Valuing Water

© Geoff Pugh
Water meter by Geoff Pugh

The subject of valuing water is highly controversial, thus its discussion must account for people’s cultural traditions and world perception as well as economic considerations of full-cost recovery.

The most important role of water valuation is in demand management and better allocation among its various uses. Improved water resource management requires decisions based on economic efficiency, social equity, and ecological sustainability. Ultimately the value of water does not depend solely on its quantity but on at least four other factors – quality, location, reliability of access, and time of availability.

Because of water’s unique characteristics and socio-cultural importance, attempts to monetarily value water services is both difficult and, according to some, altogether inappropriate. Nevertheless, economic valuation – the process of attaching a monetary metric to water services – is an increasingly important tool for policy-makers and planners faced with difficult decisions regarding the allocation and development of freshwater resources. With market prices unable to capture the full spectrum of their costs and benefits, economists have developed special techniques to estimate water’s non-market values. Two important occasions when these tools are employed are during tariff-setting and assessments of alternative government strategies. 

Understanding the value of water is essential if this ever more scarce resource is to be more effectively and efficiently utilized to meet societal needs. 

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Facts and figures extracted from WWDR3, Water in a Changing World (2009). Click on the links to know more!

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