New assessment points to strong financial capacity for future Dutch water safety measures

A new analysis published on H2O/Waternetwerk assesses whether the current financing system for water safety in the Netherlands can meet the demands of substantial future investments required by climate change. The authors explain that discussions about the affordability of water safety investments have been largely absent, but that a review of the financing system and historical financial data suggests that multiple times the current investment volume could, in principle, be financed.

Water safety measures in the Netherlands are implemented by Rijkswaterstaat and the 21 regional water authorities, with both levels responsible for significant investment costs and dependent on funding from citizens through levies. The framework for water safety includes the first layer of flood protection investments in river widening and structural water defences, with primary water defences traditionally managed by the national government and regional defences by the water authorities.

Funding for the primary water defences is organised through the Hoogwaterbeschermingsprogramma (HWBP), financed from the Delta Fund. The national government and water authorities each contribute roughly half of the programme’s costs, with water authorities receiving 90 percent of project costs when they execute work. Contributions to the Delta Fund come from general government revenue and government bond issuance, and the fund provides flexibility for long-term planning but is expected to face a cumulative shortfall of about €13 billion to 2050 unless addressed.

Water authorities fund their share primarily through self-imposed taxes, including the water system charge, and by borrowing via the Dutch Water Authorities Bank (NWB Bank), which benefits from high credit ratings and low interest costs. Historical data show that investments by water authorities have increased substantially in recent decades following changes like the 2011 Water Administrative Agreement.

The article notes that while the current system has proven flexible, robust, and scalable, potential bottlenecks could affect future financing. These include possible constraints from fiscal rules on borrowing capacity, limits to public acceptance of higher levies, regional disparities in the urgency and cost of adaptation measures, and the limits of interregional solidarity mechanisms.