The Cost of Freshwater Charging in Brazil: suppliers’ main alternatives

Abstract Charging for freshwater use raises debate on water suppliers' financial sustainability and, social and operational sector efficiency problems. The issue stands out when suppliers' income flows are insufficient to cover production costs or household revenues are low, making it difficult for tariffs to increase. Moreover, it is even worse with the combination of these factors in watersheds with water scarcity. The present work analyzes the freshwater use charging from the perspective of cost increment destination in the sanitation sector. We compared a scenario of cost absorption with the possibility of transfer to final consumers in the first block tariff, fixed by volume ( #2a), and the second block tariff charged by additional m3 consumed (#2b). Results show that scenario #1 reduces resource availability for investments, compromising infrastructure maintenance and service expansion. Alternatively, as a natural monopoly sector, the pass-through to consumers is the most likely. Both #2a and #2b scenarios nullify the encouragement of rational use and operational efficiency, add risk to environmental sustainability, and compromise basin committee plans. However, in the #2b scenario, the possibility of minor water consumption by households, changing for the first block tariff, brings back the #1 scenario possibilities. Scenario #2a, as a plausible choice, demands an accurate discussion of governance in freshwater charging.