The economics of water: Taking full account of first use, reuse and the return to the environment

The economics of reuse water is a challenging area of economic research and policy. There are many calls to subsidise water and reuse water in order to produce food and other value-added products. However, there are many competing demands on the budgets of most governments. As an alternative to subsidies, the water charging system is re-examined and a framework of charging for water, wastewater and reuse is presented. The Australian context is used as a case study. Charges can be tailored to address specific goals and objectives and put together as a package. The charging framework presented is a pragmatic approach to charging for first-use and reuse water that incorporates the cost to the environment or what economists refer to as externalities. Externalities are often location specific and temporal in nature and as a result a charging system would need to reflect this. Regular review and updating of charges would be required. By incorporating these externalities in a charging framework for first use, reuse and disposal, these environmental costs are said to be internalised in the investment decision. The long-term outcome would be a more sustainable investment pattern that improves the benefits to society. Copyright (c) 2005 John Wiley & Sons, Ltd.