Exploring water affordability through subsidy policies

Abstract

Access to clean water and sanitation is a fundamental human right, yet millions of people worldwide, particularly in low- and middle-income countries, face affordability barriers. This study evaluates Brazil's new social tariff policy for water supply and sanitation, enacted in 2024 through Law No 14,898, which introduces a nationally mandated social tariff, representing a rare example of nationwide affordability intervention in the sector. Using data from the Ministry of Social Development, the study examines three scenarios reflecting potential beneficiaries and their financial impacts on utilities revenue and on non-beneficiaries' bills. Results reveal significant regional disparities in affordability and the financial strain placed on utilities, particularly in economically disadvantaged states in the north. Cross-subsidization emerges as the primary funding mechanism, yet this approach risks exacerbating affordability issues for non-beneficiary households, as observed in the study. This research underscores the critical need for affordability analyses in public policies, highlighting the importance of equitable and sustainable subsidy structures to improve water access while maintaining the financial viability of utilities.

Keywords: Affordability; Brazil; Cross-subsidization; Water access; Water subsidies.