Hundreds of millions of people around the world depend on polluted water sources for their daily drinking water. Over half of the planet’s population lives in cities. Large cities, alone, represent $21.8 trillion (US$) in economic activity, or 48 percent of global GDP *. As the population in cities continues to grow, without adequate infrastructure improvements, this drinking water, which is both bad in quality and unreliable in availability, will affect the health and well-being of a large portion of our planet’s future inhabitants. While this may not yet be a “Hunger Games” or “Mad Max” scenario, the importance of clean drinking water and the requirement for infrastructure investment to get it, is clear. Capital investment as well as land use policy changes (agricultural best practices, for example) are essential.
The Nature Conservancy (TNC), a leading conservation organization working around the world to protect ecologically important lands and waters for nature and people, has issued a fascinating interactive report on water quality around the world. At this website, Water Blueprint, find a city, find the specific risks to drinking water in that city and the likely solutions to mitigate those risks. Boston, Bogota or Bhubaneswar, the data is there.
Solution categories include: agricultural best practices, riparian restoration, forest protection, reforestation and forest fuel reduction. Download the full document for more information.
Excerpt from “Return on Investment” section of The Nature Conservancy’s Water Blueprint report:
“ How should cities evaluate the return on investment of these conservation activities? When should
conservation be the preferred answer to a water quality problem versus more traditional engineered
solutions? After all, the potential for impact of conservation should be compared, for example, to the
economics of treating water in a utility.
Watershed protection typically offers the greatest return on investment in small watersheds that serve
large cities. The factors that control return on investment of watershed conservation are:
Size of watershed. The total area on which a conservation activity must be conducted to
meaningfully change water quality tends to be larger in larger source watersheds. Working on
areas of hydrological importance, such as high slopes, stream banks, and headwaters can focus
conservation on the areas within the watershed with the greatest return on investment, but
regardless, large watersheds tend to require a greater area of conservation activity.
Population density in source watershed. If watershed protection requires working with many
landowners, costs will increase with the number of people who must be convinced. This helps
explain why the largest watershed protection examples in the world—such as Quito, Ecuador—
tend to occur on public or communal land. While not insurmountable, the transaction costs of
working with many small private landowners can be prohibitive.
Population served. Because large cities have a larger revenue base, the ability of a city or utility
to pay for watershed protection increases with the number of customers.
Treatment technology. Since the complexity of water treatment plants is partly a function of
source water quality (see the section below on cost analyses for utilities), managers of highly
complex water treatment plants are less likely to be concerned with the quality of the source
water. While avoided O&M costs can be significant across all types of water treatment plants,
it is avoided capital expenditures—as in New York City—that are likely to motivate large-scale
investments in watershed protection.
A full evaluation of the return on investment of source watershed conservation for a utility requires
detailed information on the hydrology of the source watersheds, sources of pollutants, and the
treatment processes in use at the water treatment plant. Such a detailed return on investment (ROI)
analysis can only therefore be calculated on a case-by-case basis. However, the general principles
discussed above, combined with the information collected in our dataset of 534 large cities, allow for
rough calculations that can provide guidance about whether source watershed conservation is likely
to be a smart investment for a utility.
As discussed in Chapter 2, a 10 percent reduction in sediment and phosphorus on average reduces
treatment costs by 5 percent, although for individual water utilities this figure may be much higher.
There are other ways that higher raw water quality may reduce costs for utilities. Our study did not
consider the cost of irregular dredging of reservoirs, which can be considerable and has been shown
to be on average roughly the same order of magnitude as the direct savings from reduced treatment
costs. So the estimate that a reduction of sediment and phosphorus of 10 percent might reduce water
treatment costs by 5 percent on average is a conservative one.
Of course, the costs of running a water treatment plant are only one component of overall O&M costs
for water utilities. We are not aware of any global estimates specifically of water treatment plant
O&M for the water sector. One study  estimated US $480 billion in expenditures (both capital and
operating expenditures) in the world’s water market. Of this, US $220 billion was capital expenditures
on water or wastewater infrastructure (46 percent), while the rest (54 percent) was operating
expenditures. Out of capital expenditures for water infrastructure, only US $17 billion was for water
treatment plants, around 8 percent of total capital expenditures in the water sector. If this fraction
also applies to operating expenditures, then a rough estimate would be that 8 percent of the US $260
billion in operating expenditures, some US $21 billion, was for water treatment plant O&M.”
*Nordhaus, W., et al., The G-Econ Database on Gridded Output:. 2012, New Haven: Yale University
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