The value of water

• The time has come to acknowledge the “true” value of water so as to reach better decisions as to how to protect, share and use it.

What is water worth?

There is no easy answer to this apparently straightforward question. On the one hand, water is infinitely valuable – without it, life would not exist. On the other, we take water for granted, and waste it every day.

There is enough water in the world for everyone, provided that we use and manage it efficiently. But we don’t. Our investments are insufficient and ineffective, while we also use too much water, leading to scarcity. This has a negative impact on quality and on the environment as well.

According to economic theory, the value of a good is determined by its scarcity, in other words the difference between limited resources and unlimited needs. Human beings use water as if it were unlimited. For example, it is estimated that 80% of industrial and municipal wastewater is discharged into the environment with no prior treatment.

Fresh water is scarce, and increasingly so. More than 2 billion people already live in regions subject to water resource stress. Some 3.4 billion people, 45% of the world’s population, lack access to safely managed sanitation facilities. According to independent reports, the world will face a global water deficit of 40% by 2030. A situation that will be worsened by global challenges such as Covid-19 and climate change.

But economic theory is not the only way to determine the value of water. Social and cultural values are equally important, if not more so. Many indigenous peoples, for example, afford special status to water and rivers. In India, for instance, the Rivers Ganges and Yamuna are considered living beings, with the same rights as a person. For this and other cultures, bodies of water are beloved beings, and so have no price.

Some values can be quantified and even monetized, such as the water used for industrial processes or for agriculture, and expressed as a unit of production (or profit) according to the volume used. However, even between and within economic sectors, these parameters may prove inadequate in assigning an overall value to water. For example, while food security is of vital importance to any home, people or nation, the value of water for food security is rarely (or never) taken into account when evaluated in terms of agriculture.

The values of water for human well-being go far beyond its role for direct physical functions or the economy. The often intangible nature of the sociocultural values attributed to water frequently challenges any attempt at quantification.

This leads us on to the concept of “perception”. Even when water from the same source is used for the same purpose and under the same circumstances, its value may be perceived differently by one user and another. Personal and sociocultural differences, with variables such as gender, age, race, social class, status or even beliefs, play a decisive part.

How, then, should we value water? The truth is that there are few standardized focuses these days in order to value water. Meanwhile, these focuses do not always recognize the perspectives of different belief systems, cultures, genders and scientific disciplines. Only if we take these perspectives on board will we be able to reach the best decisions as to how to protect, share and use water, and take a step towards achieving Sustainable Development Goal 6: Ensure access to water and sanitation for all.

Value vs. Price

In the case of water, there is no clear relationship between its price and its value. In those cases where water has a price, i.e., where consumers are charged for using it, the price typically reflects attempts to recover costs, rather than the value delivered. In most countries, then, water has an infinite value, but people do not pay what they should to use it. Only countries that do not have access to this resource are willing to pay what it is worth.

Despite the huge amounts of money invested in water infrastructure, the valuation of costs and benefits is not well developed or standardized, and is not applied. The social benefits obtained are often not quantified, the costs (above all external) are not adequately accounted for, options are often not evaluated or compared properly, and hydrological data are typically deficient and are not kept updated.

Most methods for the valuation of water infrastructure adopt a cost-benefit focus, but tend to overestimate the benefits and underestimate the costs, by failing to include all of them. One of the main deficiencies is that they address only the financial costs (cash flows, capital and operational expenditure) and the financial returns. They typically overlook indirect costs, and in particular social and environmental costs, which are treated as external elements.

Although the setting of tariffs for domestic and industrial water sectors has achieved differing degrees of success, in the case of agriculture, water prices are non-existent or very low. The price of water must reflect the cost of construction and operation of the infrastructure, the cost of providing the service, the cost of guaranteed access, and the social and environmental costs derived from water use.

It may be difficult to place a value on these costs/benefits, since not all of them can be quantified. In such cases, other valuation tools may be used, such as cost-effectiveness analyses, which compare the costs against such non-economic results as lives saved, people served, or environmental metrics achieved. Another critical factor to determine the benefits of a project is to compare it against what would happen if the project were not undertaken.

The project finance method is therefore another critical component in analyzing the valuation, since if a project does not have access to finance, the service will ultimately be suspended.

The design of an appropriate tariff structure is a challenge, given the numerous political goals which are often contradictory. In providing these services, we must also take care to guarantee affordability for poorer citizens, extended coverage for the greatest possible number of people, and the availability of finance to guarantee network reliability and upgrades. The water tariff (i.e., the price) must be carefully designed to achieve as many of these goals as possible. The price of water, its cost of supply and its value are not synonymous, and price is simply one of the tools available to align water use and values.

Conclusions

The conclusion is that there is no “true” value of water. Instead, water has an infinite number of values which may differ hugely depending on its location, the level of abundance or scarcity, quality or availability. The values also depend on the purposes for which it is used, and the benefits generated by these uses.

What is clear is that the global importance of this vital resource is not appropriately reflected in terms of political attention and financial investment in many parts of the world. This not only leads to inequalities in access to water resources and water-related services, but also unsustainable use and the degradation of water supplies themselves, affecting the fulfilment of almost all the SDGs, as well as basic human rights.

Here at Almar Water Solutions we work every day to see that water is given the value it deserves in society. The fact is that without water, nothing could exist, and without applying a quantity to it, at our company we strive to spread the word that water is the most valuable resource in existence. And so we call on citizens, politicians and world leaders properly to value water and to invest in infrastructure and services to ensure that it reaches every corner of the planet, in sufficient quantity and quality.

* Source: World Water Development Report 2021