The economics of water reuse and implications for joint water quality-quantity management

Abstract:

Traditionally, economists have treated the management of water quality and water quantity as separate problems. However, there are some water management issues for which economic analysis requires the simultaneous consideration of water quality and quantity policies and outcomes. Water reuse, which has expanded significantly over the last several decades, is one of these issues. Analyzing the cost effectiveness and social welfare outcomes of adopting water reuse requires a joint water quality-quantity optimization framework because, at its most basic level, water reuse requires decision makers to consider (a) its potential for alleviating water scarcity, (b) the quality to which the water should be treated prior to reuse, and (c) the benefits of discharging less wastewater into the environment. In this project, we develop a theoretical model of water reuse management to illustrate how the availability of water reuse technologies and practices can lead to a departure from established rules in the water resource economics literature for the optimal allocation of freshwater and water pollution abatement. We also conduct an econometric analysis of a unique dataset of county-level water reuse from the state of Florida over the seventeen-year period between 1996 and 2012 in order to determine whether water quality or scarcity concerns drive greater adoption of water reuse practices.