Expansion of Piped Water and Sewer Networks: The Effects of Regulation

Strategic Insights -

Access to clean water and sanitation remains a pressing global challenge, with 2.2 billion people lacking safely managed drinking water and 3.4 billion without adequate sanitation as of 2022 (UNICEF and WHO, 2023). A widely adopted strategy to address this issue is attracting private investment in infrastructure development and service provision. However, this approach presents a trade-off between financial viability and social inclusion. A new study by the Inter-American Development Bank, "Expansion of Piped Water and Sewer Networks: The Effects of Regulation," examines the feasibility of achieving universal access to services through private providers under current regulated prices. The study, led by Carolina Tojal Ramos Dos Santos and Bruna Morais Guidetti, finds that universal connection targets are largely unfeasible due to low sewer take-up.

Key Takeaways:

  • The study finds that 71% of households take up both water and sewer services when available, while 20% opt for water-only connections.
  • Connected consumers face non-linear pricing structures, and consumers respond to the average price of their bill rather than the marginal price.
  • The study uses a structural model to predict demand in areas without services and to recover expansion costs to simulate the effects of various policies.
  • The study assesses the feasibility of meeting connection targets by simulating the firm expanding water and sewer services across all postal codes in its concessions and finds that household connections would not meet the targets due to limited consumer take-up.
  • The study explores three policies aimed at increasing the share of connected households: connection subsidies, combining subsidies with higher sewer prices, and charging consumers upon sewer availability regardless of connection status.
  • The study finds that combining connection subsidies with higher sewer prices boosts expansion and adoption but requires government funding, and charging consumers upon sewer availability is self-sustaining and promotes adoption and expansion, but it shifts costs to households.

Statistics:

  • 2.2 billion people lack access to safely managed drinking water.
  • 3.4 billion people lack access to adequate sanitation.
  • 71% of households take up both water and sewer services when available.
  • 20% of households opt for water-only connections.
  • 82% of households connect to the sewer network when the firm pairs the subsidy with a 50% increase in the average sewer price paid by households.
  • 55% of households connect to the sewer network when the firm imposes a charge for sewer availability.

Sources:

  • United Nations Children's Fund (UNICEF) and World Health Organization (WHO) (2023). Progress on Drinking Water, Sanitation and Hygiene: 2022 Update and SDG Baseline Report. New York: UNICEF.
  • Marin, A. (2009). Public-Private Partnerships for Infrastructure Development in Latin America. World Bank.
  • Fay, M., et al. (2021). Financing of Infrastructure in Developing Countries. World Bank.
  • Gamper-Rabindran, S., et al. (2010). Estimating the Impact of Improved Sanitation on Child Health. American Journal of Public Health.
  • Devoto, F., et al. (2012). The Economics of Improving Sanitation in Developing Countries. Journal of Economic Literature.
  • Alsan, J., & Goldin, C. (2019). The Effects of Improved Sanitation and Sewerage on Population Health in Latin America. World Bank.
  • Kresch, M., et al. (2023). Expanding Access to Improved Sanitation in Rural India. Center for Global Development.
  • IADB (July 2025). Expansion of Piped Water and Sewer Networks: The Effects of Regulation. by Carolina Tojal Ramos Dos Santos and Bruna Morais Guidetti.