ENVIRONMENTAL ECONOMICS

D.   Water Resources

• Water availability not a problem for most of U.S. history

• No policy to deal with scarcity => problems at end of 20th century

1.  Problems

a.  Use of water exceeds rate of replenishment in many areas

b.  Water used as an input => quality diminished when returned to surface or groundwater

c.  Surface or groundwater used to dispose waste => water pollution

d.  Degradation of ecosystems => less ability to store water and moderate drought/flood cycle

2. Characteristics of water resources

a.  Hydrological cycle

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• Most of precipitation evaporates (66%)

• Surface water - fresh water in rivers, lakes, reservoirs (31%)

• Groundwater - accumulations in porous underground rock (aquifers) (3%)

• Forest allows more water to become groundwater

b.  Nutrient cycling

• Problems when organic wastes from human activity introduced into aquatic ecosystems

- Dissolved oxygen removed when wastes broken down

- Nutrients in wastes increase algae growth

- More dissolved oxygen removed when algae die and decay

• Significant sources - agricultural runoff, urban runoff, food processing, stockyards, discharge from sewage treatment plants

3.  Water consumption

a.  Taxonomy

• Water in general is a renewable resource

• Water in riverine systems is a resource flow

• Some water viewed as exhaustible if growth is small relative to use

Ex. - "Fossil water" - water accumulated in underground aquifers over millions of years

b.  Water market

(1) Water as a resource flow

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• Price determined solely by the opportunity cost of water

• Property rights must be well defined for market to exist

• Price also reflects marginal cost of producing water - purification, transportation, etc.

• If price too low, shortage will develop

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• Price too low due to:

- Political or regulatory forces

- Scarcity value not incorporated into price

- Average instead of marginal cost pricing

- Ecological opportunity cost of water not considered

(2)  Water as an exhaustible resource

• Contemporaneous opportunity cost - cost of not having water for another current use

• Intertemporal opportunity cost - opportunity cost of not having water for future use

• Price should reflect both contemporaneous and intertemporal opportunity cost

4.  Water and property rights

• Riparian rights - right to use water allocated to owners of land adjacent to water

• Usufruct right - claimants have right to use but not ownership

• Appropriation-based water rights - water available for use by anyone who can apply it to a beneficial purpose

- Priority goes to whoever establishes rights first

- Initially nontransferable, now tranferable

5.  Water pollution

a.  Anthropogenic impacts

(1)  Ecological damage when water removed

(2)  Consumption of water and then return with wastes and contaminants

(3)  Wastes deposited directly into water

b.  U.S. water pollution policy

• Clean Water Act of 1948, Water Pollution Control Act of 1972, the Clean Water Act of 1977, and amendments to the Clean Water Act (CWA)

(1)  Background

• Point sources of pollution - pollution enters water at a specific point => the end of a effluent discharge pipe

• Nonpoint pollution - no one source of pollution =>  agricultural, urban and suburban runoff

• Focus historically on large point polluters

(2) Focus on municipal sewage

• Small cities didn't have water treatment plants - raw sewage dumped directly into rivers

• Inadequate treatment in larger cities

• Amendments to Clean Water Act required all municipalities to develop and upgrade sewage treatment facilities

  - Primary treatment - removal of suspended particles

  - Secondary treatment - breakdown of organic wastes

• Federal government paid 75% of construction costs, local government responsible for the rest + operating costs

  - Social benefits to nation > social benefits to community

  - Local governments favored capital intensive design

• Completed in 1970s, had big impact

(3) Point pollution

• Paper plants, food processing facilities, other industries

• Used command and control techniques

• National Pollution Discharge Elimination System (NPDES) - all discharges illegal unless authorized by NPDES

• Required to use best practicable technology (BPT) for conventional pollutants

• Required to use best available technology (BAT) for toxic pollutants

• BPT allows consideration of cost, BAT doesn't

• Interstate cooperation needed for marketable pollution permits

(4)  Nonpoint pollution

• EPA Website

• Agriculture one of the largest polluters

• Farmers required to institute "best farming practices" to control nutrient runoff and soil erosion

(5)  Evaluation

• Not completely successful

• Some success with organic wastes from point sources

• Toxic pollutants not similarly reduced

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6.  International water issues

• Water problems more severe in developing countries than in the U.S.

• Main problem is contamination of water by untreated human waste

• Occurring in small villages, big cities, developing and developed countries

a.  Transfrontier externalities - water consumption and waste disposal by one country affects water quality and availability in neighboring countries

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• International agreements needed to deal with transfrontier externalities

b.  Other problems

• Deforestation, over-tillage, tillage of hillsides, heavy use of dangerous pesticides, and run-off of fertilizer

• Irrigation

(1)  Rapid depletion of groundwater, reduced flows in rivers

(2)  Salts from lower levels drawn into top layers

(3)  Large withdrawals from a river can result in destruction of aquatic systems