Economic analysis of source water protection

Water Economics, Policy and Governance Network (WEPGN)

Economic analysis of source water protection

Project Description:

The overall objective of this project, of which WEPGN is one component, is to develop a framework for the economic analysis of alternative methods of protection of water quality that include consideration of ecosystem services such as upstream source water protection as an alternative to infrastructure investments. There is considerable interest, worldwide, in the evaluation of ecosystem services arising from management strategies such as source water protection (ecosystem management) as an alternative to infrastructure investments (capital, operating costs). However, there are relatively few detailed investigations of such systems. This project will develop a conceptual framework and begin to construct the empirical analysis of the economic benefits and costs of source water protection. The project will build on the existing analysis of the Lost Creek Wildfire in Alberta that provides insights into the linkages between management actions, ecosystem services and water quality / quantity. Three categories of potential benefits from source water protection will be investigated:  

a.       Avoidance of water supply interruptions and “advisories” (reliability).

b.      Associated with (a), the benefits of reduced infrastructure (capital investment in water treatment facilities) that may arise from source water protection will be examined, and

c.       The benefits associated with the provision of additional water quantity in a water-short region will be assessed.

The costs of ecosystem service provision, including direct forest management costs and potential loses of ecosystem services like aesthetics and short term water quality declines will be examined as well.

From a research perspective the key challenges are the assessment of economic benefits and costs from source water protection in a dynamic stochastic environment that includes investments in assets (forests and water infrastructure) and operational considerations. The forest dynamics and wildfire risks, and their associated impacts on ecosystem service outputs, means that time varying management actions will need to be evaluated. Simple strategies like curtailment of forest harvesting may increase fire risks and lead to increased infrastructure requirements or potentially high risks of declines in water quality and reliability.

A key component of the value of source water protection (and water treatment infrastructure as a substitute) is the maintenance of the reliability of high quality water supplies or the avoidance of water “outages” such as boil water advisories. To assess the value of reliability a stated preference survey will be designed and administered in the southern regions in Alberta. This survey will include a preference elicitation component and it will collect information on defensive expenditures associated with water quality and reliability.


Vic Adamowicz, Diane Dupont, Peter Boxall, Monica Emelko, Uldis Silins, & Steven Renzetti


Alberta Innovates - Energy and Environment Solutions (Water Resources - AWRI); Alberta Innovates – Bio-solutions; and Alberta Environment – Sustainable Resource Development.

Graduate Student(s):

Patrick Llyod-Smith