Water In a Sustainable Economy: State of the World 2008

State of the World 2008 Page 112
Valuing Water for Sustainability

“The Value of water as a resource that underpins economic activities is evident in all economies, but it is much less evident in economic statistics… Prices virtually never reflect water’s full value or the need for conservation.”

This quote is from the 25th anniversary publication of State of the World (2008)printed by The Worldwatch Institute. It's an invigorating and eye-opening read for anyone concerned about sustainability issues. This book was assigned to us in our Exploring Sustainability class by Professor Ralph Meima, who is also our ES professor.

I had thought that this book was going to be a dry read, but after picking it up I’m having a tough time putting it down. Most intriguing to me are the statements about the economic value of water. “Unlike other inputs that are sold in competitive markets, this price is generally far less than water’s real economic value, and often even less than the cost of supplying it.” The book goes on to say that the producers and policymakers have an unrealistic view of the value of water, and are therefore not knowledgeable about whether current practices are wasting or overvaluing water. In addition, “investment in manufacturing capital, such as a water treatment plant or a dam, is reflected as an increase in a country’s wealth, investments in “natural assets” such as wetlands, watersheds, or groundwater aquifers are not included at all, even if they serve equivalent functions, as produced capital”.

It's encouraging to know that people are aware of this (other than our cohort!), and that they working to create change. Serious problems are developing upriver from Arizona and Nevada, with farmers having to let fields lie fallow so that Las Vegas Casinos can bathe tourists and water landscapes. This in a time when reliable clean water sources are declining all over the world, in both developing countries (Africa) and world powers (our own United States).

Total Economic Value (TEV) is the “recognized means of capturing both the market values (those that can be observed through market trades) and the nonmarket values of natural resources”. This is a concept being used to bring attention to the value of water and other natural capital. The TEVs include Use Values and Non-Use Values.

There are three kinds of Use Values: Direct Use Value, Indirect Use Value, and Option Value. Direct Use Values are “goods that can be extracted, consumed or enjoyed directly, such as hydropower and drinking water. Indirect Use Values include current ecosystem services, such as flood control and water purification. Option Values are the values provided by using the ecosystem services at a later date, including “services that appear to have a low value now but could have a much higher value in the future because of innovations in management or new information”.

Non-Use Values are those that “derive from the benefits that ecosystems may provide that do not involve using them in any way” and include Bequest Value and Existence Value. The acceptance of these values will be the key to a resonant appreciation of the value of water. Bequest Values are the value that comes from “the desire to pass on ecosystems to future generations". Existence Value is the value of natural capital that comes from knowing that resource will be there even if we never experience it, such as blue whales in the oceans, or the Amazon River.

Understanding the TEV of water and implementing integrated water management into daily living is the key to maintaining water supplies that can continue to be used as natural capital. I still have to finish The State of the World 2008. There is a whole section on water resource management innovations I'm looking forward to reading soon, and discussing with you at a later date. Until then, save your rainwater, and please fix that leaky faucet!