wastewater treatment is one WATER GLOBAL PRACTICE | WASTEWATER? FROM WASTE TO RESOURCE IN A CIRCULAR ECONOMY CONTEXT 2 solution to the water scarcity issue, and also to the problem significant implications for public health, environmental of water security, freeing water resources for other uses sustainability, and social e ­quity. In comparison, in the or for p­ reservation. The diversification of water supply countries of the Organisation for Economic Co-operation sources is critical for enhanced security and resilience and and Development (OECD), 81 percent of the population may be considered a key factor when estimating water is connected to a sewage system and 77 percent of people ­ balances. Meanwhile, the by-products of wastewater benefit from wastewater treatment by being connected to a treatment can become valuable for agriculture and energy wastewater treatment plant (WWTP) (OECD 2017). As generation, making wastewater treatment plants more shown in Figure 1, wastewater management and treatment environmentally and financially ­ sustainable. Treating levels vary significantly across LAC countries, and regional wastewater as a valuable resource can contribute to the averages mask this significant ­variation. sanitation and major economic sectors in the ­ region. According to the CAF study (2018) on the current status of Wastewater Treatment in Latin America, the total The Sanitation Sector in Latin America annual flow of treated urban effluent is 390 m3/s, from and the Caribbean: A Call for a New Vision which an estimated of 67 m3/s were being reused (mainly Population and Sanitation Coverage ­ razil). concentrated in Mexico and B In 2017, the population of Latin America and the Caribbean The Potential for Better Investment (LAC)2 reached 644 million, 80  percent of which lived in urban a ­reas. Between 2012 and 2017, the population To reach universal coverage of basic and safety managed increased by around 34 million, or by approximately sanitation services by 2030, the region will have to reach a 5.4­  percent. During the same period, rural communities’ total of 307 million of as-yet-unserved ­ people.4 Hutton and population dropped by 1 percent (WDI 2019). According Varughese (2016) estimated that the level of investment in to the 2018 Revision of World Urbanization Prospects the LAC region (excluding Chile, Uruguay, and most of the (UNDESA 2018), by 2030, the total population in the Caribbean countries) needed to meet the UN Sustainable region will be 718 million, with an urban concentration of Development Goals (SDGs) for sanitation ranged between 84­ percent. $3.4 and $11.8 billion per year for the period 2016–30, of which approximately 95  percent would be devoted to Regarding access to water supply and sanitation, historically, urban ­areas. It is worth noting the challenge added by SDG countries in LAC have prioritized investments in water target 6.3: “by 2030, improve water quality by reducing supply, achieving good coverage in the past y ­ ears. According pollution, eliminating dumping and minimizing release of to WHO/UNICEF (2019) data of 2017, around 97 percent hazardous chemicals and materials, halving the proportion of households had access to an improved source of drinking of untreated wastewater and substantially increasing water, although this average hides the gap between rural recycling and safe reuse ­globally.” (88 percent) and urban (99 percent) coverage and does not reflect the sustainability and quality of the level of s ­ ervice. The investment needs in the sector are important, and to The share of the population with access to safety managed improve the wastewater situation in the region, countries water services was only 74­   percent. About 87  percent of are indeed embarking on massive programs to collect and the region’s population had access to some form of basic wastewater. There is a huge opportunity to ensure that treat ­ sanitation, with an important difference between rural these investments are made in the most sustainable and (70 percent) and urban (91 percent) a ­ reas. However, only efficient way p ­ ossible. As lessons learned in LAC and other 31 percent had access to safely managed sanitation ­services.3 regions indicate, investment in technology alone will not Moreover, it is estimated that only about 66 percent of the guarantee meeting the ­ SDGs. There is a need in the region population is connected to a sewage system (18  percent ­ etter. Efficiently investing in wastewater and other to invest b in rural and 77  percent in urban areas) and only about sanitation infrastructure to achieve public health benefits 30–40 percent of the region’s wastewater that is collected and environmental objectives, and to enhance the quality is treated (FAO 2017) - this value, however, does not of urban life, is a major challenge for the ­ region. As stated reflect the quality of the discharged water or whether it by a recent World Bank report (2017) on infrastructure complies with the ­ regulation. This is surprisingly low, given in Latin America: “dismal wastewater performance is a the region’s levels of income and urbanization, and has real emergency, and one that epitomizes the potential for WATER GLOBAL PRACTICE | WASTEWATER? FROM WASTE TO RESOURCE IN A CIRCULAR ECONOMY CONTEXT 3 FIGURE 1. Access to Sanitation Services in Selected Lac Countries, 2017 100 90 80 70 60 50 40 30 20 10 0 a ia l ay ru ay C le a a . r or a ti as ca o ua a ep zi do tin bi ic al m ic ai LA iv hi Pe ad r ra ai gu gu ag R m ex du .R om H na ol ua C en m B lv te ta ar ra ru B M Pa on om Ec Ja rg ol Sa ua os ic Pa U C H A N D C G EL Access to basic sanitation (% population) Sewerage network connection rates (% population connected) Wastewater treatment (% population connected) Source: WHO/UNICEF 2019. ­ aribbean. Data for Argentina is from WHO/UNICEF 2017. Note: LAC = Latin America and the C spending b ­ etter.” As described in this summary note, the first, sewerage systems are planned next, and energy inputs revalorization of wastewater as part of a circular economy for both are sometimes only considered once the systems process can contribute to an improved investment e­ fficiency. have been designed and c ­ onstructed. In order to change how institutions approach wastewater, a paradigm shift is required The Opportunities Presented by Circular in the r­ egion. Wastewater should not be seen as a burden to Economy Principles governments and society, but as an economic opportunity that can be turned into a valuable resource (Figure 2). Wastewater: An As-Yet-Untapped Resource One of the key advantages of adopting The challenges mentioned above present an opportunity to circular economy principles in the plan and invest in sanitation services—and, in particular, processing of wastewater is that the processing of wastewater—in a new ­ way. The long- standing, linear approach of abstracting freshwater from resource recovery and reuse could a surface or groundwater source, treating it, using it, transform sanitation from a costly collecting it, and disposing of it is not sustainable ­ anymore. service to a self-sustaining and value-adding ­system. Future urban development requires demand approaches and focus on resource recovery under circular economy Improved wastewater management  offers a double-value principles (Box 1). At its core, a circular economy aims to proposition: in addition to the environmental and health design out waste to achieve s ­ustainability. Waste does not benefits of wastewater treatment, financial returns that exist; products are designed and optimized for a cycle of partially or fully cover operation and maintenance (O&M) disassembly and r­ euse. In line with this, wastewater should costs are p­ ossible. Resource recovery from these facilities not be considered a “waste” anymore, but a ­ resource. in the form of energy, reusable water, biosolids, and other resources (such as nutrients and microplastics) represent However, in most LAC countries, sanitation and wastewater an economic and financial benefit that contributes to treatment services are still thought out and planned in a the sustainability of these systems and the water utilities way. Furthermore, very often water supply is planned linear ­ operating ­them. WATER GLOBAL PRACTICE | WASTEWATER? FROM WASTE TO RESOURCE IN A CIRCULAR ECONOMY CONTEXT 4 BOX 1. The Principles of a Circular Economy The A circular economy is an industrial system that is restorative or regenerative by intention and design. It is an economic system aimed at minimizing waste and making the most of ­ ­ resources. The traditional approach is based on a linear economy with a “make, use, and dispose” model of p ­ roduction. The circular economy approach replaces the end-of-life concept with restoration, shifts toward the use of renewable energy, eliminates the use of toxic chemicals which impair reuse and return to the biosphere, and aims for the elimination of waste through the superior design of materials, products, systems, and business m ­ odels. Such an economy is based on three main principles: (i) design out ­ ystems. waste and pollution; (ii) keep products and materials in use; and (iii) regenerate natural s Sources: Ellen MacArthur Foundation undated; WEF 2014. For example, WWTPs can, among other innovative This new approach is also necessary to achieve the SDGs, solutions: which are adding a new dimension to the challenges in the • Dispose of biosolids at no cost as in the case of Cusco, sector by considering s ­ustainability. The SDGs focus not Peru (World Bank 2019) and Brazil (Box 3). only on the provision of sanitation services but also on • Generate energy for self-consumption, save energy improving water quality, implementing integrated water costs, or generate revenues by selling energy as in resource management, improving water use efficiency across the case of Atotonilco, Mexico (World Bank 2018) sectors, reducing the number of people suffering from water Santiago, Chile (World Bank 2019) and Ridgewood, scarcity, and restoring water-related ecosystems, among United States (Box 4). ­argets. Sustainable wastewater treatment several relevant t • Sell recovered phosphorous for fertilizer as in the case and  management will be crucial to achieve SDG  6, of Chicago, United States (ASCE 2013). and can also contribute toward meeting several other • Sell treated water for reuse to industry and potentially ­ goals. For example, electricity generation in wastewater cover all O&M costs as in the case of San Luis Potosi, treatment plants, using the biogas produced, can contribute Mexico (Box 5) and Durban, South Africa (Box 7) toward SDG 7 (regarding energy) and SDG 13 (climate • Partner with the private sector to cover capital and action); treating wastewater and restoring watersheds operating costs completely as in the case of Cerro also contributes to SDG 3 (good health and well-being), Verde (Box 6).  SDG 11 (sustainable cities), and SDG 14 (life below water), among ­others. Cost-saving and environmental considerations are among the main reasons to consider resource recovery and to Resource Recovery is not New: Why hasn’t incorporate circular economy principles in WWTPs in this Approach Caught up in the Region? LAC and elsewhere in the ­ world. The challenge remains one of scaling up the successful experiences and ­ projects. Numerous challenges—institutional, economic, regulatory, social, and technological—will need to be overcome to Fostering these new business models with extra revenue achieve the needed paradigm shift: streams would in turn attract the private sector to close the funding ­ gap. The private sector is often reluctant to invest Institutional in the sanitation sector given the low return on investment and the high ­ risks. There is a need for an enabling Knowledge gap and lack of political w ­ ill. There is a general environment that fosters business models that promote lack of understanding regarding the concept of water shifting from waste to resource and that enables private resource recovery and how to implement it in p ­ ractice. investment in infrastructure in tandem with improved Wastewater is still considered a hinderance or a substance efficiency in public financing to promote sustainable service to be dealt with and disposed of, rather than a ­ resource. countries. delivery, especially in the poorest ­ This results in a lack of political will in developing policies WATER GLOBAL PRACTICE | WASTEWATER? FROM WASTE TO RESOURCE IN A CIRCULAR ECONOMY CONTEXT 5 FIGURE 2. Resource Recovery in Wastewater Treatment Plants WASTE?WATER FROM WASTE TO RESOURCE Worldwide, the majority of wastewater is neither collected nor treated. Wastewater is a valuable resource, but it is often seen as a burden to be disposed of. This perception needs to change. Wastewater from homes, cities, and industry WASTEWATER TREATMENT PLANT (Water Resource Recovery Facility) 80 % of global wastewater is released to the environment without adequate treatment TREATED WATER SLUDGE PHOSPHORUS for: Can be recovered and used as fertilizer Anaerobic the energy sector: such as Digester cooling water for power plants and process water for mines industrial processes, Improved wastewater such as in the textile and management offers a double paper industry value proposition if, in Biogas Biosolids addition to the environmental can be used are nutrient rich and health benefits of irrigation to generate and can be used wastewater treatment, (agriculture, urban parks, etc) energy (heat and as fertilizer in financial returns are also electricity), agriculture, to possible. Resource recovery which can be recover degraded used at the plant areas or as fuel, from these facilities in the recreational use and/or sold. among others. form of energy, nutrients, reusable water, and biosolids represent an economic and financial benefit that replenishing aquifers Carbon Credits: waste contributes to the CO2 water treatment plants can sustainability of these get carbon credits for generating renewable energy. systems and of the water drinking water utilities operating them. These resources can generate additional revenue streams for the operator, paying part or all of the operation costs, thereby contributing to the sustainability of the water system. http://www.worldbank.org/wastetoresource WATER GLOBAL PRACTICE | WASTEWATER? FROM WASTE TO RESOURCE IN A CIRCULAR ECONOMY CONTEXT 6 and regulations that support and incentivize wastewater Reliance on conventional/public financing of WWTPs recovery. reuse and resource ­ without taking advantage of market conditions and incentives to enhance ­sustainability. There is a need for Weak long-term and mid-term p ­lanning. Pressure on innovative financing mechanisms that can encourage the increasing water, sanitation and hygiene (WASH) service development of and investment in wastewater systems to coverage has postponed focus on long-term and mid-term promote the sustainability of operations and also the health ­ planning. As a result, master plans and feasibility studies ­ cosystems. of local e are usually outdated and there is a generalized lack of final designs for ­ infrastructure. This situation delays the Regulatory implementation of projects according to the investment ­needs. Current regulatory standards are often too restrictive and/or ­inconsistent. Countries adopt internationally Lack of coordination across institutions, regulations accepted regulatory standards for water quality that are and ­sectors. In most countries in the region, regulations not tailored to the specific needs of the ­ country. Often in the water sector are not aligned with the energy, health, regulations are designed without considering the financial industrial (including mining), and agriculture sectors, and implications of their implementation (especially their therefore limit resource recovery and reuse from wastewater operation c­osts). More flexible standards that can be (energy, irrigation water, nutrients, preservation, ­ etc.). introduced gradually and that are suited to the objective of Moreover, responsibilities for the provision of wastewater wastewater investment, will encourage innovative solutions services are often fragmented across different levels of needed to provide wastewater services as well as create value governments. The national government sets policies and ­ recovery. from water reuse and resource ­ targets, while service provision, including investment, O&M, and monitoring, is usually delegated to municipal Lack of adequate control over industrial d ­ischarge. governments, which in many cases lack the technical and Inadequate legislation, enforcement, regulation, and/ financial capacities to adequately provide services (Trémolet or monitoring of industrial discharge mean that excessive 2011). There is also a lack of coordination between water pollutants are released untreated into the environment or resource management institutions and those responsible left to an already overburdened ­ WWTP. In the case of the for sanitation service ­delivery. As a result, sanitation plans direct release of untreated industrial discharge into receiving are usually not incorporated in river basin planning efforts, water bodies, the result is deterioration in water quality, with leading to inefficient and costly ­systems. all its economic, social, and environmental ­ implications. Where the effluents are left to the WWTP, customers end Economic up paying with their tariffs for industrial ­treatment. Water is u ­ndervalued. Unless water resources are Lack of regulatory frameworks and guidelines for water properly valued, it will be difficult to promote resource reuse, beneficial use of biosolids, and energy generation initiatives. The lack of value for water also leads recovery ­ in ­WWTPs. In the LAC region there are even regulations to improper pricing of water resources and water services, that limit or forbid resource recovery at ­ WWTPs. For which is also a deterrent for resource recovery ­ projects. instance, in some countries, the reuse of wastewater might For example, if industries pay a very low fee to withdraw be permitted only for a specific set of activities, such freshwater, they have limited incentives to pay for treated as restricted irrigation, or the use of biosolids might be wastewater unless there is a significant short-term water forbidden in the agriculture s­ ector. There is a need for clear shortage or long-term water scarcity resulting in very low regulations and guidelines to ensure the safe use of human- freshwater ­availability. waste-derived products and to widen the market ­ potential. Moreover, a lack of regulation on the pricing of resources Excessive emphasis on promoting and financing new recovered from wastewater deters utilities and the private infrastructure, without sufficiently considering the life- sector from investing in resource recovery projects due to cycle of a plant or sustainability of the system (­ e.g., coverage uncertainty regarding the return on their i ­ nvestment. There of O&M costs) and without evaluating the real capacity of is a need for new regulatory mechanisms that allow the clear existing infrastructure and maximizing its ­ use. and fair pricing of reclaimed water, biosolids, and ­ energy. WATER GLOBAL PRACTICE | WASTEWATER? FROM WASTE TO RESOURCE IN A CIRCULAR ECONOMY CONTEXT 7 Lack of incentives for wastewater reuse and resource the right Policy, Institutional and Regulatory Frameworks ­recovery. There is a need for new regulatory mechanisms that that will help promote the paradigm ­ shift. Finally, at the specifically provide incentives to all stakeholders to consider project level, design and operate WWTPs in an efficient and wastewater systems as resource recovery ­ facilities. There is also effective way, considering resource recovery opportunities a lack of incentives for water utilities to innovate and recover and exploring innovative financing and business models resources from wastewater, given that in many countries the that leverage the circular economy ­principles. benefits and extra revenue reaped from those interventions would go only toward tariff r ­eduction. The existence of Action 1. Develop Wastewater Initiatives perverse incentives such as the low price of freshwater as Part of a Basin Planning Framework to abstraction is also a barrier to resource recovery ­ initiatives. Maximize Benefits, Improve Efficiency and Resource Allocation, and Engage Stakeholders Social There is the need to move from ad hoc and isolated wastewater Negative perceptions of reclaimed water and reuse solutions, such as one treatment plant per municipality, ­products. A major challenge to the development of the to integrated river basin planning approaches that yield resource recovery market is the low social acceptance of more sustainable and resilient ­ systems. Basin planning is a the use of recycled products from human ­ waste. Also, coordinating framework for water resources management among farmers already using untreated wastewater, many that focuses public and private sector efforts to address the are against treating it because they have the perception highest-priority problems within hydrologically defined that wastewater nutrients will be removed and that their geographic areas, taking into consideration all sources of crop yield will d ­ iminish. Public awareness and education ­water. By planning and analyzing water quality and quantity at campaigns are needed to build trust and change negative the basin level, integrated solutions that are more financially, ­perceptions. socially, economically, and environmentally sustainable are ­ possible. Basin planning allows the identification of the Technological optimal deployment of facilities and sanitation programs, including the location, timing, and phasing of treatment Technology selection criteria biased toward expensive infrastructure (See Box 2). It also enables decision makers technologies without considering all potential possibilities to set priorities for investment planning and a ­ction. The that better suit the local c ­ onditions. basin planning framework also allows the design of effluent standards to consider improvements to a specific receiving Countries still focus in the development of water water body instead of uniform or arbitrary water pollution provision. Issues infrastructure rather than on the service ­ control standards, allowing for more efficient ­ investments. such as the quality of the receiving water body, sludge Basin planning is, therefore, an iterative process that allows management, operational costs and technical capacities are decision makers to move from the traditional approach usually not taken into account to select the most suitable of being reactive to a serious environmental problem to a technology, which results in unsustainable ­ services. proactive approach of managing available resources in any given basin through a structured, gradual ­process. Moreover, What Must be Done to Overcome these by including wastewater in the hydrological system as a Challenges and Achieve the Needed potential water source, it is possible to account and plan for Paradigm Shift? wastewater ­ reuse. This shift must be reflected in the water policy ­framework. In order to achieve a paradigm shift in the sector, and based on the case studies analyzed, the workshops with key Action 2. Build the Utility of the Future: stakeholders and the lessons learnt in the LAC region, four Move from the Concept of WWTPS to One key actions have been identified at different l ­evels. First, at of Water Resource Recovery Facilities, the country or regional level, wastewater initiatives need to Realizing Wastewater’s Value be planned within a river basin framework to ensure that the most cost-optimal and sustainable solution is a ­ chieved. The practice of wastewater treatment continues to Second, there is a need to build the utility of the future evolve, not  only technologically but functionally as by moving from the concept of WWTP to one of water well. Traditionally, treatment is focused on removing ­ resource recovery ­facility. Then, at the country level, develop contaminants and pathogens to recover water and safely WATER GLOBAL PRACTICE | WASTEWATER? FROM WASTE TO RESOURCE IN A CIRCULAR ECONOMY CONTEXT 8 BOX 2. The Use of a River Basin Approach to Plan Wastewater Treatment Promotes More Efficient Outcome and Reduces Investment Needs The municipality of Guayaquil, Ecuador, has promoted the creation of a water fund (Fondo de Agua) to clean and preserve the Daule River Basin (Santos, ­ undated). The action plan includes monitoring and control of water quality, treatment of wastewater, erosion and sediment control, and reforestation, among other ­ actions. The municipality has also developed an integrated plan for wastewater management that includes a hydraulic modelling of the receiving waterbody (Daule Basin) to understand its characteristics and assess the needed level of treatment to meet the existing ­ regulation. The modelling showed that the treatment needed in the wastewater treatment plants to be built was lower than initially designed for since the waterbody had a higher capacity of absorption thought. This resulted in the more efficient and effective investment in wastewater treatment than ­ ­plants. BOX 3. The Beneficial Use of Biosolids in Agriculture Leads to Higher Crop Yields and at the Same Time Saves Significant Transport and Landfill Costs for the Water Utility For several years, the Companhia de Saneamento Ambiental do Distrito Federal (CAESB), the water and wastewater utility of Brazil’s capital district, has been reusing biosolids from its wastewater treatment plant operations to recover degraded areas in its railway operation areas (patios ferroviarios) and in ­ agriculture. The effects on corn production of using biosolids as compared with a mineral fertilizer mixture consisting of equivalent amounts of nitrogen, phosphorus, and potassium, were evaluated in a series of studies in Brazil (Lemainski and da Silva 2006­ a). All grain yields were higher than average for Brazilian standards for ­corn. The biosolids were on average 21 percent more efficient than mineral ­fertilizers. Similar studies performed on soybeans have shown that biosolids were, on average, 18 percent more efficient than mineral ­fertilizers. b. Source: Lemainski and da Silva 2006a, 2006­ discharge it to the ­environment. Today, WWTPs should be real value of wastewater and the potential resources that can considered water resource recovery facilities (WRRFs) (NSF, be extracted from it, incorporating resource recovery and DOE, and EPA 2015). This comes with the realization circular economy principles in their strategy and investment that many components in wastewater can be recovered planning and infrastructure design, moving ­ forward. for beneficial purposes (see Box 3), starting with the water Infrastructure is a long-term investment that can lock in itself (for agriculture, the environment, industry, and even countries into inefficient and unsustainable s ­ olutions. This human consumption), followed by nutrients (nitrogen and highlights the importance of having resource recovery in phosphorus) and energy g ­eneration. These resources can mind when planning for wastewater ­ investments. generate revenue streams for the utility that would potentially transform the sector, from a heavily subsidized one to one Action 3. Explore and Support the that generates revenues and is ­self-sustained (see Box 4). Development of Innovative Financing and Sustainable Business Models in the Sector To move toward the ideal utility of the future, first utilities have to be properly run and perform ­ adequately. Second, Financing sanitation infrastructure and recovering treatment facilities need to be designed, planned, managed, associated costs pose a challenge throughout the r ­egion. and operated effectively and efficiently, taking the basin as Many utilities do not collect adequate sanitation tariffs to ­ nalysis. Finally, countries need to recognize the the unit of a cover the costs of O&M, not to mention capital investment WATER GLOBAL PRACTICE | WASTEWATER? FROM WASTE TO RESOURCE IN A CIRCULAR ECONOMY CONTEXT 9 BOX 4. The Village of Ridgewood Leveraged the Potential of Resource Recovery, Attracting the Private Sector to Fully Finance the Retrofitting of their WWTP for Co-Digestion Under a PPP Agreement, Implying Zero Investment Costs and Minimum Risk for the Village of Ridgewood The case of Ridgewood shows how a well-designed public-private partnership between the village of Ridgewood’s water utility and a co-digestion technology provider and engineering company (Ridgewood Green) led to a successful co-digestion ­ project. The project allowed the wastewater treatment plant to generate enough biogas to meet all the plant’s power needs, becoming energy neutral and decreasing CO2 ­ emissions. Ridgewood Green made all the up-front capital investment needed to retrofit the plan for ­co-digestion. In return, Ridgewood purchases the electricity generated by Ridgewood Green for the operation of the plant at a lower price than it used to pay for electricity from the ­ grid. The power purchase agreement includes a fixed increase rate of 3  percent per year for inflation, establishing the village’s price and Ridgewood Green’s revenue for the duration of the contract. Therefore, this agreement benefits both ­ ­ parts. Since Ridgewood Green invested in the co-digestion infrastructure, it owns this new equipment, and the village of Ridgewood owns and operates the plant with technical support from Ridgewood G ­ reen. Ridgewood Green expects to get a reasonable return on its investment through an innovative revenue model that leverages different revenue streams: (i) selling electricity to the village of Ridgewood; (ii) selling all the renewable energy certificates (RECs) to 3Degrees, a leader in the renewable energy marketplace under an agreement of several years; and (iii) tipping fees for the organic matter collected for the anaerobic ­ digesters. The full case study can be found here. BOX 5. The Sale of Treated Wastewater Covers all Operation and Maintenance Costs of the Tenorio WWTP in San Luis Potosi, Mexico New water reuse regulations and a creative project contract incentivized wastewater reuse in San Luis Potosi. Instead of using fresh water, a power plant uses treated effluent from a nearby wastewater ­ treatment plant in its cooling ­ towers. This wastewater is 33  percent cheaper for the power plant ­ ears. For the than groundwater, and has resulted in savings of $18 million for the power utility in six y costs. The remaining treated water utility, this extra revenue covers all its operation and maintenance ­ wastewater is used for agricultural p ­ urposes. Additionally, the scheme has reduced groundwater extractions by 48 million cubic meters in six years, restoring the ­ aquifer. The extra revenue from water reuse helped attract the private sector to partially fund the capital costs under a public-private partnership agreement (40  percent government grant, 36  percent loan, and 24  percent private ­ equity). See full case study here. or future ­expansion. Hence, there is considerable agreement conditions and incentives to enhance ­sustainability. Given that more efficient subsidies are needed for sanitation, at the potential for reuse and resource recovery in WWTPs, period. The existence of subsidies, least during a transition ­ the sector should pursue innovative financial and business however, does not mean that the sector has to rely on models that leverage those potential extra revenue s­ treams conventional financing without taking advantage of market (see Boxes 5, 6, and 7). WATER GLOBAL PRACTICE | WASTEWATER? FROM WASTE TO RESOURCE IN A CIRCULAR ECONOMY CONTEXT 10 BOX 6. In Arequipa, Peru, a Mining Company, Cerro Verde, has Financed, Built and is Operating the WWTP Enzolada-Cerro Verde, in Exchange for Being Able to Use Treated Wastewater for Its Mining Operations. Under this PPP Agreement between Sedapar, the Municipal Water Utility and Cerro Verde, Sedapar has Avoided the Cost of Construction and Operation of the System thus Resulting in a Net Saving of Over US$ 335 Million Cerro Verde was planning a large-scale expansion which would require access to additional water supplies in a water scarce ­ area. The mine explored several options such as using desalinated sea water, water from far away aquifers but the cheapest option was to build a WWTP to treat and use wastewater from ­ Arequipa. The mining company agreed with SEDAPAR to design, finance and build the wastewater treatment plant, and in exchange, be able to use a part of the treated water for its ­ rocesses. Under this agreement, the industry partner (and end user of treated wastewater) – mining p Cerro Verde, provided all the needed investment for CAPEX and OPEX not only for wastewater reuse system but of the whole ­WWTP. The municipal authorities provided the land and permits for the ­plant. SEDAPAR. This win- After 29 years in private ownership by the mine, the WWTP will be transferred to ­ win solution has allowed the mine to expand its operations and has resulted in significant savings for the municipality. BOX 7. In Durban, South Africa, the Private Sector Provided all the Capital Needed to Implement a Wastewater Reuse Project for Industrial Purposes Under a PPP Agreement With the Local Water Utility, Which Resulted in a Sustainable Solution with no Extra Cost for the Municipality and the Taxpayers Durban’s sanitation capacity was reaching its l ­imits. Instead of increasing the capacity of the existing marine outfall pipeline to discharge primary treated wastewater to the ocean, Durban explored the purposes. Mondi, a paper industry, and SAPREF, possibility to further treat it and reuse it for industrial ­ an oil refinery, expressed interest in receiving the treated ­ wastewater. Given the technical complexity, cost, and risk of the project, the municipal utility opted to implement the project under a public-private ­ partnership. After an international bidding phase, Durban Water Recycling (DWR), a consortium of firms, was chosen to finance, design, construct, and operate the tertiary wastewater treatment plant at SWTW under a 20-year concession ­ contract. The municipal utility would still be in charge of the preliminary and primary wastewater treatment, and the effluent would be sent to the plant operated by DWR to be treated and then be sold to industrial u ­ sers. The private sector provided the entire funding needed for the ­ project. DWR also undertook the risks of meeting the water quality needs of the two industrial ­ users. The guaranteed demand for treated wastewater from the two industrial users made the project economically attractive and allowed DWR to undertake the investment r ­ isks. The sale of treated wastewater to the industry has freed enough demand of potable water to supply 400,000 extra people in the c ­ ity. Moreover, as a result, the need for investment in new infrastructure for water treatment has been ­ postponed. See full documented case study ­here. WATER GLOBAL PRACTICE | WASTEWATER? FROM WASTE TO RESOURCE IN A CIRCULAR ECONOMY CONTEXT 11 Action 4. Implement the Necessary Policy, of instruments from Europe and/or the United States, which Institutional, and Regulatory Frameworks to have very different capacities and financial ­ means. However, Promote the Paradigm Shift the changes in the sector call for new legislation and regulation that embrace and promote gradual compliance, are flexible, Finally, for this paradigm shift to happen, policy, institutional, and foster reuse and resource ­ recovery. Finally, countries in and regulatory (PIR) incentives are needed to encourage the region need to ensure they have the required institutional sustainable wastewater investments that consider reuse and capacity to enforce environmental regulations such as water resource recovery that promote circular economy ­ principles. pollution control s­ tandards. The case studies analyzed show that this kind of project usually happens in an ad hoc fashion and with no national or The Way Forward regional planning, with the enabling factors many times being physical and local: water scarcity, distance to nearest water Wastewater reuse and resource recovery will soon source, ­etc. To enable the development of these innovative become key aspects of wastewater management strategies projects, changes in the PIR environment and valuing of ­worldwide. The scarcity of freshwater in the face of water resources are also n ­eeded (see Box 8). Wastewater population growth and rapid urbanization, the challenge of treatment technologies for reuse and resource recovery have meeting the Sustainable Development Goals (SDGs), and been progressing much faster than the enabling e ­ nvironment. the logic of the circular economy have created a compelling Weak policy and governmental systems are among the key wastewater. incentive to reuse and recover ­ constraints to scaling up wastewater treatments that foster technologies for reuse and resource r ­ecovery. Current basin The linear approach to wastewater as something to planning efforts in the region also need to be strengthened: dispose of must give way to a more circular conception governments need to support basin organizations so they can of wastewater as a potentially valuable ­ resource. In the improve their technical expertise and exert oversight powers past, the incentives for reuse and recovery were diluted to enforce the implementation of planning i ­nstruments. by inconsistent policies, and institutional and regulatory Additionally, interventions prioritized in basin plans should structures focused solely on wastewater treatment and be aligned with municipal and regional p ­ riorities. Regulations disposal. The necessary paradigm shift is well under way: ­ and standards also need to be tailored to the needs of the wastewater policies in many countries already include region and the current trends in the ­ sector. The vast majority reuse and resource ­recovery. As more join them, the new of the existing legislation in LAC was created with the sole paradigm will boost the sanitation sector and contribute to purpose of meeting environmental standards and are copycats the achievement of the ­SDGs. BOX 8. New Cairo, Egypt: a Successful PPP to Increase Wastewater Coverage and Foster Wastewater Reuse As the first public-private partnership (PPP) in Egypt, initially the project faced significant governance issues, since there were no legal or regulatory structures to handle ­ PPPs. The solution was to use the process of the New Cairo wastewater treatment plant to design a model for future PPPs in Egypt and eventually approve a PPP law in 2010. To ensure that the first project was a success, outside advisors were structuring. The Government of Egypt worked with enlisted to assess and evaluate broad options for PPP ­ the International Finance Corporation and the World Bank Group’s Public Private Infrastructure Advisory Facility to create a conceptual framework and transaction ­ model. To facilitate the PPP process, a PPP Central Unit was created to act autonomously within the Ministry of ­ Finance. Following the success of the project, the government has created a set of laws and regulations that will govern future PPP projects in the country, drawing on lessons learned from the New Cairo p ­ roject. The establishment of a PPP central unit enabled coordination within the ­government. The full case study can be found here. WATER GLOBAL PRACTICE | WASTEWATER? FROM WASTE TO RESOURCE IN A CIRCULAR ECONOMY CONTEXT 12 Basic Rules for Planning and Financing Wastewater Treatment Plants When planning and financing WWTPs, priority should be given to projects that meet the following criteria: • The project is a prioritized component of a larger integrated water-resource management p ­ rogram. • The project sponsors have adequately analyzed capital and operating costs across the life c ­ ycle. • They have conducted life-cycle evaluations of the project’s environmental, social, and financial ­ aspects. Climate resilience considerations and contributions to climate change mitigation are built ­ in. The project will have a measurable contribution to the ­ SDGs. • The potential for the use of existing infrastructure has been analyzed and integrated into project ­planning. • Sponsors have chosen a technology based not only on its suitability for the specific application and initial capital costs but also on its long-term operating costs to ensure that the project can cover operating costs under viable tariffs, taking into account income from sale of water for reuse, biosolids for beneficial use, and energy generated by the facility (through biogas or hydropower) as demonstrated ­ nalysis. by the life-cycle a • The project promotes resource recovery (water reuse, beneficial use of biosolids, and energy generation from biogas or hydropower) in a sustainable ­ way. • Planners and sponsors have explored innovative and sustainable business and financial models, weighing the benefits of private sector participation in investment and operation while retaining regulatory control (preferably by an independent r ­ egulator). If the private sector is to be involved, the project must clearly indicate how it will contribute to the sustainability of the p ­ roject. • Clear effluent limits are based either on the loading criteria of the receiving water body (best option) or regulatory requirements based on scientifically/economically sound l ­egislation. • Industrial discharges are identified and specified in adequate monitoring and control ­ systems. Industries (e.g., $/kg treated) or will reduce their discharges to agreed concentrations will either pay for treatment ­ through in-house ­ treatment. • The project contributes to the development of the sector by assisting in the training of government employees, local university students, operators from government-run utilities, and other professionals in the region who can gain from the experience • There is public and stakeholder awareness and acceptance on the need to implement a W ­ WTP. A communication strategy has been developed that clearly explains the benefits of resource recovery and debunks the misconception around wastewater r ­ euse. Important efforts are needed to align policy, institutional, wastewater comes next, accompanied by complementary regulatory, and financing frameworks to encourage and institutional, regulatory, and financing frameworks that can incentivize the development of wastewater resource be improved over ­ time. In fact, flexibility and adaptability recovery ­projects. The frameworks need to also enable may well be more conducive to progressive adoption of collaboration among different sectors and different resource recovery ­ practices. The policies and frameworks government ­tiers. Although policy and regulatory reforms then need to be cascaded down from the national or federal are context specific and linked to the political economy levels. levels to lower ­ of each country, a clear policy statement of the reason for resource recovery as part of a broad policy on water is a good Private sector involvement in wastewater (including step. Around it, commitments from high-level political first ­ resource recovery projects) has proven to be key for the leaders can coalesce and public support can be b ­ uilt. A set promotion of waste-to-resource p ­ rojects. Private sector of policies to create incentives for resource recovery from participation brings technical expertise and technology, WATER GLOBAL PRACTICE | WASTEWATER? FROM WASTE TO RESOURCE IN A CIRCULAR ECONOMY CONTEXT 13 as well as investment in infrastructure and t ­echnology. also around the world can learn from best practices in Moreover, early on private sector participation has led to the the sector and can promote this paradigm shift towards a successful identification of resource offtakers from wastewater circular economy, fostering resource recovery and ensuring treatments p ­lants. Nevertheless, effective private sector management. sustainable wastewater ­ participation depends on a conducive enabling environment for investment and a clear policy and regulatory ­ framework. Given the increasing interest and importance of the issue, the World Bank aims to expand this regional initiative into Various forms of public-private partnerships will be a global one, providing on-demand solutions to implement needed for the financing of waste-to-resource projects, circular economy principles in wastewater projects especially since the up-front investment requirements ­worldwide. of reuse and recovery projects are beyond what many national governments can ­ afford. Blended finance is NOTES typically necessary, with subsidies from governments or donors combined with private equity and debt financing As part of the initiative,  several case studies  have been 1.  that is recovered through user tariffs and resource developed, highlighting innovative approaches on recovery ­ revenues. The level of subsidy warranted should wastewater planning, management and fi ­ nancing. The be determined by economic and financial analysis at the case studies mainly focus on innovative designs that ­ evel. To provide incentives for efficient performance, basin l promote resource recovery such as wastewater reuse or subsidies should be disbursed based on achieved ­ results. energy production and that enhance the financial and environmental sustainability of wastewater treatment Technical standards for water reuse and biosolids are plants. The case studies can be found in the webpage of ­ important in building public confidence and creating the initiative: www.worldbank.org/wastetoresource a market that makes resource recovery investments ­viable. Standards must be flexible and well adapted to local The LAC region refers to all countries in the Latin 2.  conditions, as standards that are too strict may disincentivize ­ aribbean. America and the C recovery. They must also be consistently ­ resource ­ enforced. Improved sanitation facilities are those designed to 3.  Cross-subsidies from tariffs on fresh water may be needed hygienically separate excreta from human contact (excreta to allow the price of reused water to be set low enough to are safely disposed of in situ or transported and treated allow the market to ­ grow. Moreover, water tariffs should ­ ouseholds. off-site) and that are not shared with other h ­ ater. Economic regulation reflect the real value of treated w can also be used to stimulate and create competition Approximately, 233 million people who currently do not 4.  in the bioresource ­ market. There is also a great need to ­ eople. have access, plus 74 million additional p align regulatory frameworks from other sectors relevant to wastewater resource recovery, as overlapping regulations REFERENCES can create negative i­ncentives. ASCE (American Society of Civil E ­ngineers). 2013. 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