Valuing water quality in the United States using a national dataset on property values

High-quality water resources provide a wide range of benefits, but the value of water quality is often not fully represented in environmental policy decisions, due in large part to an absence of water quality valuation estimates at large, policy relevant scales. Using data on property values with nationwide coverage across the contiguous United States, we estimate the benefits of lake water quality as measured through capitalization in housing markets. We find compelling evidence that homeowners place a premium on improved water quality. This premium is largest for lakefront property and decays with distance from the waterbody. In aggregate, we estimate that 10% improvement of water quality for the contiguous United States has a value of $6 to 9 billion to property owners. This study provides credible evidence for policymakers to incorporate lake water quality value estimates in environmental decision-making.

SDG indicator 6.4.1 "change in water use efficiency over time": Methodological flaws and suggestions for improvement

Sustainable Development Goal indicator 6.4.1 is defined as the change in water use efficiency over time and measured as the change in the ratio of gross economic value added by irrigated agriculture, industry and the services sector to the volume of water withdrawn over time. The rationale behind this indicator is to decouple a country's economic growth from its water use. Yet, this unwittingly results in an economic distortion of the water balance, favouring increased water withdrawal in service of higher water-use efficiency, at the expense of environmental sustainability. This paper discusses three methodological flaws. First, aggregation of only economic values across all sectors ignores social and environmental values and is very sensitive to changes in the relative water use by agriculture versus industry and services. Second, the economic value derived from agriculture and from imports cannot in fact be decoupled from agricultural water use. Third, the indicator completely ignores the effects of diminished return flows to the environment due to increased re-use of water. A novel alternative, disaggregated WUE approach is therefore proposed, which links water consumption to the water balance. It is defined as the economic value of irrigated and rainfed agriculture combined with water consumption (ET_a) by rainfed and irrigated agriculture per area based on earth observation data. It is measured as the change in the ratio of gross economic value added by irrigated and rainfed agriculture to the volume of water consumed by rainfed and irrigated agriculture over time. This approach is more consistent and objective, while being methodologically, hydrologically and environmentally sound. It acknowledges the coupling of economic growth and water depletion, and the need to strike a balance between opportunities for economic growth and environmental sustainability. This better serves the full breadth of the water and sanitation goal as defined in SDG 6.

Shifting from volume to economic value in virtual water allocation problems: A proposed new framework and methodology

PURPOSE

The water footprint provided a full methodology to operationalise the virtual water concept (the volume of water used along a supply chain to produce products and services). A key theme in the water footprint literature is the efficient allocation of water resources at the global scale given the feasibility of trading water intensive commodities from water rich to water poor areas: this is an economic problem of resource allocation between alternative and competing demands, albeit with a novel international component. Moreover, given that price signals indicating relative scarcity are usually either absent or distorted for water, it is also a problem that can be seen through the lens of environmental (or non-market) valuation. However, to date environmental valuation has not been used to inform the efficient use and allocation of water within and between the different locations encompassed by international supply chains.

METHODS

Drawing on an agri-food supply chain framework that we propose in this paper, we begin by conceptualising the economic values that accrue to water consumption (blue and green water) and degradation (grey water) at different points along a supply chain. Based on this conceptualisation, we assess the extent to which it is possible to approximate these economic values by relying on existing secondary data on the shadow value of water in different contexts. The use of secondary data in this way is known as benefit (or value) transfer. To achieve this, 706 unit estimates of the economic value of water are collected, standardised and reviewed encompassing off-stream water applications (agriculture, industry and municipal) and in-stream ecosystem services (waste assimilation, wildlife habitat, recreation, hydrological functions and passive uses). From this, a proposed methodology for valuing virtual water is presented and illustrated using the case study of global durum wheat pasta production.

RESULTS

The case study shows the total value of the virtual water used to produce one tonne of durum wheat pasta ($212). More importantly, the case study also highlights how variations in economic value between multiple locations where durum wheat is cultivated (Saskatchewan $0.10 m³, Arizona $0.08 m³ and Baja California $0.24 m³) indicate relative water scarcity and thus impact, as well as the potential for a more efficient allocation of virtual water.

CONCLUSIONS

The main conclusion from this research is that when geographical disparities in the economic value of water use within a supply chain are accounted for, what was perhaps considered sustainable in volume terms, might not, in fact, represent the optimal allocation. However, future research opportunities highlight the need for additional data collection on the economic value of water in several contexts. This additional data would help the environmental valuation community to undertake a more comprehensive and robust approach to virtual water valuation. This paper is accompanied by the Data in Brief article entitled "Dataset on the in-stream and off-stream economic value of water."