The importance of water to the U.S. economy

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Courtesy of IWA Publishing

Introdcution

EPA is releasing a Synthesis Report on the Importance of Water to the U.S. Economy. This report is intended to help raise the awareness of water’s importance to our national economic welfare, and to summarize information that public and private decision-makers can use to better manage the nation’s water resources. It highlights EPA’s review of the literature and practice on the importance of water to the U.S. economy, identifies key data gaps, and describes the implication of the study’s findings for future research. EPA hopes this report will be a catalyst for a broader discussion about water’s critical role in the U.S. economy.

Water is essential to life, making its total economic value immeasurable . At the same time water is a finite resource, and one for which competition is likely to increase as the U.S. economy grows. Driven by this heightened competition, the economic value of water will rise, and decision - makers in both the private and the public sectors will need information that can help them maximize the benefits derived from its use.

This report is an initial step toward (1) raising awareness of water’s importance to our national economic welfare, and (2) assembling information that is critical to sustainably managing the nation’s water resources. It highlights the U.S. Environmental Protection Agency’s ( EPA ) review of the literature and practice on the importance of water to the U.S. economy, identifies key data gaps, and describes the implications of the study’s findings for future research.

As the report’s principal findings indicate, reliable information on the economic importance of water is , in many ways , elusive. This is partly because many major users in the U.S. supply their own water, with no explicit price paid which could be used as an indicator of marginal value to the user . Even when price data are available – as is the case for those who purchase water from an external supplier – the prices often do not reflect the full cost of supply, externalities such as those caused by pollution, or opportunity costs associated with other uses. As a result, available price data fail to indicate water’s true worth , and may encourage inefficient and potentially unsustainable use of the resource.

It is also difficult to generalize about water’s economic value because water is a complex commodity . Determining this value requires analysts to control for a number of factors where data is often limited. For example, the value of water in a particular application is likely to depend on the amount of water supplied, where the water is supplied and used, when it is supplied, whether the supply is reliable , and whether the quality of the water meet s the requirements of the intended use. Empirical estimates of the value of water, where available, are therefore highly variable and depend on the context from which they were derived . Applying these estimates to support decision - making in other setting s can be problematic.

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