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While subsidies of water supply and sanitation (WSS) services are generally implemented in pursuit of worthwhile objectives, poor design often undermines these objectives, rendering subsidies pervasive, expensive, poorly targeted, nontransparent, and distortionary. This report explores how scarce public resources can be used most effectively to achieve universal delivery of WSS services.Analysis of subsidies in the sector considers their magnitude and efficacy in achieving policy objectives, finding that subsidies are prevalent across countries, with more than 320 billion US Dollars spent annually. These tend to be poorly targeted, with the richest households receiving the largest share. Meanwhile, a lack of transparency prevents informed decision-making, limits public awareness of adverse impacts, and may even provide cover for corruption. Finally, poorly designed subsidies lead to significant distortions that can contribute to the deterioration of service providers' performance and the overexploitation of natural resources. Yet such poor performance can be avoided; new knowledge and technologies make it increasingly possible for subsidies to cost less and do more. This report provides guidance to policy makers on how subsidies can be better designed and implemented to improve their efficacy and efficiency in attaining their objectives. By moving beyond the design flaws of the past, subsidies are a viable means of ensuring access to sustainable and safely managed WSS services for all.
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