Miljøprojekt, 969 – Forprojekt til værdisætning af grundvand

Pilot Project: Valuation of Groundwater

Summary and conclusions

Valuation of groundwater imposes a range of methodological challenges, and this report outlines some of these problems and presents proposals for specific groundwater valuation projects in a Danish context. Valuation may clarify whether the value of groundwater protection equals the social costs, and may, thus form part of the foundation for decisions on the protection of the quality as well as the quantity of the groundwater resources.

This type of valuation is a challenge, because groundwater protection must consider both use and non-use values related to the quality and quantity of groundwater. Hence, the quantity and quality of the groundwater resources affect both fresh and marine waters, as well as the drinking water resources. Groundwater protection will, thus, influence the quantity and quality of the water resources in the whole water cycle and the biodiversity connected hereto, but also more specifically to the use of groundwater for drinking water. Groundwater is almost the only source of drinking water in Denmark and as such the most important element of Danish freshwater resources. Investigations indicate that there are some problems that require regulatory efforts, both with respect to quality and quantity, i.e. contamination with pesticides and nitrates in groundwater. This rather widespread contamination endangers the traditional, decentralised water supply system based on simple water treatment methods that Danish drinking water supply relies on.

Besides a description and outline of the problems connected to the Danish groundwater protection, the costs of groundwater protection are estimated in budget- and welfare economic prices. These costs do not reflect all the values of groundwater protection, however, because the costs cover only use-values. Furthermore, according to the conclusions of this analysis the welfare economic costs of drinking water supply in a specific water supply area are approximately DKK 17 per m³. These cost are much higher than the retail prices actually paid by the consumers. This can be explained partially by the fact that some of the fixed and sunk costs are not accounted for in the consumer price, and partially by the way general taxes are reflected in the consumer price. This result indicates that the costs for society (the welfare economic price) are higher than the price paid by the consumers.

In order to estimate the benefits of groundwater protection within frameworks that fully grasp the broadness of the problems and values connected to groundwater protection, two valuation studies are proposed. The problems and scenarios connected to the first study are a Contingent Valuation (CV) study on the value of drinking water protection. The other study is a Choice Experiment (CE) study on the environmental benefits of groundwater protection for the aquatic environment in general, comprising both drinking water protection and the protection of the aquatic environment. CV is proposed for the first study because the concept of protection of drinking water as well as payment for the use of this resource is familiar for the respondents. Moreover, several drinking water studies are available in the international literature, facilitating comparisons of the results. Valuation of the protection of groundwater with respect to the more intangible values of the aquatic environment is more complex, and CE is therefore proposed. This method presents formulated choices to the respondents and they are asked to choose the most preferred alternative. This choice situation is close to market choices that respondents are used to make in everyday life.