Water Resources - Economic Considerations

Economic Considerations

Water supply and sanitation require a huge amount of capital investment in infrastructure such as pipe networks, pumping stations and water treatment works. It is estimated that Organisation for Economic Co-operation and Development (OECD) nations need to invest at least USD 200 billion per year to replace aging water infrastructure to guarantee supply, reduce leakage rates and protect water quality.

International attention has focused upon the needs of the developing countries. To meet the Millennium Development Goals targets of halving the proportion of the population lacking access to safe drinking water and basic sanitation by 2015, current annual investment on the order of USD 10 to USD 15 billion would need to be roughly doubled. This does not include investments required for the maintenance of existing infrastructure.

Once infrastructure is in place, operating water supply and sanitation systems entails significant ongoing costs to cover personnel, energy, chemicals, maintenance and other expenses. The sources of money to meet these capital and operational costs are essentially either user fees, public funds or some combination of the two.

But this is where the economics of water management start to become extremely complex as they intersect with social and broader economic policy. Such policy questions are beyond the scope of this article, which has concentrated on basic information about water availability and water use. They are, nevertheless, highly relevant to understanding how critical water issues will affect business and industry in terms of both risks and opportunities.