Auckland City Landscape

New Zealand’s water infrastructure landscape will undergo significant changes with the introduction of the “Local Water Done Well” policy, replacing the previous “Three Waters” regime. At the heart of this transition lies an alternative water reform originally proposed by “Communities 4 Local Democracy,” a framework that our team at Castalia had the privilege of advising on. This framework was adopted as an election manifesto policy by the largest party in New Zealand’s recently elected coalition Government. 

Global Water Intelligence Magazine published an article in March 2024 on the challenges and opportunities presented by this reform. Some local authorities have praised the Castalia-designed reform model as it maintains the local oversight of water services. Others are concerned that the new reform could increase water tariffs by 20%. This is against the backdrop of the previous Government’s “Three Waters” regime that proposed four, and later 10, regional corporations with large forecast capital expenditure. The new Government’s proposed reform aims to strike a balance between retaining accountability to local communities and ensuring water services are delivered on a financially sustainable basis while achieving managerial, operational, and capital project sequencing efficiencies (where available).   

Local Water Done Well proposes to maintain managerial and finance responsibilities under local governments while clarifying the central government’s regulatory role, with improved enforcement to address water quality, financial performance, and environmental outcome issues. It will require councils to develop robust plans for future capital expenditure needs. The new policy also provides local authorities with options to create viable water management configurations rather than imposing a one-fits-all approach.  

The first stage of this regime is expected to be signed into law in mid-2024 and allows councils to establish new council-controlled organizations to deliver water services. A second bill will be introduced in December. The bill will create a new range of financing tools and allow the creation of financially independent council-owned water providers. Councils will be able to establish joint-owned utilities or choose to remain independent based on each utility’s managerial and financing needs. As Castalia’s CEO David Ehrhardt said to GWI, the new policy is “all about options that local authorities can choose from, not about forcing solutions on them.” 

Our Managing Director, Andreas Heuser was appointed Chair of the Government’s Technical Advisory Group (TAG). The TAG will advise the Government in preparing the policy and legislation to implement Local Water Done Well.

Download GWI’s article here: New Zealand Utility Reform Struggles with Cost of CAPEX.pdf

Voluntary Carbon Market Image

Globally, the water sector emits more than 2 billion tons of CO₂e annually, which corresponds to 5% of total global emissions. This is more than double the yearly emissions of the aviation and maritime sectors combined.   

Additionally, there are 1.6 billion people who don’t have access to safe drinking water, and 2.8 billion people who don’t have access to safe sanitation3. The number of people who lack access to safe water and sanitation increases every day due to climate change, rapid urbanization, and lack of finance in the water sector.  

Castalia and The University of Colorado collaborated on a research project to assess how voluntary carbon markets can help in reducing emissions from the water sector while contributing to the achievement of SDG 6, ‘safe water and sanitation for all’.  The work was commissioned by The Sustainable Markets Initiative, WaterAid’s Resilient Water Accelerator, HSBC, VCMI, and Gold Standard 

As part of the study, we assessed the potential of emissions reduction in various water sub-sectors. According to our findings, if we maximize the use of voluntary carbon markets in the sub-sectors with the highest verifiable potential for emissions reductions, we could achieve over 445 million tons of CO₂e emissions reduction annually. This could yield $1.7 billion in carbon revenues annually, potentially mobilizing an additional $10.6 billion over the next 10 years for water sector investment.  

In 2021, the global voluntary carbon market transacted 500 million tons of CO₂e. Materializing the full potential for voluntary carbon credits from water services could almost double the size of the global voluntary carbon market.  

Using voluntary carbon markets for water also has co-benefits such as increasing access to water, boosting water sector resilience, improving sanitation, and preserving aquatic ecosystems.   

To encourage the collaboration of relevant stakeholders to support WaterAid’s Resilient Water Accelerator Initiative, Castalia’s Chief Executive, David Ehrhardt, presented the potential of voluntary carbon markets to reduce emissions in the water sector during the COP 28.  

You can access Castalia’s COP 28 presentation here: Voluntary-Carbon-Markets-for-the-Water-Sector

References

1. GWI. “Mapping Water’s Carbon Footprint,” 2022; Page 26. Greenhouse Gas Protocol. “GHG Protocol Agricultural Guidance Interpreting the Corporate Accounting and Reporting Standard for the Agricultural Sector.” https://ghgprotocol.org/sites/default/files/2022-12/GHG%20Protocol%20Agricultural%20Guidance%20%28April%2026%29_0.pdf
2. McKinsey. “Agriculture and Climate change,” 2020; Page 6. https://www.mckinsey.com/~/media/mckinsey/industries/agriculture/our%20insights/reducing%20agriculture%20emissions%20through%20improved%20farming%20practices/agriculture-and-climate-change.pdf
3. Emission from aviation and maritime transport sector is around 938.14 million tons CO₂e (2020). Ourworldindata.org. “Greenhouse Gas Emission by Sector, World.” https://ourworldindata.org/emissions-by-sector 
4. UN Water. “WHO/UNICEF Joint Monitoring Program for Water Supply, Sanitation and Hygiene (JMP) – Progress on household drinking water, sanitation and hygiene 2000 – 2020,” 2021. https://www.unwater.org/publications/who/unicef-joint monitoringprogram-water-supply-sanitation-and-hygiene-jmp-progress-0. 
Mayors representing Communities 4 Local Democracy at Parliament during a visit to voice concerns about Three Waters back in late 2021

In New Zealand, the “Local Water Done Well,” policy is set to replace the “Three Waters” regime. The Local Water Done Well policy is based on an alternative water reform put forth by “Communities 4 Local Democracy”, whom we advised.  

The New Zealand Herald recently published a column written by Andreas Heuser, Managing Director at Castalia, about the Local Water Done Well policy. 

Mr. Heuser outlines the key components of the Local Water Done Well policy, emphasizing its potential to address financial challenges within the water sector. Mr. Heuser dispels misunderstandings, particularly regarding the separation of balance sheets, and explains the policy’s focus on decentralization and community involvement. 

The proposed framework involves creating separate corporatized water service providers (WSPs) owned by individuals or groups of councils. These WSPs would maintain independent accounts, subject to regulation by the Commerce Commission to ensure efficient expenditure. This approach, globally tested and successful in other utility sectors, aims to make WSPs credit-worthy entities, attracting capital and positively influencing credit ratings. 

Heuser addresses concerns about financing challenges and explains the suggested mix of standard utility financing and targeted government support. The new policy encourages a case-by-case approach, with the government providing technical assistance to WSPs or councils facing financial challenges. Innovative solutions, such as a Ratepayer Assistance Scheme, revenue bonds, conventional LGFA finance with relaxed debt limits, and Crown support with equity finance, could be explored based on local needs and preferences. 

Highlighting the importance of local involvement, Heuser stresses that communities should play a pivotal role in overcoming challenges. The column underscores the flexibility of Local Water Done Well, allowing local communities to shape its design based on specific circumstances. The example of Auckland is presented, where tough choices, like separating Watercare from Auckland Council, are best decided by Aucklanders themselves. 

Mr. Heuser highlights the potential of the Local Water Done Well policy to be a major advance in New Zealand’s water services. Castalia looks forward to supporting this proven and adaptable method.

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WASHINGTON, DC
+1 (202) 466-6790
1747 Pennsylvania Avenue NW, Suite 1200
United States of America

SYDNEY
+61 (2) 9231 6862
Suite 19.01, Level 19, 227 Elizabeth Street
Australia

AUCKLAND
+64 (4) 913 2800
74D France Street, Newton South
New Zealand

WELLINGTON
+64 (4) 913 2800
Level 2, 88 The Terrace
New Zealand

PARIS
+33 (1) 73 44 26 97
6 Rue Duret
France

BOGOTÁ
+57 (1) 508 5794
Calle 81 #11-08, Piso 5, Oficina 5-127
Colombia

Thinking for a better world.

Castalia-logo-negative-2col
PROJECTS        NEWS        BLOG        CONTACT
© Copyright 2019 Castalia. All rights reserved.
Terms | Privacy | Credits | Sitemap