Economic valuation of the environment and infrastructure.

 

Significant values can be attributed to ecosystem services that relate to supporting resilienceor reducing risks. In 2019, environment-related risks accounted for three of the top five risks by likelihood and four of the top five by impact. Most disaster risks and costs are water-related. The value of nature’s contribution to people outstrips other economic values. One estimate of the notional economic value of nature’s contribution to people was US$125 trillion per year in 2011, around two-thirds higher than global GDP at that time. Only the water-related services provided by nature are valued at US$29 trillion per year (Costanza et al., 2014). The costs of inaction, in terms of ecosystem loss and degradation, are high. As reported by the Organisation for Economic Co-operation and Development, “between 1997 and 2011, the world lost an estimated US$4–20 trillion per year in ecosystem services owing to land cover change and US$6–11 trillion per year from land degradation.

By 2030, investment in water and sanitation infrastructure will need to be around US$0.9–1.5 trillion per year, roughly 20% of the total requirement for all types of infrastructure investment. About 70% of this total infrastructure investment will be in the global South, with a large share in rapidly growing urban areas. In developed countries, large investments will be required for renovation and upgrade. Investments in both grey and green water infrastructure have the potential to deliver a good economic return, in addition to often unquantifiable social and human welfare returns. There are some estimates of national water infrastructure value that can be implied from projected benefits delivered. For example, in the USA, Current national water infrastructure capital needs are US$123 billion per year, with an aggregate economic impact of US$220 billion in annual economic activity and 1.3 million jobs, and an added indirect benefit of US$140 billion. But these kinds of estimates are not available for the majority of countries. Some indications of global values can be implied from The costs of infrastructure deficits or infrastructure failure. In 2015, the economic losses caused by water risks were estimated at approximately US$500 billion annually. In the USA, service disruptions put US$43.5 billion in daily economic activity at risk. A recent World Bank study found that only 35% of utilities can cover Operation and Maintenance costs through revenues generated by tariffs, and only 14% can cover all economic costs related to service provision. Even fewer of these utilities can cover the original capital costs, which are often on par or higher than operation and maintenance costs (for instance, capital costs amount to an average of 49% of total costs for water utilities in the United Kingdom). About half of global utilities use increasing block tariffs. They are especially popular in Latin America (70% of the utilities), the Middle East and North Africa (74%), and East Asia and the Pacific (78%). The uniform volumetric tariff is the next most common water tariff, and used in many developed countries (44%). It is the dominant practice in Europe and Central Asia (85%).