IDEAS home Printed from https://ideas.repec.org/a/spr/waterr/v39y2025i2d10.1007_s11269-024-03991-w.html
   My bibliography  Save this article

Determining the Economic Benefit of Watershed Conservation for Urban Water Supply Based on Scarcity rent for Water and Consumer Surplus

Author

Listed:
  • Rossano Belladona

    (Water and Wastewater Service of Caxias do Sul (SAMAE))

  • Guilherme Fernandes Marques

    (Federal University of Rio Grande do Sul (UFRGS))

  • Tiago Vargas

    (Federal University of Rio Grande do Sul (UFRGS))

Abstract

Watershed conservation aimed at urban water supply not only holds ecological significance but also offers substantial economic benefit. Unrestricted land use can affect raw water quality and undermine current water purification efficiency, leading to more costly treatment processes and higher water tariffs. This study adds to the water resources management literature by quantifying the economic benefit of watershed conservation, which ensures the supply of affordable, high-quality urban water. It bridges the economic connection between the two ends of the water supply system: the source and the user. The economic benefit of watershed conservation was measured by assessing the loss in consumer surplus, as any fluctuation in water tariff directly impacts consumer surplus. Using the point expansion approach, this study derived the demand function and incorporated the scarcity rent to estimate the economic value of the in-situ water. Including the marginal scarcity rent for water in tariffs serves an important purpose of safeguarding the interests of future consumers by signaling to present users the future value associated with the use of a scarce resource. The municipality of Caxias do Sul, in southern Brazil, served as a case study. The findings showed an annual reduction in consumer surplus of up to 4.66 million USD when watershed conservation is not enforced, thus confirming that investing in watershed conservation yields significant economic benefit.

Suggested Citation

  • Rossano Belladona & Guilherme Fernandes Marques & Tiago Vargas, 2025. "Determining the Economic Benefit of Watershed Conservation for Urban Water Supply Based on Scarcity rent for Water and Consumer Surplus," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 39(2), pages 795-808, January.
    • Handle: RePEc:spr:waterr:v:39:y:2025:i:2:d:10.1007_s11269-024-03991-w
    DOI: 10.1007/s11269-024-03991-w
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11269-024-03991-w
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11269-024-03991-w?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Javier Martínez-Dalmau & Carlos Gutiérrez-Martín & Alfonso Expósito & Julio Berbel, 2023. "Analysis of Water Pricing Policy Effects in a Mediterranean Basin Through a Hydroeconomic Model," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 37(4), pages 1599-1618, March.
    2. Ronald C. Griffin, 2006. "Water Resource Economics: The Analysis of Scarcity, Policies, and Projects," MIT Press Books, The MIT Press, edition 1, volume 1, number 026207267x, December.
    3. Cropper, Maureen, 2012. "How Should Benefits and Costs Be Discounted in an Intergenerational Context?," RFF Working Paper Series dp-12-42, Resources for the Future.
    4. James E. T. Moncur & Richard L. Pollock, 1988. "Scarcity Rents for Water: A Valuation and Pricing Model," Land Economics, University of Wisconsin Press, vol. 64(1), pages 62-72.
    5. Shuqin Li & Nannan Wang & Juqin Shen & Fuhua Sun, 2024. "Pricing of water rights transactions for major water transfer projects considering water quantity and quality," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(3), pages 7735-7756, March.
    6. Viju Ipe & Subhash Bhagwat, 2002. "Chicago's water market: dynamics of demand, prices and scarcity rents," Applied Economics, Taylor & Francis Journals, vol. 34(17), pages 2157-2163.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Athanasios Kampas & Stelios Rozakis, 2017. "On the Scarcity Value of Irrigation Water: Juxtaposing Two Market Estimating Approaches," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 31(4), pages 1257-1269, March.
    2. Kimberly Burnett & James Roumasset & Christopher Wada, 2014. "Cost Optimal Joint Management of Interdependent Resources: Groundwater vs. Kiawe (Prosopis pallida)," Working Papers 2014-6, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    3. Sheila M. Olmstead, 2010. "The Economics of Managing Scarce Water Resources," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(2), pages 179-198, Summer.
    4. Roseta-Palma, Catarina & Monteiro, Henrique, 2008. "Pricing for Scarcity," MPRA Paper 10384, University Library of Munich, Germany.
    5. Olmstead, Sheila M. & Michael Hanemann, W. & Stavins, Robert N., 2007. "Water demand under alternative price structures," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 181-198, September.
    6. David Aubin & Frédéric Varone, 2013. "Getting Access to Water: Property Rights or Public Policy Strategies?," Environment and Planning C, , vol. 31(1), pages 154-167, February.
    7. James Roumasset & Christopher Wada, 2012. "The Economics of Groundwater," Working Papers 201211, University of Hawaii at Manoa, Department of Economics.
    8. J. Doyne Farmer & John Geanakoplos & Matteo G. Richiardi & Miquel Montero & Josep Perelló & Jaume Masoliver, 2024. "Discounting the Distant Future: What Do Historical Bond Prices Imply about the Long-Term Discount Rate?," Mathematics, MDPI, vol. 12(5), pages 1-25, February.
    9. Bernard Lapeyre & Emile Quinet, 2017. "A Simple GDP-based Model for Public Investments at Risk," Post-Print hal-01666574, HAL.
    10. Glyn Wittwer, 2009. "The Economic Impacts of a New Dam in South‐East Queensland," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(1), pages 12-23, March.
    11. Freeman, Mark C. & Groom, Ben, 2016. "How certain are we about the certainty-equivalent long term social discount rate?," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 152-168.
    12. Mark Hoffmann & Andrew Worthington & Helen Higgs, 2006. "Urban water demand with fixed volumetric charging in a large municipality: the case of Brisbane, Australia ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(3), pages 347-359, September.
    13. Sarah Ann Wheeler, 2022. "Debunking Murray‐Darling Basin water trade myths," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(4), pages 797-821, October.
    14. Bennie Grové & Johannes Jacobus Bezuidenhout & Nicolette Matthews, 2023. "Farm-level Hydroeconomic Analysis of Alternative Water Tariff Charges Using a Hybrid Solution Method," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 37(12), pages 4679-4692, September.
    15. Mark C. Freeman & Ben Groom, 2015. "Positively Gamma Discounting: Combining the Opinions of Experts on the Social Discount Rate," Economic Journal, Royal Economic Society, vol. 125(585), pages 1015-1024, June.
    16. Moore, Mark A. & Boardman, Anthony E. & Vining, Aidan R., 2013. "More appropriate discounting: the rate of social time preference and the value of the social discount rate," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 4(1), pages 1-16, March.
    17. William Brock & Anastasios Xepapadeas, 2015. "Modeling Coupled Climate, Ecosystems, and Economic Systems," DEOS Working Papers 1508, Athens University of Economics and Business.
    18. Henrique Monteiro, 2005. "Water Pricing Models: a survey," Others 0510002, University Library of Munich, Germany.
    19. W. Pfaffenberger & U. Scheele, 1992. "Environmental aspects of water price formation. An empirical investigation of the cost of ground water protection," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 2(3), pages 323-339, May.
    20. Knoke, Thomas & Paul, Carola & Härtl, Fabian, 2017. "A critical view on benefit-cost analyses of silvicultural management options with declining discount rates," Forest Policy and Economics, Elsevier, vol. 83(C), pages 58-69.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:waterr:v:39:y:2025:i:2:d:10.1007_s11269-024-03991-w. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.