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Local Government Papers


Energy & Water

by the International Council on Local Environment Initiatives


1. Context

The protection of water resources and provision of water and environmental sanitation services is a fundamental requirement of any global effort to eliminate poverty. In spite of extensive water and sanitation investments made over the past decades, 1.2 billion people in the world today still are without access to safe drinking water, and three billion people are without proper sanitation.

For this reason, the international community is in the midst of a comprehensive review of worldwide approaches to water resources management. Specific mechanisms for this review include the Global Water Partnership and the recent World Water Vision exercise. Related to and supporting this process is a variety of new initiatives, including a new program launched by the worldwide community of local government, called The Water Campaign. The Water Campaign, which will be managed by the International Council for Local Environmental Initiatives-ICLEI, will actively engage local governments and their local stakeholders in the design and implementation of workable, “bottom-up” water resources solutions.

2. Challenges

The World Water Vision recognizes that water is a resource with complex social, economic and ecological aspects that are distinct to each society, each locality and each ecosystem. For this reason, sustainable water and sanitation solutions cannot be designed and provided according through top-down Fordist approaches. After many billions of dollars of donor investments-often involving the export of advanced technologies to the developing world-the international community has realized that sustainable, effective water and sanitation solutions require a bottom-up approach. As concluded by the 1998 UNDP-World Bank Water and Sanitation Program in its report Learning What Works:

“The provision of services is no longer seen as a construction job to be hired out to the most cost-efficient contractor, but as a contribution to the economic, social and human development of people, including their skills, knowledge, and organizational capacity. The success of these processes-not the technical perfection of systems-ultimately decides whether services are used, are sustainable, and have an impact on health and quality of life.”

Acting on this conclusion will require dramatic changes in the way that water resources and water and environmental sanitation services are valued, planned, managed and used. In the 1980-90s, a dominant role for the private sector was prescribed as a panacea. But privatisation, when introduced as another top-down solution to a unique local challenge, has produced new problems of equity, governance, and security. For this reason, the international community is now calling for multi-stakeholder partnerships, integrated water resources and services planning approaches, and a more prominent role for local communities in selecting technologies and devising local service solutions.

Problems and Solutions


One of the greatest threats in the fight against poverty is the degradation or depletion of available water resources. Private control of these resources or unaccountable, monopolistic public control, without regulatory frameworks that define and protect socio-cultural and ecological values, is a major cause of resource depletion, degradation and inequitable service.

While water resources are amenable to public, community or private management, they need to be controlled, secured and governed by accountable public authorities or recognized indigenous or traditional authorities. However, public authorities must not assume sole responsibility for water resources. Rather they must govern these resources within a framework of shared responsibility. Shared responsibility involves an obligation on the part of all people and institutions, both individually and collectively, to value and protect these resources.

In order to promote responsible water governance, governments must support the participation of all stakeholders as partners, with full information, in protecting watershed areas and in determining the water and environmental sanitation services that they receive. This will require new institutional mechanisms, new policy frameworks and civic rights, and new procedures for designing, approving and implementing water and sanitation projects and investment programs.


In addressing the financial aspect of poverty and water management, discussion should not focus exclusively on bringing more money into the sector, but rather should address the urgent need to make better use of the money that is available. Even in the United States, water and wastewater management systems face an estimated annual funding gap of $23 billion. This example alone should be sufficient to illustrate that the traditional donor or private sector finance and export of  ‘Western' water and wastewater technologies to developing world economies represents a serious misallocation of international resources. The scope and scale of the financial resources needed to build, operate and maintain these centralized systems over time is too much for developing economies and their service users to absorb. A dramatic change in investment patterns is needed.

New approaches to water supply and sanitation must be developed for both rich and poor countries. These must be locally affordable. Financial institutions and donor agencies need to become ardent supporters of alternative technologies, such as solar powered water pumps, rainwater harvesting technologies and ecological sanitation devices. On an international scale, a $200 million investment in an alternative technology would have much greater benefit to society than an equivalent investment to construct wastewater treatment facilities in one city that would be unable to afford the associated, long-term operation and maintenance costs. Where external financial resources are is required, local authorities and utilities will require access to flexible sources of financing that encourage community involvement and consultation.

A new water resources economics must be established and supported by progressive public policies and regulations. Charges for water and related services must, in aggregate, reflect the true value of water resources and consider both the current and future cost of service provision. Water should not be wasted, and the waste and/or pollution of water must bear an economic cost. The financial responsibility for water must be both collective and individual. Prices for water and sanitation services must be structure to permit all people to secure their basic human water needs.

The only way that this new “water economy” can be established is to employ a wider selection of technologies, a more balanced use of both supply-side and demand-side management solutions, and a variety of local-specific economic instruments (e.g., fees, rates etc.) to transform water users into informed economic actors. As happened in the energy sector, government support for the development of alternative technologies has the potential to generate new expertise, markets and employment opportunities.


To reflect the social, economic and ecological dimensions of water in this new water economy, water management institutions must be thoroughly transformed. The water management institutions of the future must include cultural and social workers, economists and policy planners in partnership with engineers and technicians. Ultimately, these institutions must be viable and accessible local agents, working in partnership with local authorities and the other local stakeholders who together define local consumption patterns, preferences and behavioral norms.

Both poverty and water issues are mostly directly experienced at the local level, and local authorities will need specific capacity-building support to provide a consistent governance and management foundation for water and sanitation services. Empowering local governments to address the issues of poverty and access to water and water services in their communities involves a commitment on the part of higher levels of government to be responsive to locally developed needs and priorities. Once these local priorities are established, national and sub-national policies may need to be reviewed to remove impediments caused by these policies to cost-effective local initiatives.

The water supply and sanitation sector has shown that widespread consultation and involvement of the community is needed to design effective systems. However, gaining public, private and community support takes time, energy and resources, and requires supportive regulatory frameworks and the skills of trained facilitators.

Special attention needs to be given to building the capacity of local authorities and public water utilities to engage effectively with the private sector, particularly where private finance and ownership issues are involved. Guaranteeing transparency and accountability in water and sanitation services contracts is fundamental to creating a peaceful and secure management structure for these services. The financial benefits and income of private partners should be limited due to the monopolistic nature of the services being provided and their social aspects.


Operational constraints posed by the expense of providing water and sanitation services to local populations will become less severe with the increased involvement of citizens in determining the type of services they receive. Involving the community educates them about the expenses involved in water and sanitation service delivery. The poorest of the poor may always require assistance in the form of subsidies that allow them to meet their basic needs for water and sanitation services, however.

Supply management of water resources will play an important role in securing year round access to water supplies for local populations. This will be particularly important in the coming decades as the impact of global climate change becomes more pronounced. Supply management techniques will have to focus additional attention watershed protection and on managing the impact of severe weather events and extreme variations in water supplies.

Demand management will remain a key element of modern water management systems.  It addresses the requirements of those who lack sufficient water services to meet their basic needs and reduces the demand for water of those who use an excess amount of this valuable resource. Demand management induced reductions in water use can be achieved without sacrificing the quality of life of urban residents by placing an increased emphasis on the efficient use of water and by making a significant dent in the amount of water that is currently lost through leakage.

In order to provide water and sanitation services in an effective way, water resources management, in and of itself, is no long sufficient. The concept of integrated water resources management, integrated urban water management in towns and cities has become the predominant framework for current discussions in this area.  IWRM is defined by the Global Water Partnership as "a process, which promotes the coordinated development and management of water, land and related resources in order to maximize the resultant economic and social welfare in an equitable manner without compromising the sustainability of vital ecosystems". Focusing on social welfare and poverty alleviation puts added emphasis on the need for an integrated approach that takes a broad look at the complexity of water and sanitation issues.

Inter-sectoral debates regarding the allocation of water and upstream/downstream issues are best dealt with within a watershed, or catchments, based unit of management. Watersheds are recognized as the most appropriate units of organization for the management of water systems. Local water resource information is most effectively organized using watershed, or catchments, boundaries. Watershed management strategies promote stakeholder involvement in designing appropriate and acceptable local solutions. From a local tributary to an international river basin scale, watershed plans can be 'nested' within one another to achieve complementary management schemes for very large systems.

3.             Possible Partnerships--Strategy for International Cooperation - up to 2002 and beyond

Local governments are well placed to initiate a dialogue between local stakeholders about new approaches to the management of water and water services in their communities. This effort may build on Local Agenda 21 forums, where they exist. The support of a representative cross-section of society is needed to provide a stable framework for water resource management decisions. The empowerment of the poor is a key element of this strategy. Increasing opportunities for water managers to share their practical experience and expertise with their peers will speed the acceptance of new approaches to water and sanitation services.

The local government community, supported by the Global Water Partnership, has launched its new Water Campaign as a worldwide framework for coordinated local action to implement the World Water Vision. Within this framework, partnerships are presently being prepared with numerous multi- and bi-lateral institutions, professional associations and NGOs.


1.             Context

Energy is fundamental to socio-economic development, poverty alleviation, and social change. Fuels and electricity are not demanded or needed for their own sake, but for the services they provide to fulfil basic human needs including food, health, shelter, education, employment.  An energy strategy focused on human welfare will focus on the demand side of the energy equation.  The "demand side" measures -- conservation, efficiency improvements, renewables -- are seen as alternative means for supplying services, and emerge as the key to energy and environmental security in both the short and long terms.

Poverty is not caused by low energy consumption, but by inadequate energy services. The poor tend to use energy inefficiently, primarily because the technologies available to them are so inefficient. The goal for a sustainable future must be to increase the efficiency of energy production and use and to strengthen energy services in order to reduce poverty and improve the standard of living, while reducing the negative impact of consuming and producing energy on the natural and human environment. This applies especially to urban areas and to related transport, industrial production, and energy generation activities. The urbanisation process creates substantial increases in energy consumption per capita and related health-afflicting pollution problems.

The consumption of energy is linked to one of the gravest environmental challenges facing humankind today: climate change.  Climate change will have its most severe social and economic impacts on the poorest nations, which will be most handicapped in adapting to climate-induced natural disasters and impacts on health, food and water supplies.

2.             Challenges

Improving access to energy and supporting climate change mitigation will require policies that significantly change the ways in which societies produce and consume goods and services.  This can be achieved by resolving the tension between enhancing energy services and limiting total energy consumption and by breaking the present linear relationship between energy demand and carbon. By acting at the demand-side at the local level, local governments have many tools at their disposal to influence local energy use. In some countries local governments exert even greater influence on energy use than national governments. By increasing energy efficiency and decreasing fossil fuel consumption in their communities local governments can improve air quality, create jobs, save money, and enhance the quality of life in their communities. However, in most countries the ability of local governments to pursue these opportunities is constrained by policies that favour large-scale, centralised energy solutions and that subsidise carbon-based fuels.

Problems and solutions


Energy efficiency and renewable energies require a change in investment patterns. A financial barrier is the short payback period required for many demand-side investments compared with those for energy production.  Especially for local governments, the up-front investment costs are a major obstacle.  Compounding this is the fact that in some places the deregulated privatisation of the energy market has resulted in significant energy price reductions that make energy efficiency and renewables seemingly no longer affordable. The development of the cogeneration of heat and power is currently at a standstill in many places because of the low prices on the electricity market.  Privatisation of the energy market must acknowledge that the high initial investment required for renewable energy and the conservation and rational use of energy is recuperated over the life of the system through the reduced operating cost.

The establishment of energy prices that reflect the true costs of energy (internalising external costs) is crucial to efficient energy use and the further introduction of renewables. Also important is the reform of subsidies for energy and of fiscal policies to ensure consistency between economic and environmental objectives, including the further introduction of carbon taxation in order to shift the composition of fuels to non-fossil sources.

Within such a framework of supportive macro-policies, local governments can and should make use of a number of mechanisms, including:

                 innovative approaches to self-financing such as revolving energy efficiency funds and third party financing (energy service contracting),

                 aggregated purchases of advanced energy-saving products and renewable technologies to promote their demand and bring costs down,

                 economic measures such as taxes and fees to internalize the full costs of energy consumption.

National governments should give priority in their public infrastructure investments to local projects locally that reduce energy use, save money, create jobs, stimulate the economy locally, and make communities more liveable.

Local authorities in developing countries need to have access to the programmes and funding of international monetary institutions with the aim of building local capacity in promoting sustainable energy. In this context the Clean Development Mechanism (CDM) as provided for in the Kyoto Protocol to the UNFCCC will be a key vehicle for promoting energy efficiency and renewable energy in the developing countries. Local governments in those countries should have access to the public funds made available for CDM projects for their sustainable development activities.


Strong, transparent and accountable institutional frameworks are required to meet the multifaceted challenge of sustainable energy provision and climate change mitigation. This requires engagement of different levels of governments and multiple stakeholders from an early stage to share information and ideas, learn from experience, build consensus, and to take action.

As the key institutional mechanism for energy service provision, public utilities must be transformed into energy service companies offering a full spectrum of energy services, including centralised and decentralised supply options and energy efficiency solutions.

Towards this end, information, labelling, and training programmes must be implemented to strengthen the foundation for the energy service industry. 

Integrated energy planning must be promoted involving a participatory process in which all affected parties-including users, producers, workers, professional, enterprises, and local, regional and national interest groups-take part and make decisions. Local authorities can set up "energy roundtables" within their Local Agenda 21 processes to provide a forum for expression of the various interests and to gather input from the relevant stakeholders.  For smaller jurisdictions, which may not have the technical capacity and expertise for integrated energy planning, regional centres could be established to leverage technical, managerial, financial and program delivery capacity through partnerships.

National governments should accord local authorities larger jurisdictional powers and responsibilities to enhance their capacity to reduce local energy use, promote decentralised and renewable technologies, and reduce net greenhouse gas emissions. By setting national targets for cogeneration and renewable energies, national governments can provide the necessary impetus to drive innovation in energy resources and technology.

Energy companies must not deny local authorities access to energy data for their communities as a consequence of privatization.


There must be a shift from centralised large-scale remotely sited energy facilities to more decentralised units located closer to users and using dispersed sources of energy. Decentralised technologies, such as household combined heat and power units, and are preferred over centralised technologies because the centralised technologies tend to allocate benefits to one end of the transmission line or pipeline and costs to the other. Furthermore, technologies and energy options for a sustainable future do not allow wastes, risks, and costs to be passed on to future generations.

Energy service companies must fulfil customer needs through a mixture of new demand and supply options. Energy must be sold in the form of commodities that the customer wants - efficient heating and cooling, lighting and power - not in kWh. Energy services must be provided at the least cost, consistent with social, environmental and other objectives.

New minimum efficiency standards must be specified for buildings, vehicles, and other equipment. Energy and environmental improvements must be encouraged within urban legislation. Local building codes should be promoted which give emphasis to options that reduce the energy and environmental impact on urban settlements. Urban planning must provide innovative solutions in zoning and securing land tenure in serviced areas of cities, thereby decreasing energy and environmental pollution related to urban transportation. Mobility management must be aimed at reducing the need for travel, especially by the private automobile, while ensuring access.

Technology and Know How

Wide arrays of technologies for energy efficiency and renewable energies have already been proven and are available on the market. However, public policies bias the market against these technology solutions. Furthermore, adaptation of new technologies requires institution- and professional capacity building. Training and certification on the use and maintenance of energy-efficient technology is needed.  State-of-the-art technology must be transferred to developing countries to eliminate the lack of access to efficient, cost-effective solutions.

3.                Partnerships 

Possibilities for partnerships to promote energy efficiency are endless, between national, regional, and local levels of government, private enterprises, financial institutions, associations, unions, networks, citizens groups and various combinations of the above. 

Joint technology procurement in the form of buyers clubs and joint ventures can stimulate demand for new technological solutions. Establishing networks of committed institutions (e.g. cities, companies) and providing recognition for best practices can be a motivation for action.  Sustained and targeted stakeholder information campaigns can change misconceptions among consumers about energy services and sources, and their related costs in financial and environmental terms.

4.             Strategy for International Cooperation up to 2002 and beyond

International co-operation is necessary to help share ideas, learn from national experience, and build confidence among stakeholders. In the globalised world, with a growing decentralisation of power and expansion of the private sector role, cooperation becomes even more crucial.

Key to the success of the Clean Development Mechanism (CDM) in fulfilling the objectives of improved local services, urban liveability, and economic growth will be the capacity of all stakeholders, and in particular municipal governments and local authorities, to be engaged in the development, implementation and monitoring of CDM activities. Twinning or sister city relationships between cities in the Annex I and non-Annex I countries will strengthen the latter's capacity to participate in and benefit from the CDM.

International co-operation activities are critical elements in promoting energy efficiency. An example would be harmonised efficiency standards for internationally traded goods and services.

An integrated strategy is needed that involves all levels of government, all sectors of the society, in both the industrialised and developing countries to meet the challenge of the rapid growth of energy demand and growing threat of climate change. The strategy must consist of pursuing efficient production processes and reducing waste, using fuels more efficiently, and relying more on renewable energies. 

Concerted efforts must be made to ensure the environmental integrity of the Kyoto Protocol and its early ratification so that it is ready to enter into force by 2002.