Water supply and reuse through non-conventional water resources can significantly decrease the stress on natural water resources. Decentralized systems can help not only to alleviate issues of water security in arid areas, but also to create a sustainable framework within a circular economy. Although these small-scale innovative technologies are able to achieve ready-to-use, high quality of recovered/treated water on-site, the loop cannot be closed in most cases due to legislative barriers. Similarly, the end-use of sewage sludge after treatment in decentralized systems still lacks specific regulations that limit its valorization. This work analyzes the current policy and legislation related to water supply, wastewater treatment, water reuse, and resource valorization within the context of decentralized state-of-the-art technologies applied in rural areas. The drawbacks in the current EU legislation that set barriers to close water-related loops in European countries are highlighted. A regulatory fitness check is applied to each type of loop to identify the key factors to accomplish the legislative compliance, and financing pathways are further evaluated at the EU level. As a possible solution, further development of an innovation deal approach is recommended to address the environmental, regulatory, and financial gaps in water management through an integrated framework, providing ad-hoc policies and prescriptions for the sustainable reuse of all water resources.

This work was supported by the Innovation Action project "Demonstration of water loops with innovative regenerative business models for the Mediterranean region - HYDROUSA" which has received funding from the European Union's Horizon 2020 research and innovation program under grant agreement No. 776643.