Cullmann et al.: The Price of Water Pollution

In External Costs of Water Pollution in the Drinking Water Supply Sector, Astrid Cullmann (Econometrics and Business Statistics, Technical University of Berlin), Julia Rechlitz, Greta Sundermann, and Nicole Wägner (all Energy, Transportation, Environment, German Institute for Economic Research - DIW Berlin) quantitatively analyze the costs of groundwater pollution on the provision of public water supply.

This study addresses the overall costs of removing nitrates from agriculture and farming practices for water suppliers in Germany. The authors point out that nitrate pollution is a primary source of pollution in developed nations like Germany and attempt to comprehensively analyze the economic costs of removing these pollutants to supply safe, potable water.

The authors used two models—the treatment cost model and the total cost model—to identify the treatment costs of water suppliers removing the nitrates from groundwater and the effect of this removal on the total costs of water suppliers. To do this, the authors measured nitrate concentrations from 1,350 groundwater sampling sites over eight years. They focused on the costs of suppliers who treat “raw” groundwater, which accounts for 70% of all suppliers in Germany. The findings demonstrate that both treatment and total costs increase with higher levels of nitrate pollution. Along with this conclusion, the authors emphasize that water suppliers in Germany spend approximately €2.2 million per year on raw water treatment, which is passed on to consumers. Policy to reduce nitrate pollution would, in turn, reduce these treatment costs.

Although the authors recognize some limitations to their research, such as their inability to compare raw water quality before treatment, this research provides a more comprehensive look into the overall costs of water treatment than prior research. The research does this by looking at a larger sample size to control for previously uncontrolled factors, considering treatment and total costs, and focusing specifically on the German supply sector. The authors encourage further empirical evidence to identify external treatment costs and allow policymakers to conduct informed cost-benefit analyses to enact efficient policies on nitrate pollution.