Improving sanitation strategies through coordinated investment on wastewater treatment reuse and water supply at the watershed scale: A Brazilian view of water security

Water stress has underscored the need to transition from traditional water management practices to strategies that promote the sustainable use of resources. This shift is centered on two fundamental concepts: the circular economy (CE) and water reuse (Bellver-Domingo & Hernández-Sancho, 2022). Urban water management, responsible for providing essential services to populations and ecosystems, is increasingly challenged by demographic growth and climate change. These pressures necessitate a rethink of how water is utilized, reused, and transformed to meet current and future demands (UNESCO & UNESCO i-WSSM, 2020).

The integration of circular economy principles into the water sector is exemplified by initiatives such as the European Union's Circular Economy Action Plan (European Commission, 2020) and the EU Water Reuse Regulation. These policies aim to enhance agricultural water reuse, ensure the safety of reclaimed water, and support climate change adaptation. Circular water management encompasses reducing water use in production processes, promoting sustainable water flow management, reusing water for specific purposes with consideration of health and environmental impacts, generating energy, and recovering valuable materials from wastewater treatment processes (OECD, 2020).

In densely populated basins, the discharge of wastewater treatment plants (WWTPs) is often located a few kilometers upstream of drinking water treatment plant (DWTP) intakes, with insufficient time for decomposition and dispersion of effluents' residual pollutants. There are numerous locations where wastewater effluent accounts for a substantial fraction of a potable water supply (Swayne et al., 1980; Wang et al., 2017). In a study analyzing 1,210 DWTPs across the United States, Rice & Westerhoff (2015) identified that 50% were potentially impacted by upstream WWTP discharges. The same study also pointed out that during low flow conditions in dry seasons, 23 out of DWTP intakes with gauge data had the potential to be comprised of 100% wastewater effluent discharged upstream, also referred to as de facto reuse (Asano et al., 2007).

Water supplies impacted by upstream wastewater discharges usually exhibit higher concentrations of organic and ammonia nitrogen and other residual organic compounds (Xu et al., 2011; Li & Mitch, 2018; Zhen et al., 2018; Dantas et al., 2022). This results in high water treatment costs for the downstream DWTPs to meet potable water standards in addition to the need to seek out alternative water supply sources. In the case of residual ammonia nitrogen, the use of chlorine oxidant for disinfection at DWTPs promotes the formation of chloramines, which reduces the power of disinfection and requires a higher chlorine dosage (Kabuba et al., 2022). Disinfection sub-products (DSPs) formed in the presence of organic compounds are another source of concern for DWTPs due to their link to human health risks (Li et al., 2019; Mujathel et al., 2022).

Improving pollutants removal in WWTPs has profound and broad impacts to society, ranging from reduced health problems and disease heterogeneity, given over 50 diseases are related to poor water quality (Lin et al., 2022), to lower demand for hospitalization due to waterborne diseases and lower costs to downstream DWTP. Ferreira et al. (2021) estimated the demand for hospitalizations due to waterborne diseases could be reduced by 157,000 per R$100 million invested in sanitation in the case of Brazil. In Marin et al. (2007), the economic benefits of pollutants removal at WWTPs were quantified as a function of the pollutants reduction, treatment costs, and concentration distance to meet different water use requirements. Hernández-Sancho et al. (2010) and Molinos-Senante et al. (2013) applied the methodology of shadow prices to estimate the avoided costs (environmental benefit approach) resulting from the removal of pollutants in wastewater treatment. Finally, Dalcin & Marques (2020) identified that coordinating opportunities for sanitation investments within a watershed (where and when to concentrate investments in wastewater treatment) and water management decisions (where and when to allocate water permits to different water users) also reduced total treatment costs by avoiding additional drinking water treatment.

Enhanced wastewater treatment plays a crucial role in facilitating the reuse of treated effluent for both potable and non-potable applications, including industrial and agricultural uses (National Research Council, 2012; Hernández-Sancho et al., 2015). All investments and planning toward this role are part of the transformation to a CE approach, which maximizes the value of natural resources, such as water, by keeping them in use for as long as possible. Given CE frameworks provide a comprehensive strategy for water management by integrating sustainability, resource efficiency, and resilience (Smol et al., 2019), and it can be applied to broaden the planning perspective to water and sanitation services and increase sustainability, inclusiveness, efficiency, and resiliency (Delgado et al., 2021).

Under such systemic view, water and wastewater services can be optimized, as pollution loading to water bodies is reduced, improving their quality, contributing to Sustainable Development Goal (SDG 6.3), which contributes to reduce water and treatment costs, expanding affordable service coverage and ensuring access to more users (SDG 6.2) (United Nations, 2024). Verlicchi et al. (2012) and Heinz et al. (2011) provide an example of such relationship by calculating how costs and benefits associated to the reuse of the reclaimed wastewater by agricultural and recreational uses are affected by effluent quality improvement.

Despite the well-known effect of pollutants in the DWTP costs quantified in existing literature, studies addressing how investment strategies can be designed to implement pollutant removal considering the associated costs and benefits through time are limited. Sanitation investment strategies in water supply and wastewater often lack a proper governance structure to coordinate and integrate investments, especially when made by different utilities and involving the private and public sectors (Ekane et al., 2014; Mulumba et al., 2014). This paper brings a contribution to this gap by investigating the economic trade-offs of multiple time strategies where investments could be anticipated, or delayed, to meet different levels of contaminant removal from wastewater. The economic benefits of coordinated treatment decisions include upstream WWTPs, downstream DWTP and expected demands for treated wastewater reuse. This study also builds a stronger case for coordination of different investment strategies and need for joint investment policies and plans.

The methodology integrates a water quality model to simulate the effects of various wastewater treatment measures at existing WWTPs, including biological treatment with nutrient removal and membrane processes to provide reuse water, with investment scenarios to calculate the increasing benefits from improvements in sewage collection, treatment, and the gradual enhancement of nitrogen removal efficiency.

The corresponding economic benefits were evaluated by three aspects: (a) reduction of drinking water treatment costs; (b) reduction of abstraction and pumping costs in further but better-quality water sources, and (c) potential sales of treated wastewater for reuse. The study area is the Jundiaí River, in Brazil, which receives the basin WWTPs discharges and provides public water supply, contributing to the water security of several municipalities.

The Jundiaí Basin is divided into 22 sub-basins. In this study, we focused on the water quality at the exutory of sub-basin 164 (Figure 1). The municipality of Indaiatuba is equipped with two water withdrawals that supply the DWTP – Intake 03. The primary supply is in the Piraí River (sub-basin 161), while a supplementary supply, employed during periods of water scarcity, withdraws on the Jundiaí River (sub-basin 164). Jundiaí River offers considerably poorer water quality which increases water treatment costs, however it is still preferred given the intake's proximity to the DWTP, which reduces pumping and energy costs.

As the water quality condition is consequence of lacking wastewater treatment measures in four upstream municipalities along the Jundiaí River, we investigate how sanitation strategies could be economically improved through coordinated investment on wastewater treatment-reuse and water supply at the watershed scale. High nitrogen levels have been reported at the intake at the Indaiatuba DWTP, which required breakpoint chlorination in the water pretreatment, reaching up to 10 mg/L Cl₂ for each 1 mg/L of Ammoniacal Nitrogen N-NH3, significantly increasing treatment costs and adverse effects on public health demonstrated by some halogenated harmful by-products (Muellner et al., 2007; Plewa et al., 2008; Stefán et al., 2019). Despite our focus on reuse to meet water demands, it should be highlighted that the potential uses of treated wastewater as a resource are diverse, including serving as a renewable energy source and nutrient-rich resource (Rodrigues et al., 2024) which can bring additional benefits beyond the ones considered here. The magnitude of these benefits depends on the local demands and context, and is beyond the scope of this paper.

The economic benefits from improvements in the WWTPs of the municipalities upstream of the Indaiatuba DWTP intake (Itupeva, Jundiaí, Campo Limpo Paulista, and Várzea Paulista) were evaluated by considering: (a) reduction of drinking water treatment costs at the Indaiatuba DWTP, (b) reduction of pumping costs by using the Jundiaí River as an alternative to the Piraí River, and (c) potential sales of treated wastewater for non-potable reuse.

We proposed five scenarios with different wastewater treatment options and efficiencies. All scenarios consider the same incremental population growth every five years (Supplementary material, Figure S1) to simulate sewage discharges and raw water withdrawals (2020, 2025, 2030, and 2035).

The scenarios emphasize the economic benefits resulting from the implementation of enhancements in sewage collection and treatment, considering the current situation to universalization as well as the gradual improvement in nitrogen effluent efficiency (Table 1).

For all scenarios, sewage originates from the population served by the WWTP in each municipality and it is discharged into the Jundiaí River. As nitrogen removal efficiency increases, it enhances the possibilities for selling reused water, which vary according to the industrial demand of each municipality in S2, S3, S4, and S5 (Table 1). Industrial reused water returns to WWTP through the sewerage systems. Water quality is modeled through the PCJ Basin Decision Support System (Lopes et al., 2021) described in Supplementary material, Figure S2, which is based on a priority-based optimization approach (Fulkerson, 1961).

The wastewater systems and treatment technologies used for the scenarios considered not only region-specific information but also different wastewater treatment models, as described in Oliveira & Von Sperling (2005), National Water and Sanitation Agency (Brazil) (2021) and Dantas et al. (2022).

S1 – Constant scenario (business-as-usual): Investments in sewage collection and treatment only cover population growth, maintaining current coverage and nitrogen removal efficiency (Table 1), with no additional investment to increase current coverage. Consequently, water quality standards defined by the watershed plan will not be met.

S2 – Biological treatment scenario: Investments in sewage collection and treatment expand to cover 98% of the population with 100% treatment, meeting 2035 water quality standards (the same for S3, S4 and S5 scenarios). Such targets are equally applied to each population growth step. The wastewater treatment technique is activated sludge with biological nitrogen removal (Von Sperling & Chernicharo 2005; Von Sperling 2007) with efficiencies for total nitrogen removal ranging from 70 to 80%. These efficiencies are the same ones proposed by the Water Resources Plan to meet the corresponding 2035 water quality standards. This scenario considers selling treated wastewater as reuse water, attending 20% of industrial demand.

S3 – Biological treatment plus partial membranes scenario: Treatment combines activated sludge with biological nitrogen removal and post-treatment involving membrane filtration in the designated reuse section. We considered a total nitrogen removal rate of 85% in all WWTPs through improvements in nitrogen removal (Von Sperling, 2007) and membrane filtration (95% efficiency in nitrogen removal) (Pagotto et al., 2014; Mao et al., 2020). The existing WWTPs capacity would undergo membrane post-treatment to meet 40% of the industrial demand for reused water.

S4 – Biological treatment plus total membranes scenario: Nitrogen removal is increased by combining biological treatment and post-treatment with membranes (efficiency of 95%). The capacity of the existing WWTP would undergo post-treatment with membranes to meet 100% of the industry demand (0.57 m³/s) with the treated wastewater as reuse water.

S5 – Super: The same sanitation and nitrogen efficiency inputs of S4. However, the full capacity of the existing WWTP (4.55 m³/s) would undergo post-treatment with membranes to meet 100% of the industry demand (0.57 m³/s) plus an additional 3.82 m³/s of other demands (ex: irrigation, urban non-potable uses, among others (Profill-Rhama, 2020)). While scenario S5 is not likely feasible in the medium term, it provides a theoretical upper bound on the reuse potential in the watershed.

Infrastructure investments to implement the planned improvements are separated into four categories, as follows: (a) investments in sewage collection and treatment to reach 98% collection and 100% treatment targets, (b) investments in nitrogen removal through the activated sludge process, (c) investments in nitrogen removal through membrane process, and (d) investments in infrastructure to implement reuse.

To reach the defined 2035 water quality standard, a given time trajectory of investments is needed for the 2016–2035 planning horizon. Major expansion investments are made in four stages: 2016–2020, 2021–2025, 2026–2030, and 2031–2035 to achieve the target coverage (98%) of sewage collected by 2035. Different investment time trajectories were considered for the financial analysis, detailed in section ‘Financial analysis of investment strategies and benefits along the planning horizon’.

While reaching the target coverage earlier requires more investments to be made sooner, it also means the population will start reaping the benefits from improved river water quality earlier. This includes reduced water supply treatment costs and utilities accessing nearer raw water withdrawal's locations, which had their water quality improved.

The investment cost varied to each WWTP according to the size of the population supported, current efficiency levels and capacity treatment of the WWTP. The cost per inhabitant related to the implementation of a treatment plant with activated sludge process with nitrogen removal superior to 75% is US$ 128.73/inhabitant (Von Sperling, 2014). This treatment is appropriate to promote a retrofit in the WWTP related to the scenario S2 (70 and 80% nitrogen removal efficiencies) and S3 (85%). The WWTPs of all municipalities already present processes with high BOD and nutrient removal, requiring additional improvements to increase efficiency. We estimated these upgrades constitute 30% of the total costs associated with a new plant from empirical data and feasibility studies within the field, which exhibit a wide range, spanning from 20 to 45%. The investments were calculated considering the Equations (5) and (6) and the information about existing WWTPs (Table 1).

The cost per inhabitant for membrane treatment was US$ 88.28 (Lo et al., 2015), achieving an overall efficiency to 95% when used as tertiary treatment in WWTPs with biological nitrogen removal.

For scenario S3, the total investment is scenario S2 added to the cost of post-treatment with membranes for the fraction intended for reuse 40% of industrial demand (Table 1) at each WWTP. In scenario S4, investments include those from scenario S2 plus cost for implementing membrane treatment for the fraction destined to reuse (100% of industrial demand). Finally, in S5, we considered S2 plus the remaining WWTP capacity, so that 100% of the WWTP capacity would be upgraded to 95% nitrogen removal efficiency.

The investments for the reuse distribution infrastructure were based on the CH2M (2018) study, which presents a technical-economic feasibility analysis at the conceptual level for implementing a non-potable water reuse project, including engineering projects, environmental licensing, disinfection, storage, pumping and conveyance infrastructure for a flow rate of 49 L/s and a total of US$ 4.28 million.

The economic benefits for improving the WWTPs in municipalities upstream of the Indaiatuba DWTP withdrawal (Itupeva, Jundiaí, Campo Limpo Paulista and Várzea Paulista) were calculated by comparing the costs of enhanced nitrogen removal at the WWTPs with the savings at the DWTP. These benefits include (a) reduction of drinking water treatment costs; (b) reduction of abstraction and pumping costs from a further water source with better quality, and (c) potential revenue from non-potable reuse of treated wastewater. While there are several other relevant benefits considering the improved water quality, we focused on the direct externality caused to downstream DWTP and the availability of reuse water.

Energy costs are calculated based on variable and fixed power consumption varying between peak and off-peak times according to Indaiatuba WSS. Power contracted consumed costs are US$ 0.13/kWh (peak price), and US$ 0.09/kWh (off-peak price). Peak consumption costs US$ 0.13/kWh, while off-peak costs US$ 0.09/kWh. The cost per kWh of demanded energy is US$ 5.89 during peak times and US$ 2.84 during off-peak times. Calculations assume 20 hours per day and 30 days per month, resulting in 66 peak hours and 534 off-peak hours monthly, with a 30% tax included.

Pumping data from the Piraí and Jundiaí rivers, provided by Indaiatuba WSS, shows a pumping rate of 300 L/s¹ (Supplementary material, Figure S3). Marginal pumping costs are estimated at US$ 0.021/m³ for Piraí and US$ 0.013/m³ for Jundiaí, reflecting a 37% energy savings when using the closer Jundiaí River. Energy savings benefits are calculated as the difference between these costs (Equation (9)), aggregated monthly and annually over the planning period.

indicates total revenue of sale of reused water.

To simulate different implementation strategies for each investment scenario, four investment timing strategies (A, B, C, D) were devised. The time horizon was divided in four 5-year intervals (2016–2020; 2021–2025; 2026–2030; 2031–2035) with each strategy dictating when investments and benefits (I&B) commence within these intervals. Supplementary material, Figure S4 illustrates investment time strategies along the planning horizon.

For simplification, wastewater collection and treatment investments across municipalities were concentrated in the second and third years of each time interval, preceded by a year for project contracting. Benefits begin one year after the conclusion of the sanitation investments.

• Strategy A (early investment): I&B begin in the first-time interval.

• Strategy B (Mid investment): I&B begin in the second time interval.

• Strategy C (Mid-late investment): I&B begin in the third time interval.

• Strategy D (late investment): I&B begin in the fourth time interval.

After investments, additional funding is needed to cover population growth. The scenarios explored hypothetical sanitation universalization within two years, which is short under Brazilian conditions, representing the upper bound for potential benefits.

This section presents the results of water quality, investments, and benefits across different scenarios, followed by the financial analysis of investment strategies and their benefits over the planning horizon.

In Figure 3(a) increasing nitrogen removal efficiency from scenario S1 to S5 leads to a significant reduction in the raw water nitrogen concentrations. Scenario S1, reflecting population growth impacts, starts with a maximum nitrogen concentration of 4.6 mg/L in the early years, rising to 8.4 mg/L by the 20th year in the absence of sanitation improvements. In contrast, scenarios S4 and S5 demonstrate a significant reduction in nitrogen ammoniacal, with the concentration starting at 0.66 mg/L in the early years and reaching to 1.04 mg/L in the 20th year (88% reduction compared to scenario S1). The average concentration differences over 20 years are 55% for S2, 69% for S3, and 85% for S4/S5 compared to S1. These scenarios also illustrate how ammoniacal concentrations vary with stream flow and dilution capacity.

Under the final investments and benefits for each scenario accumulated until the year 2035 (Figure 3(b)), US$ 123 million are needed to maintain the current situation (S1) and US$ 149 million (S2, S3, S4, and S5) to achieve 98% of sewage collected and treated in all municipalities by 2035, despite the high sewage collection rates. Approximately 20% of these investments aim to increase collection rates to 98%, while 80% are allocated to maintain the current levels considering the population growth. This is close to a recent estimation by the Brazilian National Water Agency (ANA, 2017) at US$ 120 million for collection and treatment until 2035 for these municipalities, further highlighting the need to address nitrogen impacts and promoting a collaborative approach among municipalities within the watershed.

Investments to enhance nitrogen removal from S2 to S5 are significant, given more complex and costly technologies for higher efficiency are required. Despite the high level of sewage collection and treatment coverage in Jundiai River watershed, the presence of densely populated areas and the lack of tertiary treatment still resulted in insufficient pollutant removal.

Figure 3(c) illustrates the simulated scenarios of water treatment and energy costs over the 20 years. The reduction in drinking water treatment costs is calculated by comparing S1 with other scenarios (S2–S5). Pumping cost savings arise from using the closer Jundiaí River instead of the Piraí River are constant across all scenarios.

The rise in population and nitrogen load directly affects water treatment costs. In S1, pretreatment cost reaches US$ 18.3 million over 20 years. Intensified nitrogen removal in S2, reduces costs to US$ 4.9 million, a 73% reduction and a US$ 13.4 million benefits. S3 enhances benefit to US$ 17.2 million (94% savings). Under S4 and S5, ammoniacal nitrogen levels fall below 1.5 mg/L, rendering chlorination unnecessary and resulting in a benefit similar to S1's US$ 18.2 million cost.

For energy costs, switching from pumping from the farther Piraí river to the closer Jundiaí River would bring US$1.03 million in energy savings.

Finally, the potential benefits of reused water revenue are the most representative, responding for over 90% of total benefits in S2, S3, S4, and S5. High industrial demand in municipalities can generate substantial revenue from selling reclaimed water (see Table 1).

In S2, supplying 20% of industrial demand with reused water yields US$ 210.5 million over 20 years. S3, covering 40%, this potential turnover could rise to US$ 420.9 million. Achieving full industry demand in S4 scenario results in US$ 1,052.3 million. However, in S5, utilizing 100% of the treatment capacity of the WWTPs, this benefit could soar to US$ 9.7 billion. These representative values show the potential benefit associated with the revenue from recycled water. Nevertheless, realizing these benefits depends on overcoming challenges related to the water reuse tariff and gaining acceptance.

Table 2 presents the financial analysis of I&B. In each scenario, the invested assets are the same and the difference in values is due to their timing. Later the investment, the less costly it becomes as we consider the value of money from strategy A to D. Given later investments also delay the benefits and shorten the period they will be available within the 20 years' time horizon, those become smaller from strategy A to D, except for S1, as there are no investments in technologies improvement (only in their maintenance), hence no differences in benefits.

The results indicate that investment strategies S1 and S2 do not yield a positive NPV, given the relatively limited benefits compared to the investments. This result does not discourage S2 investments since they provide several other benefits not considered here. According to Ex Ante Consultoria Econômica (2018), the indirect benefits of sanitation universalization in Brazil until 2036 show that for every US$ 1.00 invested, the benefits return is US$ 4, considering health, education, productivity, tourism, income generated by investments, operations, and taxes on consumption and production collected. Therefore, sanitation investments result in social, environmental, and economic improvements.

As the sanitation investments are increased in S3, positive NPV becomes possible, which also improves other benefits unaccounted. A positive NPV means more opportunities to finance water security improvements, a critical aspect as pointed out in World Water Council (2015). However, S3 only provides a positive NPV if investments are made earlier (time strategy A). At this point, each US$ 1 invested could yield US$ 1.06 in benefits from water supply treatment cost savings, reuse water sales, and energy savings.

While deferring investments into the future decreases their cost considering the time value of the money, it also postpones the benefits with water treatment costs, energy, and water reuse revenue, resulting in overall less benefits over the same time (they are produced in a shorter period if compared to other time strategy with earlier investment). Here we have an economic trade-off: is it advantageous reducing the investment cost by deferring them to the future? The benefits in Table 2 show that in each scenario it is preferable that investments occur earlier rather than later.

For the S3, any other time strategy besides A only brings increasingly smaller NPV, therefore less attractive, despite having their investments postponed and reduced. Negative NPVs means investment recovery is unlikely within the planning horizon. This result confirms the answer to the question about the trade-off: postponing investments in water and sanitation infrastructure is not a good deal. Supplementary material, Figure S6, illustrates the behavior of investments and benefits over time in S3 scenario. When the balance becomes positive (grey area in the graphs), the benefits begin to exceed the investments.

For S4, early investments (time strategy A) would bring US$ 1.37 in benefits for each US$ 1 invested, with a positive NPV of US$ 104.7 million over 20 years. Delaying investments to time strategy B still result in a positive NPV, albeit with a significant loss in benefits (NPV is down to US$ 9.2 million, which is about one-tenth that of time strategy A). The scenario S5 presents higher NPVs due to the potential benefits from reused water. In all S5 time strategies the NPV is positive, and the potential benefits are significantly higher, reaching up to US$ 3.2 billion in time strategy A over 20 years. This is the only long-term feasible scenario as an important strategy toward water security.

The comparison between scenarios revealed that while scenario S2 can meet river water quality goals, greater investments in higher-efficiency treatments (scenarios S3, S4, and S5) are more favorable for enhancing water quality and amplifying economic benefits. These advanced treatments offer significant potential for revenue generation through water reuse and enhanced water security, aligning with a circular economy approach. Also, the benefit/investment ratio decreases from financial scenarios A to D, showing that the sooner the investments are made, the more economic benefits can be obtained.

Water reuse integrates the urban water cycle and reduces pressure on limited resources, contributing to the circular economy in the water sector (Bellver-Domingo & Hernández-Sancho, 2022). Our findings indicate that improving wastewater treatment enhances water quality and creates economic opportunities through the reuse of treated effluents. Reclaimed water is a key solution for addressing global water resource demands, water quality problems and wastewater production, particularly in regions facing water scarcity, offering a cost-effective solution compared to other supply alternatives (Asano et al., 2007; Regulation (EU), 2020/741, 2020, Salgado & Marques, 2023). Despite its higher cost when compared to raw river water, reuse has higher reliability given withdrawals directly from the river could face a temporary shut off to either maintain required flow to nearby DWTP (since urban supply takes priority under Brazilian water law) or due to poor river water quality.

A study published in the UNESCO & UNESCO i-WSSM (2020) report, conducted on the Iguaçu River in the metropolitan region of Curitiba, Brazil, emphasized the importance of assessing water availability through an integrated analysis of quantity, quality, and purpose. These factors are critical for informed decision-making when introducing reuse systems within a circular economy framework. The study further demonstrated that in regions with degraded river water quality, reuse systems can offer economic advantages by reducing treatment costs compared to direct river water abstraction. Our findings support these conclusions by incorporating both water quality and quantity into the analysis. We show that improving the efficiency of ammoniacal nitrogen removal not only enhances the benefits of effluent reuse but also reduces the consumption of chemicals and energy required for water treatment. This underscores the need for a systemic approach to wastewater management aligned with circular economy principles, particularly in regions where degraded water resources create additional challenges. Nevertheless, despite these potential benefits, the high cost of reclaimed water continues to limit its broader adoption.

According to Salgado & Marques (2023), reuse water pricing should explore different tariff structures based on local socioeconomic factors and water authority objectives. Environmental conditions, institutional arrangements, technical considerations and economic specifics are influential factors when establishing recycled water charges, which may vary in different watersheds. In a discussion of reuse pricing policies, Fagundes & Marques (2023) highlight that the reuse rates should consider a connection with drinking water rates, cost of service, maintenance or expansion of the market for recycled water and the actual cost of production of potable and recycled water as one broad service. Environmentally, the reuse price should also consider the avoidable costs, which include deferring expansion and inclusion of new potable water sources. On the user's side, the decision to purchase reuse water depends on the capital and water prices, i.e. the more expensive, and scarce, the alternative supplies, the more firms would be willing to invest in water reuse (Feres et al., 2011).

As shown in Table 2, even under a reuse price of only one-tenth of the assumed price the cash-flows would still be positive from selling reclaimed treated wastewater, offering a higher benefit than S1. This highlights the significance of water reuse in water-scarce regions, as shown by Wang & Wu (2024), enhancing water security and emphasizing our findings.

In contrast, Brazil's current legal framework for water reuse remains insufficient, as federal guidelines are non-mandatory, and state-level regulations vary significantly (Handam et al., 2021). The Interaguas Program, a federal initiative, provides non-binding guidelines for water reuse (Santos & Lima (2021). In São Paulo state, where the Jundiaí River basin is located, regulatory progress has been made with the introduction of São Paulo (2020), which governs the direct non-potable reuse of water for urban purposes, sourced from WWTPs. São Paulo has become a favorable environment for advancing reuse projects due to its institutional preparedness, water scarcity, and high population and industrial demand. Among various reuse initiatives, the Aquapolo Project stands out as the largest water reuse initiative in Latin America, with a treatment capacity of 1 m³/s of reclaimed water to meet industrial demand (Aquapolo, 2023). Additional projects, such as the Optimization of WWTPs in the São Paulo Metropolitan Region, are being developed to improve wastewater treatment and expand water reuse initiatives (World Bank Group, 2021). As these efforts maximize the value of natural resources, according to circular economy principles, they also support SDG given the resulting reduction in waste and pollution (SDG 6.3) which contributes to cost reduction, affordable water services and thus increased access (SDG 6.2).

Despite São Paulo's progress, challenges to expanding water reuse across Brazil persist, notably low effluent treatment rates, which hinder the broader adoption of reuse practices. This underscores the need for stronger regulations, as well as improved public perception and acceptance of wastewater reuse (Rodrigues et al., 2023).

There is an important relationship between sanitation investments and the watersheds' economic benefits, particularly in achieving water quality objectives. Water management and sanitation decision-making should consider and discuss the trade-offs to improve overall gains and optimize investments at the watershed level. While the sanitation investments can improve water availability (by boosting water quality) and reduce water treatment costs to multiple users, it still needs water management to drive changes by imposing regulation on water quality targets. The sanitation sector can also help finance some important improvements with processes such as water reuse.

The downstream economic benefits of improving sewage treatment efficiency vary according to the level of efficiency attained, the time strategy of the investments and the water uses. There are, however, trade-offs which are often overlooked in decision-making processes related to water resource management, such as setting up water quality targets or developing watershed plans. Our analysis showed quantitatively how more efficient sewage treatment led to reduced water treatment costs, higher revenue from reused water, and decreased energy expenses. The different investment scenarios also indicate that there are varying trade-offs when investments are postponed.

Reuse is a key process to help finance future improvements on wastewater treatment, boosting water security and circular economy. Current water use, availability and effluent production in the watershed indicate that tertiary treatment is a reality that must be faced to mitigate economic (and environmental) externalities to users downstream. However, the higher costs of tertiary treatment also pose a challenge. The significant revenue generation from reuse strategies can contribute to overcoming it.

The trade-off analysis allows better integration between sanitation investment planning and water quality targets, which is useful to set up future investment strategies. The sooner the wastewater investments are made, the longer the period when benefits are reaped. In our particular case, the benefit/investment ratio decreased quickly with postponing investments, indicating that the sooner the investments are made, the better. However, this depends on making reuse a feasible and widespread process in the region.

The water quality targets set up by the watershed's water resources plan do not necessarily reflect the best compromise solution between costs of investments and benefits from improved water quality. In our specific case, improving water quality beyond the existing water quality targets can potentially bring higher economic benefits at the watershed scale, beyond a single municipality. This conclusion shows just how better integration between water planning and sanitation investment planning can uncover additional benefits to the watershed as a whole.

Overall, the results offer valuable insights for shaping public policies and guiding resource allocation to maximize societal well-being. This includes setting water quality targets and watershed plans, contributing to the achievement of SDGs 6.2 and 6.3, supporting transition to Circular Economy principles. Achieving these benefits requires cooperation among sanitation companies within watersheds. Agreements between upstream and downstream municipalities can help share the costs of improved sanitation infrastructure. However, the lack of integration between watershed scale water resource management and municipal water and sanitation decision-making must be addressed to optimize synergies, enhance water sector efficiency, and ensure equitable access to safe water.

Our study is strongly focused on reuse benefits to industrial demands, which is already using reuse water in the region and is considered very important economically. However, there are other potential benefits to use such as agriculture and non-potable urban demands that should be included in future developments to provide a broader picture of the reuse potential. Some of these demands are suggested in the S5 ‘super scenario’. Another limitation is that there are benefits to industrial uses (and others) related to improved supply reliability and reduced risk during drought spells, also not considered. With changes in climate and increased likelihood and severity of droughts, those benefits are expected to increase in the future and should be addressed in future work.

The authors thank the Agencia Nacional de Águas e Saneamento Basico (ANA) for funding provided to the Profágua graduate program and CNPq grant 311263/2023-2.

All relevant data are included in the paper or its Supplementary Information.

The authors declare there is no conflict.