Background & Justification
Within the framework of the SIRWASH initiative, the Inter-American Development Bank (IDB) has been supporting efforts to strengthen the sustainability of rural water and sanitation services across Latin America and the Caribbean.
Despite progress in expanding infrastructure, rural water services face structural challenges: limited financial resources, weak cost-recovery mechanisms, and institutional constraints affecting reliable operations and maintenance (O&M).
Phase I of SIRWASH identified carbon finance as a promising mechanism to generate additional revenue streams. Safe drinking water interventions that reduce household water boiling can yield measurable GHG emission reductions—potentially certifiable under voluntary carbon market standards (Gold Standard, Verra).
Key insight: Carbon finance for water interventions remains incipient in LAC. This consultancy will assess the conditions under which these mechanisms are viable and could strengthen rural water service sustainability.
Objectives
Overall objective: Assess the potential viability of carbon finance mechanisms linked to safe drinking water interventions as a complementary instrument to strengthen the financial sustainability of rural water and sanitation investments, with a particular focus on supporting long-term O&M.
Feasibility Assessment
Assess the feasibility of carbon finance linked to safe drinking water interventions as a complementary financing mechanism, including its potential contribution to O&M financing.
Country-Level Analysis
Analyze rural water service interventions in selected countries to identify where carbon finance could apply, considering service delivery models, population scales, and operational contexts.
Regional Assessment
Conduct a structured feasibility assessment focused on four priority SIRWASH countries while extending analysis to up to twelve countries for a regional overview.
Decision-Support Framework
Develop a practical screening and decision-support framework to help governments and project teams assess opportunities to integrate carbon finance into rural water programs.
Scope of Services
The consultancy will evaluate the potential applicability of carbon finance mechanisms linked to safe drinking water interventions in rural water services across LAC, with primary focus on four SIRWASH countries.
Key Areas of Examination
Technical Conditions
- Baseline household water treatment practices
- Dependence on non-renewable biomass for boiling
- Population density and scale
Institutional Factors
- Institutional arrangements for service delivery
- Regulatory and policy frameworks
- Service delivery models
Operational & Market
- MRV system availability
- Voluntary carbon market standards
- Biophysical conditions
Key Activities & Phases
Inception & Analytical Framework
- Review existing analytical work on carbon finance linked to safe drinking water and rural water services
- Define analytical framework and methodological approach
- Confirm scope of country-level assessments and regional screening
- Prepare and present inception report and work plan
Country-Level Feasibility Assessments
- Analyze selected rural water interventions in Bolivia, Brazil, Haiti, and Peru
- Assess key enabling conditions (contextual, institutional, operational)
- Examine factors for carbon credit generation linked to safe drinking water
- Identify opportunities and constraints
- Prepare country notes for each priority country
Regional Screening of Carbon Finance Potential
- Rapid screening across up to twelve LAC countries
- Identify key contextual factors across national contexts and service delivery models
- Compare opportunities and constraints to identify regional patterns
Decision-Support Tool & Final Synthesis
- Consolidate and synthesize all findings
- Identify key opportunities, constraints, and risks
- Develop practical screening and decision-support framework
- Prepare final synthesis report with strategic considerations
Periodic knowledge-sharing sessions will be organized throughout to present findings and facilitate feedback with stakeholders across the region.
Deliverables & Payment Schedule
| Deliverable | Description | Timeline | Payment |
|---|---|---|---|
| D1. Inception Report & Analytical Framework | Work plan, analytical framework, methodological approach, and confirmed scope of country-level assessments and regional screening. | 30 days (Month 1) |
20% |
| D2. Country-Level Feasibility Assessments | Analysis of rural water interventions in Bolivia, Brazil, Haiti, and Peru. Assessment of enabling conditions, opportunities, and constraints. Country notes for each. | 90 days (Month 3) |
35% |
| D3. Regional Screening | Rapid screening of carbon finance potential across up to twelve LAC countries. Comparative analysis of opportunities and constraints. | 120 days (Month 4) |
20% |
| D4. Decision-Support Tool & Final Synthesis Report | Consolidated synthesis, practical screening tool, strategic recommendations for integrating carbon finance into rural water programs. | 150 days (Month 5) |
25% |
Geographic Focus
Priority SIRWASH Countries (in-depth assessment)
Regional Screening (up to 12 additional LAC countries)
A rapid preliminary screening will provide a comparative regional overview, considering regulatory frameworks, service delivery models, and biophysical conditions across a broader set of LAC countries.