An Economic Analysis of Clean Water Act Issues

Abstract

This paper presents an economic analysis of the incremental benefits and costs of clean water programs. Benefit estimates are principally based on contingent valuation research on willingness to pay for clean freshwater. These data are supplemented with estimated benefits for municipal and industrial water withdrawals and saltwater fishing. Cost estimates are largely based on Environmental Protection Agency “needs” data and on studies of nonpoint source pollution control practices. The analysis suggests that Clean Water Act programs, as currently planned, may have incremental costs that exceed their incremental benefits. Several alternative scenarios, with different benefit and cost assumptions, support this conclusion. Importantly, the policy options examined in this study generally are not the least cost approach for attaining water quality goals. The analysis suggests that the focus on municipal treatment facilities, as opposed to nonpoint source practices, is unlikely to be cost effective as a national strategy. The analysis also suggests that the concept of “needs” has limitations when viewed in a benefit-cost context. Finally, better information linking planned expenditures (costs) to expected ambient quality improvements (benefits) appears necessary to plan efficient programs.