Applying Natural Capital Accounting to Water Policy

Abstract

This chapter provides an introduction to key water policy areas and the concepts of full cost recovery and integrated water resource management to which natural capital accounting (NCA) has or could contribute. The discussion uses examples from Australia, the Netherlands, and Wealth Accounting and the Valuation of Ecosystem Services (WAVES) countries to illustrate some key points, which are likely to be relevant beyond the countries examined. It is important to understand, that the limited freshwater resources on the planet require management through water policies that regulate the supply as well as the demand of multiple users. Freshwater resources are unevenly distributed in time and space. Reservoirs are used to manage water over time, but options for increasing water supply in dry areas are limited. Because water is a bulky good, the demand in one region cannot simply be addressed by supply from another region. Water policy targets are set at different levels: globally (for example, through the Sustainable Development Goals [SDGs]), regionally (for example, European Water Framework Directive), as well as through national strategies and legislation. Water accounting is a helpful tool to analyze current water uses and related environmental and financial implications. Accounting helps in demand forecasting to assess the impact on the economy of reduced water availability and determine cost-effective options for increasing supply or reducing demand. Furthermore, it is a useful tool to model the impact of regulative measures on water use patterns and the impact of changing the price of water on the economy. Show more