How Important Is the Nexus between Water and the Economy? The Case of Ecosystem Services


There’s an old Western phrase, “Whiskey’s for drinking; water’s for war.” The quip captures the significance of water—water is essential to life. It is also fundamental to economic well-being—with a nexus to food, energy, industrial production, and a host of goods and services.

Others today speak of these significant intersections and their economic implications. But thinking of water and the economy requires thinking about water and what I will call Nature. How we think about water and Nature’s components and processes affects the potential to sustain cost-effective, secure supplies of water for human consumption, agriculture, energy, wildlife, and other values. Consider that natural landscapes purify water. They help protect coastal communities from catastrophic storms and storm surge. The U.S. Geological Survey (USGS) reports, for example, that each 2.7 miles of sea marsh along the Gulf Coast can reduce storm surge by a foot. Over the past 100 years, the Gulf Coast has lost 100 miles of sea marsh. Think of the implications. A hundred years ago, a Category Five storm with a 30-ft. storm surge flowing across that sea marsh would have been reduced to one foot by the time it reached New Orleans.

But Nature’s systems provide other functions that also benefit human communities. Floodplains store water and can mitigate flooding of the built environment. Vegetation secures soil, prevents erosion, and provides shading that cools water temperatures. As we degrade or even destroy these natural systems, we turn to manmade infrastructure to replace Nature’s services.

Much of this effort—our planning and management of water—has focused on developing manmade infrastructure and mechanical processes to substitute for Nature’s processes.  We use mechanical filtration systems to purify water. We build levees to wall off the sea. We channelize rivers to direct or redirect their flows.

Five challenges, however, are shifting attention to Nature’s functions and benefits—or what many economists refer to as ecosystem services.

First is aging infrastructure. Many water and stormwater systems are over 100 years old with exorbitant replacement costs. The U.S. Environmental Protection Agency (EPA) reports 240,000 water main breaks per year in the United States. USGS estimates that water lost from water distribution systems is 1.7 trillion gallons per year at a national cost of $2.6 billion per year. One estimate puts a $390 billion price tag over the next two decades on the cost of updating and replacing wastewater systems if we were to deploy current technologies and current practices.

A second challenge is failing performance of some existing infrastructure. Consider flood control infrastructure in New Orleans.

A third challenge is the context of climate change. Some scientists project that climate change may result in changes in the frequency of extreme storm events, earlier snow melting, changing precipitation patterns, and other dynamics. These changes strain current infrastructure and raise questions about current water resource management practices. Within this changing and uncertain context, the Nation (and world) face must manage water to assure clean, fresh drinking water supplies; treat wastewater and storm water runoff; avoid flooding and adverse impacts of extreme weather events; sustain robust food production; support energy provision; and maintain biodiversity.

A fourth challenge is a growing national and global population, with especially rapid growth in the United States in the arid West. Nevada’s population grew a staggering 202 percent over 25 years; Arizona grew by 119 percent during that same period. Can current water infrastructure and management practices meet the needs of communities and their economies in this changing environment?

This brings me to the final challenge—budget constraints. While public-sector operating budgets and infrastructure replacement funding are always constrained in the sense of demands outstripping available resources, such constraints are particular acute as federal, state, and local governments struggle to balance budgets amid a sluggish economic environment.

These drivers—aging infrastructure, strained performance of some infrastructure, climate change and population growth, along with budget constraints—all are combining to prompt a search for new ways to think about water, water infrastructure, and ecosystems. Can Nature help us out?

Nature’s processes of filtering and purifying water, storing water, preventing erosion and sedimentation of streams and rivers, along with other economic services, have economic value. Can we capture that value to benefit people, economies, communities, and the environment? Can investments in ecosystems to sustain their services be greener, cleaner, cheaper, and smarter sometimes and in some places? Can such investments mean new revenue streams to ecosystem service providers—farmers, for example, and other landowners?

Let me lay out a few more situational details. Reliance wholly on built infrastructure in some cases can contribute to water consumption and water quality challenges. Paving over natural landscapes has reduced water infiltration into the soil and decreased run off to surface water, for example.

But perhaps the most notable challenges of traditional infrastructure relate to storms and flooding. Urban infrastructure has had some significant unintended consequences. Channelizing streams and rivers has resulted in massive losses of sea marshes and wetlands along the Gulf Coast. The USGS reports that Louisiana lost more than 1,900 square miles of coastal lands between 1932 and 2000. During Hurricane Rita in 2005, areas along the Gulf Coast that had retained significant wetlands experienced much less storm surge and related damage than areas that lacked these buffers due to coastal wetland losses. Along the North Carolina coast, studies have shown that areas with protected natural dunes fare better, with less property losses in the built environment, than areas that built on and destroyed their coastal dunes.

But Louisiana and North Carolina communities are not alone. And not all the challenges of traditional flood protection infrastructure are in coastal areas. Levee failures in California during heavy rainfall in 2006 triggered emergency state spending to shore up that infrastructure. Much of that infrastructure is nearly 100 years old and has indeterminate engineering specifications.

What can Nature do for us? More forest cover in watersheds can reduce water treatment costs. One study of 27 water suppliers concluded that each 10 percent increase in forest cover in a water source area decreased treatment and chemical costs by some 20 percent. And investment in forests can protect urban water systems in other ways. After the disastrous Hayman Fire in Colorado in 2004, Denver’s reservoirs experienced massive siltation from the erosion that followed in the wake of the fire. The price tag to reverse this damage is tens of millions of dollars. Not wanting a repeat of this disaster, the Denver Metropolitan Water District worked with the U.S. Forest Service to craft a “faucets to forests” initiative. The water district cost-shares with the Forest Service on hazardous fuels treatments to remove overly dense and flammable underbrush and diseased tree stands to maintain forest health and reduce the risks of catastrophic wildland fire.

But enhancing ecosystem services is not confined to the countryside. Restoring permeable surfaces and expanding tree canopy in cities can reduce storm water runoff and associated contaminants from entering urban streams. With some climate models projecting increased frequency of high-intensity rainfall events, reducing storm water becomes increasingly salient to cities. In this context, investment in urban ecosystems presents a potentially important strategy.

Using ecosystem services concepts, Portland, Oregon achieved a 95 percent storm water flow reduction through bio-retention in parts of the city. Bio-retention uses the chemical, biological, and physical properties of plants, microbes, and soils for reducing flows and removing pollutants from storm water runoff. Seattle reduced the volume of runoff in one neighborhood by 98 percent using “green” infrastructure, and the price tag was 25 percent less than traditional management tools. These examples highlight the significant services natural systems and their components provide in the context of water, wastewater, and stormwater management.

The 21st century may be a time of re-creating natural landscapes in cities and in the countryside. It may also be a time of linking urban ecosystems to broader regional ecosystem restoration and conservation. But such efforts require better metrics—how do we calculate the benefits delivered by these ecosystems?

Moreover, the full potential of ecosystem services may reside in exploring linkages between urban and nonurban ecosystems. In the Tualatin Basin, in Oregon, storm water and wastewater managers required new EPA permits to meet water temperature standards. Under traditional approaches, they could have met these standards by investing in refrigeration systems for a cost of $60 million. Instead, using an ecosystem services approach, they combined five permits into a single bundle. Using trading tools available under the Clean Water Act and nudged along by development of water trading guidance under former Assistant Administrator for Water at EPA, Tracy Mehan, water managers paid $6 million to farmers to plant trees along 37 miles of streams to meet the required temperature standards.

Through some big picture thinking and strong public-private partnerships, these federal, state, local, and private-sector pioneers may be re-writing the future of watershed management. Many cities and companies are pushing the “greening envelope.” But expanding these efforts may require new governing tools and innovative use of existing tools. Agency silos inhibit coordination among water, wastewater, storm water, energy, and other infrastructure decision makers. In Albany, New York, for example, the city owns the wastewater plants but does not own the piping leading to the plants. In Virginia, one agency permits wastewater; another handles stormwater permits.

Governing jurisdictions and political boundaries in most cities seldom align with watersheds or other ecosystem landscapes. A few cities, such as Seattle, acquired lands a century ago that supplied the city’s source water, but such acquisitions were infrequent.

Coordinating across jurisdictional boundaries may present the single biggest 21st century governance challenge. But investments in ecosystem services are, nonetheless, emerging. Florida, concerned about water quality and supplies, established the Florida Ranchlands Ecosystem Services Program. Through the program, the state pays farmers to revise their management practices to enhance water storage and reduce polluting runoff. The alternative to this ecosystem services approach to water storage is high-dollar investment in expanding the levee height around Lake Okeechobee. In France, a mineral water bottling company is paying farmers to change their practices and reduce risks of nitrate contamination of an aquifer.

Ecosystem services investments come in many forms and with different motivations. They include service payments, trading schemes, and public investments such as what Philadelphia, Seattle, and others have done to introduce “green infrastructure” as a cost-effective way to meet infrastructure needs. These examples highlight the significant services that natural systems provide to human communities, their health, safety and prosperity.

Failure to recognize these services results in decisions that diminish, degrade, or even destroy natural assets. The result of this degradation can be increased environmental harm, higher costs to provide services such as water filtration, and foregone benefits of energy savings and community safety. Sustaining and enhancing ecosystems and the services they provide is, thus, not only about Nature. Such efforts are integral to economic opportunity, service innovations, and, often, the cost-effective delivery of water services to communities, businesses, and farmers.

Baseball philosopher Yogi Berra once quipped that: “The future ain’t what it used to be.” As ecosystem services enter the lexicon of economists and the toolkits of companies and public decision makers, we may see the foundations of a new future of economic opportunities in how we deliver water services.

About Lynn Scarlett
Lynn Scarlett is the former Deputy Secretary of the U.S. Department of the Interior and co-director of Resources for the Future.

Posted in Environment, Future, Solutions |