Sanitation Markets: Using Economics to Improve the Delivery of Services Along the Sanitation Value Chain | Source: Tremolet, S., Shareresearch.org, Dec 2012.
This Pathfinder Paper has been commissioned by the SHARE Research Consortium to provide a basis for future research with respect to sanitation economics, defined as the application of economic concepts, approaches and tools to the sanitation sector.
The objectives of this paper are to identify how market failures affect the ability to extend appropriate and sustainable sanitation services alongside the entire sanitation value chain. We examine how economic analysis has mostly been used so far to assess the economic case for investing in sanitation overall, i.e. where ‘sanitation’ is considered as a single
market. We argue that, although this type of analysis can be useful to shift mind-sets and public attitudes, its usefulness is limited by a number of uncertainties affecting such economic valuation and by a fundamental difference between the evaluation of economic costs and benefits and the financial incentives that drive actual investment decisions (from
both public and private actors) across the entire spectrum of sanitation markets along the value chain. Based on this finding, we investigate how economic analysis can help identify market failures in sanitation markets and potential interventions to make these sanitation markets work better. The paper examines in turn three main market segments alongside the sanitation value chain, starting with markets for providing ‘access’ to sanitation (collection
services), markets for transport and treatment activities and finally, markets for reuse services.
The paper concludes with recommendations to policy-makers on what to do based on what we know and to researchers on areas for future research in the developing area of ‘sanitation economics’.
