Valuing Water: Monetary Water Accounts as a First Step

London Group Meeting, New York June 2006

Rebecca Thomson and Michael Vardon Centre of Environmental and Economic Statistics

Australian Bureau of Statistics

Presentation outline

1. What are the issues to do with water valuation?

2. Why are monetary accounts useful

3. Experimental monetary accounts• Methods and results

4. Key data issues

The issues and • The classification of water and water related assets, products

and industries• Practical problems

– Water pricing and zero resource rents– “Thin” and imperfect markets for water trading– Valuation of flood damage?– Who owns the rain?– Data availability and data quality

• Subdivision of water supply industry– Rural, primarily for agricultural use– Urban, primarily for household and industrial (non-agricultural) use– Size categories (e.g. volume supplied and/or number of agents

serviced)

Water and Water Related Assets

1. Water supply infrastructure2. Water application and management infrastructure

(e.g. flood mitigation works, sprinklers)3. Water administrative/economic instruments4. The water itself e.g. distributed water (wholesale

and retail), re-use (=grey) water, surface water, ground water and rain water

(Also current and capital EPE, eg for sewerage plants)

Why monetary accounts are useful

• Reveal information necessary to calculate the value of the water itself (ie. Net Present Value)

• Enable the economic costs and benefits of water supply to matched with physical data on water stocks and flows. Costs and benefits can occur:– Now/later– Here/there– Public/private (and between industries), especially public water

supply and private agricultural water use

• Assists with resource allocation decisions and the selection of policy instruments needed to achieve optimal/efficient allocations

Water use in Australia and scope of monetary account

Self-extracted (GL)

Distributed Water (GL)

Reuse Water(GL)

In-Stream(GL)

Water Consumption(GL)

Agriculture 9,132 7,105 423 16,660

Mining 480 49 5 127 401

Manufacturing 296 554 16 866

Water Supply 12,767 1,768 23 1,793

Electricity and Gas 49,116 123 5 47,544 1,688

All other industries 544 1,099 45 368 1,320

Households 96 2,086 2,181

Total 72,431 12,784 517 48,039 24,909

Methods: Classification of products and assets

Four products were selected for revenue/expenditure data:1. Urban distributed water

2. Rural distributed water

3. Bulk water

4. Wastewater/sewerage services

Three assets selected for asset values:1. Urban water supply infrastructure assets;

2. Urban sewerage infrastructure assets; and

3. Irrigation and drainage infrastructure assets

Methods: Primary data sources and reference year

Supply side:• ABS Economic Activity Survey• State government, industry association and company

annual reportsUse Side:• Households: State government reports, WSAA facts• Agriculture: Water Use on Australian Farms• Other industries: Economic Activity Survey• Sewerage services: Environmental Protection

Expenditure Account 1996-97Reference year: 2003-04

Supply table, 2003-04

NSW&ACT VIC QLD SA WA TAS NT TOTAL$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Urban water 1,250,162 526,225 1,250,162 434,819 335,752 74,921 61,101 3,283,454Rural water 64,504 115,680 85,544 18,701 24,524 1,288 0 310,241Bulk water - urban suppliers 125,720 158,822 84,572 0 0 34,811 0 403,925Bulk water - rural suppliers 40,000 5,619 5,505 0 0 0 0 51,124Wastewater/sewerage services 1,243,795 783,225 563,205 260,763 402,562 69,451 26,903 3,349,904Total 2,724,181 1,589,572 1,988,988 714,283 762,838 180,471 88,004 7,398,649

Use table, 2003-04

Urban water Rural water Bulk water

Wastewater & sewerage Total

$'000 $'000 $'000 $'000 $'000

Agriculture Forrestry & fishing 110 292,241 - 15,112 307,463Manufacturing 234,900 9,940 - 239,756 484,596Mining 45,800 2,000 - 56,931 104,731Electricity & gas supply 58,500 4,460 - 48,112 111,072Water supply, sewerage & drainage 2,100 220 455,049 12,083 469,452Construction 28,250 - - 28,822 57,072Wholesale & retail trade 114,500 - - 112,327 226,827Accommodation, cafes & restuarants 165,000 - - 163,339 328,339Transport & storage 224,238 - - 223,776 448,014Finance, property & business services 239,802 - - 239,655 479,457Government administration 49,660 - - 50,665 100,325Education 34,200 - - 35,708 69,908Health & community services 52,297 - - 53,355 105,652Cultural, recreational & personal services 116,567 - - 113,926 230,493Total intermediate consumption 1,365,924 308,861 455,049 1,393,567 3,523,401Final consumption - by households 1,917,530 1,380 0 1,956,336 3,875,246Exports 0 0 0 0 0Total 3,283,454 310,241 455,049 3,349,904 7,398,648

Household expenditure table, 2003-04

NSW &ACT VIC QLD SA WA TAS NT TotalUrban water ($000) 733,283 350,239 365,412 202,944 194,668 43,053 27,932 1,917,530Population 30 June 2004 ('000) 7,055.3 4,972.8 3,882.0 1,534.3 1,982.2 482.1 199.9 20,108.6Expenditure per capita ($) 104 70 94 132 98 89 140 95Number of households 2004 ('000) 2698.8 1911.1 1498.1 633.1 782.8 197.3 55.2 7,776.4Expenditure per household ($) 272 183 244 321 249 218 506 247

Asset table, 2003-04

NSW&ACT VIC QLD SA WA TAS NT TOTAL$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Water infrastructure assets 12,773,806 4,943,424 5,379,458 4,859,051 2,948,958 774,518 359,816 32,039,031

Wastewater/sewerage infrastructure assets 15,231,224 5,113,648 6,685,471 3,577,688 3,582,972 625,580 113,141 34,929,723

Irrigation and drainage assets 761,046 2,609,509 1,976,465 328,953 297,000 48,266 0 6,021,239Total 28,766,076 12,666,581 12,361,214 8,765,691 6,828,930 1,448,364 472,957 71,324,613

Results for 2003-04

• Total output of water & sewerage services in was $7.4 billion, of which;

• sewerage services generated $3.4 billion;• urban water sales generated $3.3 billion;• bulk water sales $0.5 billion; and• sales of rural water were worth $0.3 billion• NSW generated the most revenue at $2.7 billion• Total assets $71.3 billion

Monetary v physical use (%)

0 20 40 60 80

Agriculture

Manufacturing

Finance, etc

Electricity and gas

Transport and storage

Other

Households

Key data issues

• Macro accounts v. micro level statistics• Differing classifications use in water supply industry (Water

Accounting v water accounting)• Frequency of collection/reporting• Repeatability of collection/reporting• Accuracy and precision (±0.1%, 1.0% or 10%)• Data access• Level and change v. cause and effect (ie aggregates v micro

data for research)• Perfection v. realistically deliverable • Degree possible v. degree necessary