Estimating the environmental and resource costs of leakage in water distribution systems: A shadow price approach.
Water scarcity is one of the main problems faced by many regions in the XXIst century. In this context, the need to reduce leakages from water distribution systems has gained almost universal acceptance. The concept of sustainable economic level of leakage (SELL) has been proposed to internalize the environmental and resource costs within economic level of leakage calculations. However, because these costs are not set by the market, they have not often been calculated. In this paper, the directional-distance function was used to estimate the shadow price of leakages as a proxy of their environmental and resource costs. This is a pioneering approach to the economic valuation of leakage externalities. An empirical application was carried out for the main Chilean water companies. The estimated results indicated that for 2014, the average shadow price of leakages was approximately 32% of the price of the water delivered. Moreover, as a sensitivity analysis, the shadow prices of the leakages were calculated from the perspective of the water companies' managers and the regulator. The methodology and findings of this study are essential for supporting the decision process of reducing leakage, contributing to the improvement of economic, social and environmental efficiency and sustainability of urban water supplies.
Departamento de Ingeniería Hidráulica y Ambiental, Pontificia Universidad Católica de Chile, Av. Vicuña Mackenna 4860, Santiago, Chile; Escuela de Arquitectura e Instituto de Estudios Urbanos, Pontificia Universidad Católica de Chile, El Comendador 1916, Santiago, Chile; Centro de Desarrollo Urbano Sustentable CONICYT/FONDAP/15110020, Av. Vicuña Mackenna 4860, Santiago, Chile. Electronic address: mmolinos@uc.cl.
María
M
Molinos-Senante
Department of Mathematics for Economics, University of Valencia, Avd. Tarongers S/N, Valencia, Spain.
Manuel
M
Mocholí-Arce
Department of Mathematics for Economics, University of Valencia, Avd. Tarongers S/N, Valencia, Spain.
Ramon
R
Sala-Garrido
D002677:Chile; D000074067:Conservation of Water Resources / Q000191:economics* / Q000706:statistics & numerical data; D003365:Costs and Cost Analysis; D004777:Environment; D014881:Water Supply / Q000191:economics* / Q000706:statistics & numerical data
Economic valuation; Externalities; Leakage; Water companies; Water losses