A review of literature on the factors affecting wastewater treatment and recycling across a broad spectrum of economic stages of development

In the search for alternative sources of water, wastewater recycling has emerged as a prominent option (Scott et al., 2000; Radcliffe, 2006; Capra & Scicolone, 2007; Furumai, 2008). The other alternatives include storm water recycling (Anderson, 2003; Gardner, 2003; Hwang et al., 2006; Begum et al., 2008) and rainwater harvesting (Pandey et al., 2003; Nolde, 2007; Sazakli et al., 2007). While ground water exploitation has occurred for a long time now, desalination (Belessiotis & Delyannis, 2001; Zhou & Tol, 2004; Troy & Troy, 2008) and water trading (Dwyer et al., 2005; Jenerette & Larsen, 2006; Quiggin, 2006) across regional, national and international borders is emerging. In this context, the key questions that arise are: How do communities determine which option is best for them? Furthermore, what are the factors that make one water alternative more appealing than another? To what extent does the economic development of a region influence the way water is managed? In this paper, these questions are evaluated with respect to wastewater as an alternative water source.

The aim of this paper is to understand the factors that affect wastewater management across communities that are at varying stages of economic development. Finally, drawing on the Environmental Kuznets Curve (EKC), a framework has been developed that combines the factors that constrain or facilitate wastewater treatment and recycling over a broad spectrum of economic settings and stages of development. In doing this, the aim is to highlight the changing nature of economic, institutional and environmental factors that will influence long-term investments in wastewater infrastructure.

In this study, wastewater is defined as all the sewage water that comes from the residential bathrooms, kitchen sinks, washing machines and toilets, along with the industrial effluents that are released into the common sewerage network of a city. Wastewater treatment is any process that changes the effluent from its spoiled state into something that is less spoiled. The degree of treatment is usually delineated into its sequential biophysical process of primary, secondary and tertiary, where primary is at the lowest quality level. Wastewater reuse is defined as the use of wastewater with either no treatment or that is only subject to primary treatment. Water with this degree of treatment is mainly used for irrigation in urban and peri-urban agriculture. This is a common practice in developing countries of Asia and Africa (Scott et al., 2004; Jimenez Cisneros & Asano, 2008; Raschid-Sally & Jayakody, 2009; Qadir et al., 2010a, b). Wastewater ‘recycling’ is defined as the use of wastewater after secondary or tertiary treatment. Recycled water is increasingly being used in the more developed countries of Europe, North America and Australia (Lazarova et al., 2001; Bixio et al., 2006; Hochstrat et al., 2006).

The issues addressed in this study centre on the factors that motivate and constrain cities in dealing with their wastewater problems. From a physical stand point the problem remains the same regardless of the location and development status of a community; however, from an economic perspective the way it is handled changes. The link between economic development and environmental degradation has been characterised in the EKC. While the EKC hypothesis might be too simplistic to capture the complexity of issues surrounding environmental degradation, it has in the past been used to examine wastewater management (Bhattacharya, 2008). The EKC income thresholds for the treatment of water pollutants have been calculated, and the impact of institutions and global treaties and their direct or indirect impact on the way water pollutants are handled have been examined in previous studies (Grossman & Krueger, 1995; Yandle et al., 2002).

The factors that link the physical problems of water to the changing economic development phase of a city or a community are complex, interrelated and wide ranging. An in-depth review of the literature on wastewater use in countries across Asia, Africa, Europe, North and South America and Australia revealed that 329 studies on the factors that influence and determine how wastewater is handled and perceived have been undertaken (selected recent literature is presented in Table 1). Grouping these factors together, the following in general can be concluded:

1. The degree of water scarcity facing a city provides context on the degree to which handling wastewater is pursued. The physical problems of fresh water supply and wastewater generation are encompassed in the water scarcity dimensions.

2. Institutional arrangements capture the processes involved in managing a public good with external ramifications and determine whether wastewater of particular quality can be delivered or not.

3. Cost constraints, both relative and absolute, capture the purely financial aspects of running wastewater schemes.

4. Environmental considerations are important as this is about dealing with a waste product, but these to a degree are related to the cost constraints and social acceptability.

To understand the problem at hand, all these (four) factors need to be combined into a single framework that policy-makers and stakeholders can use to handle the problems associated with wastewater. A framework would help identify the factors and the relationships among these factors that organise diagnostic and prescriptive enquiry (Ostrom, 2009). Further these elements would help an analyst generate the necessary questions that need to be addressed in a particular community setting.

Frameworks provide the most general set of factors that should be used to analyse all types of settings relevant to them. The framework presented below provides an all-encompassing perspective on the wastewater problem facing policy-makers. If policy-makers in developing and developed countries are to come to terms with what to do with wastewater over a lengthy period of time, they will require tools that can help them assess the nature and the scope of the problem. There is no reason to believe that the tools that are required at one stage of economic development would be different to those required at another stage. These tools could be (and are) based on the rational economic principles that trade off the benefits against the costs, over a long period of time.

There is mixed evidence that supports the contention that the growth and abatement of water pollution follows a typical EKC (Bhattacharya, 2008). A cross-country analysis by Grossman & Krueger (1995) focussing on river basins shows evidence of an inverted U-shaped curve for biological oxygen demand, chemical oxygen demand, nitrates and some heavy metals (arsenic and cadmium), whereas Shafik & Bandyopadhyay (1992) analysed two indicators of river water quality (dissolved oxygen concentration and faecal coliform) and found that neither followed a typical EKC path. Grossman & Krueger (1995) found that different pollutants in water had different turning point incomes.

A number of studies have questioned the robustness of the EKC relationship. It has been found that two main factors determine whether a certain environmental degradation follows the EKC path or not: the type of pollutant and the impact of globalisation. According to Leonard (2006), the shape of the EKC depends on the type of pollutant; he found clear evidence that the growth and abatement of airborne particulate matter and pollutants (like NO₂, carbon monoxide and sulphur dioxide) fit neatly into EKC models. However, the correlation is much less clear in the case of deforestation or carbon dioxide emissions. It has been assumed that if one cannot see or smell a pollutant in their local urban neighbourhood, then, no matter how rich one is, not much would be done about it.

The initial studies on EKC relationships did not take into account the impact globalisation may have on the relationship. Tierney (2009) argues that the industrialised world succeeded in cleaning up its own environment by exporting the dirtiest industries abroad (outsourcing). What this means is that while a particular country's EKC might decline as its income rises, in reality on a global scale the level of pollution has not fallen. The extent to which this occurs depends on the type of pollutant, if it is movable from one place to another. Clearly this does not hold for wastewater-related pollution. While there is a hope that new technologies will be cleaner and hence reduce pollution to some extent in the poorer countries, even when the poorer countries finally become affluent they will not be able to export their pollution-causing industries anywhere else and may have to clean their environment at a very high price. The damage caused by pollution in India is estimated to cost 4.5–5% of GDP annually due to air pollution, groundwater mining, deteriorating aquifers, land degradation and deforestation (Liebenthal, 2002).

The amplitude of the EKC path is affected by changes in technology, policy or institutions. This is called a policy tunnelling process in the environmental management literature (Panayotou, 1997; Dasgupta et al., 2002; Yandle, 2002). Greater trade openness (i.e. a higher ratio of trade to income) and good institutions that are democratic and open, tend to result in a flatter EKC for pollutants. According to Bhattarai (2004) undertaking an analysis of the EKC is the first stage towards a policy tunnelling process which could lead to a flattening of the EKC path. According to him, if it is possible to identify the ecological threshold limit in a region/ecosystem/hydro-ecological basin, irreversible damage to the environment could potentially be avoided by limiting damage under the ecological threshold limit. Bhattarai (2004) further argues that policy and institutional changes can be made that flatten the EKC. These involve prioritising the basic needs of the society, allowing for only a minimum level of development and managing environment resources in a better fashion. However, Tierney (2009) argues that any global treaties and policies of a country which slow down the rate of economic growth, will lengthen the time it takes the poor country to reach the turning point on the curve. This will also have a flattening impact on the curve. While EKC is a useful concept that provides an explanation of certain trends with pollution and its link to the economic growth of a region, it does not hold true for all types of pollutants and for certain pollutants may not have any link with economic growth of a region.

Economic growth is one indicator of higher demand by people for a cleaner environment, but unless the requisite institutions and policies are in place, not much pollution control will happen. In this study, EKC is used to broadly explain the trend of how the economic situation of the region/country affects the management and level of wastewater treatment. It should be noted that the degree of economic growth in a region is not a sufficient pre-condition to ensure that the treatment and safe use of wastewater will occur. What is also needed is a robust institutional set-up, effectively implemented policies and a desire to be concerned about the environment.

With climate change and increasing population pressures, water scarcity has emerged as a major problem in already dry countries. Water scarcity is expected to have a significant influence on the way urban water authorities will manage their wastewater resources. Water scarcity is an interesting term that is, strangely enough, not well understood. In its simplest form water scarcity implies a shortage of an item which is essential to life. Thus, it plays on the psychological instincts of survival and is used to evoke both fear and the urgency to solve the problem with some form of engineered solution. Economists, those who study the science of scarcity and the choices that are made about it, tend to have a less alarmist view of scarcity. To them it is a case of the demand for water exceeding its supply. The extent to which this occurs is revealed by the price. So if the demand for water greatly exceeds its supply, its price will be high. The high price rations the use of the good, so that when it exceeds peoples' capabilities of paying for it, they do without. With the necessity for water this would mean acquiring it from a cheaper source somehow or somewhere else. However, given its essential nature, governments fix the price of water, usually at a low level, thus stopping this rational adjustment process. When this occurs, demand grows greater than supply and the physical difference between the two grows. This difference between the two (the physical supply and demand) is the usual measure of water scarcity.

However, supply and demand are highly dynamic concepts in water. The supply of water is dependent on changes in rainfall, ground water and many other hydrological factors, all of which vary greatly. It could be said that the supply of water to a city is seasonal. The demand for water by a city is exactly the opposite. It is usually a constant invariant; people tend to consume the same amount of water day in and day out. This is not to say that the factors that influence demand are static and invariant. In some cities like Melbourne where most households have at least a small garden, demand is seasonal to the extent that garden irrigation occurs mostly in summer. Moreover, as populations grow, industries develop and peoples' demand does change over time, usually quite quickly (Ker, 2008). Agriculture is the largest user of water and its water demand varies widely depending upon type and age of plant and conditions of evapotranspiration (tropical/temperate zones, season), whereas water supply depends on rainfall and the ability of farmers or institutions to be able to store water in reservoirs and transfer it over long distances to the point of use, which has implications for funding and pricing mechanisms for water (Giraldo et al., 2014). Therefore, finally the role of water pricing in the context of water scarcity has been discussed, even though it tends to be the subject of institutional analysis. Whenever there is an excess of demand over supply, i.e. whenever there is water scarcity, there is an underlying price for this water scarcity. Therefore while assessing the water scarcity situation for a city and its implications for wastewater management, one has to assess the current and future supply sources of water and their reliability over the decades. In terms of demand, the uses of water in different sectors and their quality requirements should be assessed and the underlying trends of population and economic growth need to be studied.

While both supply and demand are put together to determine the physical degree of water scarcity, it in turn becomes a factor that motivates decision makers to resolve issues surrounding wastewater collection, treatment, and reuse and recycling. In the case of cities in developing countries of Asia and Africa, the effort to solve the water scarcity problem actually results in the neglect of the wastewater system. Buechler & Mekala (2005) show this consequence in the case of Hyderabad in India, where they found that a correlation between the worsening water scarcity problem and wastewater not being collected and treated exists. Alternatively, in a developed country context the opposite occurs, with wastewater seen as the solution to the scarcity problem. The evidence to further support these beliefs can be derived through an institutional analysis.

The role of environmental policies and institutions, their quality, flexibility to adapt to changing resource situations and their robustness, is important (in addition to the economic growth of a society) to ensure that a community or city reaches that crucial turning point on the EKC (Shafik & Bandyopadhyay, 1992; Panayotou, 1997; Torras & Boyce, 1998; Dasgupta et al., 2002; Yandle, 2002; Bixio et al., 2006). Therefore a detailed institutional analysis would need to be undertaken to assess the quality of the institutions and policies that deal with and influence wastewater management.

Institutions can be defined as the humanly devised constraints that shape human action (North, 1990; Gunderson et al., 1995; Scott, 1995). They set the ground rules for resource use and establish the incentives, information, and compulsions that guide economic outcomes. Institutions evolve with changes in society and its priorities. Institutions affect the performance of an individual, group, organisation, a country or its economy, through the effect they have on the costs of exchange and production. Together with technology, institutions determine transaction and transformation (production) costs (North, 1990).

Understanding and analysing institutions is key to understanding the issues surrounding complex problems and the same must hold for the water and wastewater sectors (Bandaragoda, 2000; Blomquist et al., 2004; Saleth & Dinar, 2004; Mitchell, 2005; Brown & Keath, 2008). Blomquist et al. (2004) argue that instead of just saying that institutions are important and treating them as a ‘black box’, there is a need for comparative and empirical institutional analysis which will explain how institutions prompt people to try to change management practices, how they ease or hinder those changes, how they shape the management alternatives water users and organisations consider and adopt, and how they affect the outcomes that result.

Institutions can be both formal and informal. In addition to written laws, rules and protocols, informal procedures, norms and practices accepted by society and followed over several years, become part of the institutional framework. Certain patterns of norms and behaviours persist because they are valued by people for practical and other reasons. In such cases informal rules have a tendency to override formal rules. This is common in many developing societies, making the enforcement of formal rules very difficult and thereby affecting performance (Bandaragoda & Firdousi, 1992).

Formal and informal institutions coexist in many societies. Informal rules/practices which replace declared laws, rules and regulations are referred to as rules-in-use by Bandaragoda (2000). As a number of such rules-in-use may exist in the wastewater disposal and reuse situation in developing countries, an analysis of it will be needed in the case of developing country cities, but may not be required for developed country cities.

Saleth & Dinar (2004) argue that in order to capture and assess the overall effectiveness of these individual components, there is a need to capture their progressive nature. The national and regional policies provide the vision for the management of wastewater; the laws, rules and procedures enable them; and the formal organisations implement them. Any gaps in the actual vision and its implementation may be attributed to a number of socio-political, economic and environmental problems.

The performance of the authorities that control water and retail it has a huge impact on overall wastewater management. Their performance can be assessed in terms of physical, financial, economic and equity dimensions. There are strong inter-dimensional linkages among these. However, objective and internationally comparable economic and equity criteria assessments are constrained both by data and methodological problems. Understanding the judgments and opinions of the stakeholders and water experts would be useful to complement the available knowledge.

The context within which the institution-performance interaction occurs is as important as the mechanics of the interaction because of its conditioning effect on the wastewater institution and water sector performance in general. In reality, an interplay of innumerable factors that are strictly exogenous to the water sector influence the way it functions. For analytical convenience and simplicity, Saleth & Dinar (2004) classified them into: political system; legal framework; economic development; demographic condition; and resource endowment. Further, treatment of wastewater and its use as recycled water is strongly influenced by economic, environmental and social considerations.

Economic viability of any project is essential for its sustainability. A number of questions need to be addressed in this context: What does it cost to treat the wastewater for a city? What are the costs of non-treatment to the society in terms of environmental pollution and health hazards for farmers using untreated wastewater for irrigation? What are the costs of recycling treated wastewater and in which sectors should it be used? How do these costs compare with other alternate water sources such as stormwater recycling, rainwater harvesting, desalination and inter-basin water transfers? And, finally, how much are people willing to pay for this recycled wastewater? While often the cost of recycled wastewater is much higher than normal water sourced conventionally, people expect to pay less for recycled water than for normal water (Po et al., 2005).

The cost of treating wastewater and the willingness of the people to pay for it are linked to the quantity and quality of wastewater, environmental water quality guidelines for the region, the receiving water body/the sector where it will be recycled, the bio-physical limitations, technologies available and the efficiency of the institution. The more wastewater that is treated, the greater the beneficial environmental impact but also the greater the cost (with some cost savings due to economies of scale). To understand this issue it is necessary to come to terms first with the costs of treating, reusing and recycling wastewater to different levels, then the extent to which people value the degree to which wastewater is treated needs to be assessed. In undertaking this component of the study the contingent valuation method (CVM) can be employed. CVM is so called because it is contingent on simulating in a questionnaire a market in which consumers' behaviour can be modelled. It has a great appeal as it is possible to estimate the value of a benefit with a simple question: what is the maximum a consumer would be willing to pay for it? The response should be an estimate of the total benefit that the person expects from the particular item and by subtracting the appropriate costs should provide an estimate of the consumer's surplus (Sinden & Thampapillai, 1995). The method uses a series of questions to elicit people's preferences for goods not sold in a normal market situation by finding out what they would be willing to pay for specified improvements in them (Mitchell & Carson, 1989).

In the case of developing countries where untreated wastewater is released into the sea, rivers and other fresh water sources, one will have to consider the costs of pollution and health hazards. However, research shows that while there are a number of negative externalities of not treating wastewater, there are many positive externalities too which actually reduces the net costs to society. Wastewater reuse generates substantial livelihoods for the marginal farmers in urban and peri-urban areas of many developing countries like India and Ghana (Mekala & Buechler, 2009). It ensures food security for these urban poor farmers, recycles nutrients and improves the micro-climate of the cities.

The actual cost that a consumer pays for using recycled water in comparison with other alternate sources of water plays a crucial role in the overall utility of this resource. While the costs of alternate sources of water would vary from city to city, the case of Melbourne can be used as an example here to understand how these costs compare. Table 2 presents the costs of various wastewater alternatives.

In spite of all the different available options, Melbourne opted to take the most expensive option of desalination. While this was mostly to manage the political risks, it was justified as the most suitable option considering: it is a rainfall independent option; there are no social acceptability problems associated with it; unlike wastewater recycling it does not require a dual reticulation system for its supply; and the quantities of sea water available are almost unlimited, which means more and more water can be sourced as per the need. However, recycling wastewater can not only substitute/complement/save fresh water, but has a unique ability to fulfil a number of other objectives like: reducing nutrient discharge to the natural water bodies; reducing greenhouse gas emissions if used in sectors which require lower treatment levels; creating healthy green spaces in the city even in drought times etc. However, this brings us to the next question: the issue of environmental and social acceptance.

The key research questions in this context are: how important is preventing environmental pollution for communities? Would a city recycle its wastewater as a matter of principle to prevent environmental pollution irrespective of its costs to the community? How acceptable is wastewater recycling to people and for what purposes? Survey methods with a carefully designed questionnaire that captures people's preferences and levels of acceptance of recycled wastewater and its products, and their trust in the institutions to deliver them, can be assessed (ARCWIS, 2002; Po et al., 2005). The willingness to pay for these services can be determined by using the CVM.

As discussed above in the section on EKC, environment conservation priorities of communities may increase with an increase in the income or GDP of countries. In a number of developing countries in Asia, Africa and South America, often rivers and other fresh water streams are polluted with untreated wastewater, and in most developed countries of Europe, North America and Australia, wastewater is treated to acceptable environmental standards before it is released into natural streams. While the absolute and relative cost of wastewater treatment plays an important role in its use/non-use, a few cities in Europe and North America have recycled their treated wastewater to prevent the pollution of their rivers and groundwater. There has also been ample research across the world on the social acceptance of treated and untreated wastewater for irrigation (gardens, sports fields, golf courses, parks, vegetables and other crops), and for industrial and residential use. It was found that untreated wastewater is extensively used for irrigation in Ghana (Agodzo et al., 2003), India (Murray et al., 2011), Pakistan (Ensink et al., 2004), Vietnam (Raschid-Sally et al., 2004), Mexico (Scott et al., 2000), Jordan and China (Mara & Cairncross, 1989). Buechler et al. (2002) states that this is a reality that cannot be denied or effectively banned. The main reason for this is severe water scarcity and lack of other livelihood options for the marginalised farmers in urban and peri-urban areas. Therefore, wastewater reuse occurs by default and not by design and is socially acceptable. Whereas in the water scarce developed countries such as Australia, the Middle East, south west of United States and in regions with severe restrictions on disposal of treated wastewater effluents, such as Florida, coastal or inland areas of France and Italy, and densely populated European countries such as England and Germany (Marsalek et al., 2002), wastewater recycling for agriculture is socially accepted. However, social acceptance of recycled wastewater varies in the case of residential use.

Frewer et al. (1998) stated that people use their moral and social values known as outrage factors to evaluate situations. Based on these outrage factors, Po et al. (2005), in a study on wastewater recycling, suggest that people may perceive wastewater as too risky to use because: (1) the use of this water source is not natural; (2) it may be harmful to people; (3) there might be unknown future consequences; (4) their decision to recycle water may be irreversible; and (5) the quality and safety of the water is not within their control. Po et al. (2005) found that, in the suburbs of Perth, recycled wastewater was highly acceptable for recreation, moderately so for agriculture, surprisingly acceptable for bathing and swimming, but really unacceptable for home consumption in cooking and for drinking. These results were found consistent with the previous research findings (ARCWIS, 2002), where the percentages of participants who found a specific use of treated wastewater acceptable or highly acceptable decreased as the use moved closer to human contact.

The paper presents a contained review of the wastewater management system, one that changes as economic development changes and one that can be used by those who need to plan for the future of the system. In developing this framework there is a need to combine the different strands of information that are usually used in a singular manner to make decisions on wastewater management and to fill in the gaps that exist in that framework. These single strands within the system relate to the degree of water scarcity, the institutional setting, the cost constraints and concerns for the environment. Then, in turn, this framework can be used as a tool that policy-makers can use to plan future developments of the system.

Given that cities are presumably moving from a low stage of economic development to a higher one (i.e. that they are developing) this study provides policy-makers with additional ways of thinking about wastewater treatment and reuse needs that will govern their future needs. The key questions that are investigated with this framework are:

• To what extent will water scarcity in a region, and solutions to that problem, drive improvements in wastewater treatment and its use?

• Does the institutional setting of a region and/or the urban setting responsible for wastewater management determine the extent of wastewater treatment, reuse and recycling?

• What are the different costs involved in wastewater management that constrain or facilitate its collection and treatment in developing countries and its recycling in developed countries?

• To what extent is the treatment and safe recycling of wastewater driven by environmental and social considerations in developing and developed countries?

By understanding and prioritising the objectives of water treatment, reuse and recycling as suggested by the order presented above, the hope is that policy-makers may improve the way they think about wastewater and the problems associated with it. This study presents some of the key aspects to be considered regarding wastewater treatment, reuse and recycling over the long-term and through various phases of economic development.

The framework presented in this paper is the result of a larger body of research work funded by Cooperative Research Centre for Irrigation Futures (CRC IF) and International Water Management Institute (IWMI).