Association of State Wetland Managers - Protecting the Nation's Wetlands.

The Compleat Wetlander: Don’t Miss Out on the Importance of Water to the U.S. Economy

“Because water is an essential input into the economic system, major water shortages have the potential to affect not only the balance of trade, but also the structure and composition of different nations’ economies, including the U.S. economy.”
—The Importance of Water to the U.S. Economy, Part 1:                                        Background Report

On December 4th I was sitting at my computer eagerly awaiting the live broadcast of a public symposium on “The Importance of Water.”  Sadly there were technical difficulties and after trying to access the broadcast for an hour, I gave up.

The good news is that the symposium was video-taped and is now available along with a series of background reports and analysis about the importance of water to the U.S. Economy.  The U.S. Environmental Protection Agency’s project includes information on how much water is used for what, water’s value to various sectors of the economy and projected current and future scarcity.

Anyone who is trying to understand competition for water or conduct cost-benefit analyses on water ecosystem services should spend some time reviewing the materials that have been developed to carry out this project.

I have spent some time reviewing the background report developed for the project:

It examines in considerable detail off-stream water (withdrawal) uses including public waters supply, domestic self-supply, irrigation, livestock, agriculture, industrial use, mining, and thermo-electric power use.  It provides similar analyses for in-stream uses including commercial fishing, commercial navigation and recreation and tourism.

Reviewing the report, I learned many things I did not know.  For example:

  • The economic value that can be attributed to water approaches the size of the national debt (page 2-15).
  • 49% of the water withdrawals in the U.S. are for thermoelectric energy (page 3-3).
  • Water withdrawals for industrial and irrigation uses have decreased since the late 1970s (page 3-15).
  • Aquifer depletion is occurring in California’s central valley, the lower Mississippi and the Atlantic coast (page 3-23).

This is an extremely valuable report, but it also highlights some of the challenges associated with assigning value to water, particularly in-stream flow.  It is much easier to assign value to a specific amount of water that has been withdrawn than water that is in-stream.  For example, over 50% of the market value of all crops is generated on farms where at least some irrigation is used. (See pages 5-10).  However, in the discussion of commercial navigation one of the findings is the “marginal value of water in commercial navigation depends on the physical characteristics of the vessels and body of water in question, as well as the costs of shipping via alternative modes of transportation.  Estimates of average values for major U.S. rivers are highly variable.” (See pages 10-11).   The current historic low flows on the Mississippi River are providing an opportunity for economists to improve their understanding of some of the complex factors involved and their economic consequences.  A traffic stoppage this winter could cost $2.8 billion.

In addition, there are additional challenges to quantifying value for in-stream water use for recreation and tourism.   For example, neither the U.S. Economic Census nor the Bureau of Labor Statistics (BLS) provides data exclusively for the tourism industry. Also it was difficult for the report authors to determine how much wildlife and nature viewing was water-dependent.

There are other important economic values associated with in-stream use that are not addressed in the report.  For example, properties located along lakes and ocean front property have much higher property values.  Individuals who purchase or pay taxes for these lands are well aware of the value added for waterfront property.  Communities are as well. This is why there is a great deal of pressure to rebuild coastal, riverine or lakefront communities after a natural disaster.  The private homes as well as the businesses located there are often the most valuable properties in a community.  Natural disaster or degraded water quality through algal blooms, beach closures and low water levels have the potential to affect property home values as well as businesses dependent on commercial fishing, navigation, recreation and tourism activities.

The underlying challenge, which is articulated early in the report, is that water  possesses features that differentiate it from other more typical “goods and services” in an economic context.  In particular, the location, timing, quality, and supply uncertainty make water difficult to value in a conventional framework.

However, we all know if we cease to have reliable supplies of reasonably clean water: much of the U.S. economy will cease to work.

For more information visit:

Main EPA page
Five Study Components (Background Report, Expert Papers, Synthesis Report Public Symposium Technical Workshop,
Videos of December 4 symposium
Draft Report
Science Advisory Board Meetings and Reports

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