Water Value Highest In The U.S. West, RFF Report Finds

December 10, 1996

WASHINGTON, DC -- Researchers at Resources for the Future (RFF) today release one of the largest and most comprehensive compilations of estimates of the value of water for its various uses in the United States. They find water's value to be highest in the West for its withdrawal uses. The report, titled "Economic Values of Freshwater in the United States," includes nearly 500 water value estimates in the continental U.S. from 41 published and unpublished studies performed under a wide range of economic conditions over the last several decades.

RFF's Kenneth Frederick, Tim VandenBerg & Jean Hanson examine water's value for four instream uses -- hydroelectric power generation, recreation and fish & wildife habitat, navigation, and waste disposal -- and four withdrawal uses -- irrigation, industrial processing, thermoelectric power generation, and domestic uses. Converting all estimates to 1994 dollars per acre-foot, researchers find the value of water nationally to be highest in the drier, more water-scarce Rio Grande ($191) and lower Colorado ($122) regions; and lowest in the the Great Lakes ($7) and New England ($4) regions. By use, water's value is highest for industrial processing ($282) and domestic uses ($194); and lowest for recreation and fish & wildlife habitat ($5) and waste disposal ($3).

"As water becomes increasingly scarce and conflict among users grows, it becomes increasingly important for policymakers to recognize the key role water plays in the U.S. economy, identify disparities, and encourage more efficient use of this vital resource," says Frederick, who heads RFF's Water Resources Program.

Water is the most widely used resource by industry, a key element in energy production and agriculture, and an important part of the nation's transportation network. It serves as a vehicle for waste disposal as well as a valued resource for many recreational and economic activities. The United States is fortunate to be able to call itself a water-rich nation, yet conflicts over water are growing. Often taken for granted when supplies are plentiful, water has become the focus of increasing controversy as supplies are not keeping pace with growing demands in many areas of the country. But actual physical scarcity of water is not the key issue in most regions. Rather, there is enough water to meet society's needs, but there are few market incentives for conserving water or for encouraging efficient allocation among competing users.

Water has traditionally been provided to meet demand. In the East, local reservoirs were generally sufficient to moderate seasonal variations in supplies and satisfy community needs. In the West, the supply-side solutions included the construction of large dams and canals for transporting water to irrigated lands and towns some distances away. But as the demands for water have changed and expanded, so have the costs of developing additional water sources. Large-scale structural solutions for meeting still-increasing demands have become prohibitively expensive.

The institutional structure of the U.S., which evolved when water supplies were vast in relation to the country's needs, thwarts flexibility in allocating supplies. The result -- inefficiency, which arises when water is locked into relatively low-value uses, and conflict among users, which escalates when the distribution of water cannot adapt to changing supply and demand conditions.

The report, prepared for the Electric Power Research Institute, also highlights the problematic nature of definitively determining water's value -- there are enormous variations in value estimates, due to water's numerous dimensions (quantity, quality, timing and location) and differences in the methodologies used in the studies cited.
RFF's Water Resources Program aims to increase understanding of how factors, such as changing environmental values and problems, increasing resource scarcity, and the prospect of global warming, are likely to impact the supply and demand for water, and to assess the policy alternatives for responding to these changes.

RFF's report "Economic Values of Freshwater in the United States" can be ordered by calling (202) 328-5025 (reference Discussion Paper 97-03).

To speak to Kenneth Frederick about this report or other water resources issues, please contact Michael Tebo in RFF's public affairs office at (202) 328-5019.

Resources for the Future (RFF)

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