Externalities, water prices, and water transfers

Discussing, estimating or analyzing the value of water is a difficult task. In addressing the value of water as reflected in its price - either as charged by a water utility, as the price of a water transfer, or a water sale in some market - this paper will examine three propositions regarding water pricing. The paper will consider the marginal scarcity rent of water, estimates of externalities, the full cost pricing of water and the consequences of these considerations on water prices, transfers and the efficiency of water use.