Valuation of water resources

A2.19 Valuation evidence is publicly available from Water Resources Management Plans developed by water companies in England and Wales. These include marginal costs (known as "average incremental social costs") of providing extra water output which may be used as a proxy for the economic value of water resource impacts. In the 2014 round of Management Plans, the industry average incremental social cost of provision of an additional million litres (a marginal mega litre) per day was around £1.5 million. This can be interpreted as the typical economic cost of replacing a marginal mega litre of water and may be suitable for high-level assessment of the value of water resource impacts. However regional variation can be significant, because options to augment resources are constrained to varying degrees, in part reflecting wider water scarcity. Care should therefore be taken in using these figures. For significant interventions, the relevant local Water Resource Management Plan should be consulted and Defra can advise at watereconomics@defra.gsi.gov.uk.

A2.20 The quality of water in the environment has an effect on biodiversity, amenity and recreation and was the subject of a major study in 2007, updated in 2013, called the National Water Environment Benefits Survey.28 Estimates29 of the average benefits of improvements in the quality of water in rivers, lakes, canals & coastal waters are:

£17,400/km/year - value of improving water quality from bad to poor

£20,100/km/year - value of improving water quality from poor to moderate

£23,300/km/year - value of improving water quality from moderate to good

A2.21 For river basins with higher population densities, benefits are above these averages. Economic valuation of ecosystem services provided by the water environment, particularly in urban areas, is an active area of research. For additional information Defra can be contacted at watereconomics@defra.gsi.gov.uk.

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28 For a summary of values see the Environment Agency web pages. In addition, the water companies run customer surveys ahead of each five-yearly business planning round (most recently in 2013) which include stated preference elements to determine customers' local willingness to pay for various improvements in water services, often including the quality of the local water environment.

29 Based on estimates for each river basin and catchment in England and Wales.