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

Rossano Belladona (), Guilherme Fernandes Marques and Tiago Vargas
Additional contact information
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)

Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), 2025, vol. 39, issue 2, No 13, 795-808

Abstract: 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.

Keywords: Watershed conservation; Backstop technology; Water supply; Economic benefit (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11269-024-03991-w Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:waterr:v:39:y:2025:i:2:d:10.1007_s11269-024-03991-w

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/11269

DOI: 10.1007/s11269-024-03991-w

Access Statistics for this article

Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA) is currently edited by G. Tsakiris

More articles in Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA) from Springer, European Water Resources Association (EWRA)
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().