The CHANGING 2024 WEALTH of NATIONS TECHNICAL REPORT Adding Water to the Changing Wealth of Nations 20 30 40 60 80 100 120 140 160 © 2024 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. 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Design and layout: Clarity Global Strategic Communications www.clarityglobal.net Acknowledgements Author: Michael Vardon, Australian National University This report has drawn extensively on previous World Bank valuation work, including that led by Jarl Kind and Juha Siikamäki and discussions with them and their teams, including Matías Piaggio, Frederiek Sperna Weiland, Sjoerd Schenau, and Diana Morales. A series of consultations were undertaken as part of preparing this report, including with the United Nations, the World Bank Water Global Program, and the Delft Institute for Water Education. Participants in these consultations included Alessandra Alfieri, Isabel Arango, Tijen Arin, Ken Bagstad, Eileen Burke, Raffaello Cervigni, Richard Damania, Uju Dim, Bram Edens, Luis Diego Herrera Garcia, Peter Goodman, Abdurrahman Bashir Karwa, Christian Leb, Ruyi Li, Robert Marks, Marloes Mul, Grzegorz Peszko, Robert Smith, Amal Talbi, Svetlana Valieva, Omer van Renterghem, Ferdinando Villa, and Fran Zhang, among others. The review of water accounting was included as part of the United Nations 2023 World Water Day Conference,1 while the treatment of water-related assets and water flows in the SEEA Central Framework, SEEA-Water, and the SEEA Ecosystem Accounting was presented to the 2022 Meeting of the London Group on Environmental Accounting.2 Figures 2.1 and 2.2 were prepared by Anna Normyle. The report benefited from the thoughtful guidance and input of Stefanie Onder, Poolad Karimi, and Soumya Balasubramanya of the World Bank. This technical report was produced as input to the upcoming Changing Wealth of Nations 2024 report. The Changing Wealth of Nations flagship series is produced by the World Bank and provides the most comprehensive accounting of the wealth of nations, an in-depth analysis of the evolution of wealth, and pathways to build wealth for the future. The flagship series—and the accompanying global database—firmly establishes comprehensive wealth as a measure of sustainability and a key component of country analytics. Each iteration expands the coverage of wealth accounts and improves our understanding of the quality of all assets, notably, natural capital. In addition, each report provides a new set of tools and analysis to help policy makers mainstream wealth and its components into economic analysis and guide decision-making at the country and global scale. This report received financial support from the Global Program on Sustainability (GPS) trust fund. 1 https://seea.un.org/events/water-accounting-sustainable-development-goals-side-event-un-2023-water-conference. 2 https://seea.un.org/events/london-group-environmental-accounting-28th-meeting. ADDING WATER TO THE CHANGING WEALTH OF NATIONS I l EXECUTIVE SUMMARY Executive summary INTRODUCTION water, groundwater, and soil water (“green” water). Recycled water (“gray” water) is not considered a Water consumption is increasing around the world water asset as it is derived from water extracted from due to the growing population and economy. the environment and circulates within the economy. Compounding the problem of increased water use is Ocean water is not considered an asset needing that the availability of water is changing due to climate valuation as it is essentially limitless and industrial change, historical overuse of groundwater, and processes are needed to make it suitable for most declining water quality. Understanding the uses and uses (for example, desalination for drinking water values of water and how these are changing should and pumping for cooling). lead to more effective water policy and management. Estimating the value of water and adding it to The The report identified three approaches for estimating Changing Wealth of Nations (CWON) would help to values consistent with the value of the other natural make clear the importance of water to the economy capital assets in CWON: (1) asset-by-asset, (2) use-by- and embed water into macroeconomic thinking. use, and (3) service-by-service. CWON aims to account for the wealth of nations The service-by-service approach, based on the by providing comparable monetary measures of supply of water-related ecosystem services, is the natural capital and other asset classes, grounded in most feasible at the scale required. This approach the balance sheet approach of the System of National relies on incomplete environmental and economic Accounts (SNA) and its extension, the System of data, a meta-analysis of valuation studies, and global models using many assumptions—all of which Environmental-Economic Accounting (SEEA). The will probably result in low-quality estimates. New World Bank has a long-standing interest in the data sources and models are in development and valuation of natural capital and in using national expected to be available in the near future, which wealth as a measure of progress. Water is a vital should lead to higher-quality estimates. The use- part of natural capital but has yet to be included by-use approach is possible but problematic. Data as one of the assets recorded in CWON. Despite is only available for a small number of countries some physical water stocks being depleted (for and uses (agriculture, hydroelectricity, households) example, groundwater) or degraded (for example, by at this stage. This approach should become more pollution), the cost of this is not yet recognized in the feasible in future as more countries adopt natural estimates of national wealth in any country. capital accounting. The asset-by-asset approach, The objective of this report is to assess the feasibility which uses the value of tradable water rights and of valuing water as a natural capital asset in at least separates the water value from land value (for 150 countries for possible inclusion in CWON. Water example, hedonic pricing), is currently not possible represents a portfolio of assets, including surface due to a lack of information. II ADDING WATER TO THE CHANGING WEALTH OF NATIONS EXECUTIVE SUMMARY l THREE APPROACHES using this approach could be made. While the TO WATER VALUATON existing SEEA accounts could be used to make assumptions for the countries that do not have The three water valuation approaches identified water accounts to generate an estimate of value, are consistent with the SNA and SEEA. These the estimate would be of low quality. Because approaches are: of this, the use-by-use approach is not presently feasible. 1. Asset-by-asset. This approach is a bottom-up country-by-country assessment based on the 3. Service-by-service. This top-down approach trade of assets related to water. These assets would be based on global models and data sources are water rights, which in the SNA are taken to that estimate the use of water-related ecosystem represent the value of water and land value, which services of water supply and water filtration. There embodies at least part of the value of water, which are several other water-related ecosystem services is also recognized in the SNA. Neither is possible at but the two identified are the most relevant and present as the trade of water rights is limited to a tractable to measure. This approach is like the few countries and the data needed to separate the ecosystem service approach currently used to value value of water from the land on which it occurs is forests in CWON. The approach would use global not possible with current data sources. hydrological data sources and methods to estimate the physical quantities of services used, with prices 2. Use-by-use. This approach is another bottom- derived from a meta-analysis of the values of these up approach based on country-level data. It services in the literature. While this is possible and assesses the use of water by different industries— the most suitable method at present, there are data agriculture, mining, manufacturing, energy, water constraints, with relatively few studies separately supply, education, health, and so on—with water estimating the value of water-related ecosystem as one input to production. In this approach, the services, and the geographic distribution of studies value of the water used is taken to be embedded is uneven. in the value added of each industry, rather than just the price paid per unit volume of water used, The key advantage of the service-by-service top-down which may be subsidized or zero in the case of the approach is that it can be done relatively easily, while its use of “green” water in rain-fed agriculture. The weakness is that the place-to-place variations in value use-by-use approach requires information about are hidden and that any resulting estimates would be the amount and sources of water used by each accompanied by many caveats. The advantage of the industry, for each country. SEEA water supply bottom-up approaches is that the estimates are likely and use tables would provide this information, to be a more accurate reflection of the uses and values but these are only available for a small number of water within countries and that the development of countries at the level of detail needed. Many of water accounts, particularly at subnational levels, countries have information on the value of is likely to be of use for individual countries. The agricultural production and agricultural water difficulty with the use-by-use approach is that few use. Agriculture would likely account for a large countries have existing national water accounts at the proportion of water value, so a partial estimate level of detail required. ADDING WATER TO THE CHANGING WEALTH OF NATIONS III l EXECUTIVE SUMMARY BACKGROUND for discussion. This would stimulate interest in the broader natural capital, water, and accounting Several natural capital assets are already included in communities by providing experimental estimates of CWON—minerals, fossil fuels, forests, mangroves, water value as well as case studies to help understand and marine fisheries. CWON’s wealth accounts are the regional variation in water value. This would designed to provide comparable monetary measures aid the: of natural capital and other asset classes, grounded in the balance sheet approach of the System of • Discovery of additional data sources and National Accounts (SNA) and its extension, the methods for water valuation to assist with System of Environmental-Economic Accounting estimates based on the three approaches identified (SEEA). The SNA and SEEA are international in this report. International agencies, countries, statistical standards that provide a framework for and research organizations hold a wealth of integrating environmental (such as hydrological and data and methods and not all of these have been water quality data) and economic information (such identified. as the costs and income associated with the supply • Identification of other possible approaches to and use of water). water valuation not considered in this report. A variety of concepts and methods are used to value • Development of partnerships to leverage the natural capital assets. The SNA and SEEA both use use of existing knowledge, identify data gaps and the concept of exchange values, with the net present deficiencies, and seek additional resources for value (NPV) of the future expected income based on improving data sources for estimating the value of current uses; a common method used to value natural water in a systematic and comprehensive manner. resources. In the case of water, a range of market factors, including that water is often provided at cost • Promotion of the collection of data and or is subsidized, means that the NPV approach will methodological innovation to enable reliable significantly undervalue water assets. The SNA and estimates of water value to be regularly produced. SEEA provide for other valuation methods, including hedonic pricing, replacement cost, and the value For the estimates, a top-down approach could be done of property rights (for example, tradable water for 150 countries, while a bottom-up approach could rights). These methods are increasingly being used be tried for a selection of countries. This would also in ecosystem accounting, and the literature on the provide more information for comparing the merits valuation of ecosystem services is rapidly growing. of the use-by-use and service-by-service approaches. The results of the use-by-use bottom-up approach could also be used to calibrate the service-by-service NEXT STEPS top-down approach, while the bottom-up estimates To move forward with water valuation, a combination for individual countries could replace those made of the use-by-use bottom-up and service-by-service from the top-down. Reasons for discrepancies can top-down options could be used to generate estimates be investigated and resolved. IV ADDING WATER TO THE CHANGING WEALTH OF NATIONS EXECUTIVE SUMMARY l An issue identified as part of the report is the extent in the value of renewable energy (hydropower), to which the value of water is already counted in which is being added to CWON. If a separate water the other natural capital assets already valued in value is produced for CWON, then care would need CWON. At present, the value of water is embedded to be taken to ensure that the value of water assets in the value of agricultural and forested land, and is appropriately attributed and not double counted the contribution of water to these assets is likely to within the other CWON assets. be very large. Water value would also be included ADDING WATER TO THE CHANGING WEALTH OF NATIONS V TABLE OF CONTENTS EXECUTIVE SUMMARY IV TABLES VII FIGURES VII ACRONYMS AND ABBREVIATIONS VIII 1. INTRODUCTION 1 1.1 Water Valuation 4 1.2 Natural Capital Assets and CWON 4 1.3 The System of National Accounts and its Relationship to CWON 6 2. WATER VALUE IN THE CONTEXT OF CWON 10 2.1 SEEA-Water 13 2.2 SEEA Ecosystem Accounting 17 2.3 Differences Between SEEA-Water and the SEEA Ecosystem Accounting 21 2.4 Uptake of Water and Ecosystem Accounting 23 3. WATER VALUATION OPTIONS FOR CWON 24 3.1 Asset-by-Asset 24 3.2 Use-by-Use 25 3.3 Service-by-Service 25 3.4 Double Counting 26 4. DATA SOURCES AND METHODS 27 4.1 Valuation Methods 27 4.2 Global Data Sources and Methods 28 5. WAY FORWARD 30 5.1 Options for Valuation 31 5.2 Conclusion and Next Steps 32 REFERENCES 34 APPENDIX 1: Glossary of SEEA-Water 40 APPENDIX 2: Physical water supply and use accounts—Example from the SEEA Central Framework 45 APPENDIX 3: Botswana as an example of water accounting supply and use tables 47 APPENDIX 4: Review of water accounting 48 APPENDIX 5: Global water databases and hydrological models 50 VI ADDING WATER TO THE CHANGING WEALTH OF NATIONS TABLES TABLE 1.1: Definitions of industries and sectors of most relevance to water valuation 17 TABLE 2.1: Physical water asset account 23 TABLE 2.2: Simplified water supply and use table 24 TABLE 2.3: A simplified supply and use account for water-related ecosystem services and assets 29 TABLE 2.4: Comparison of the asset classifications in the SEEA Central Framework, SEEA-Water, and the SEEA Ecosystem Accounting 30 TABLE 5.1: Summary of the theoretical and practical challenges with water valuation 38 FIGURES FIGURE 1.1: The scope of the Changing Wealth of Nations, 2021 13 FIGURE 1.2: The scope of the Changing Wealth of Nations, 2023 14 FIGURE 2.1: Overview of the hydrological system and its interactions with the economy 19 FIGURE 2.2: Expanding coverage of the SNA, SEEA-Water, and the SEEA Ecosystem Accounting 26 FIGURE A3.1: Botswana—Physical water supply and use, 2014–15 (million m3) 55 FIGURE A4.1: Search pathways 56 ADDING WATER TO THE CHANGING WEALTH OF NATIONS VII ACRONYMS AND ABBREVIATIONS ABS Australian Bureau of Statistics IWMI International Water Management Institute ADB Asian Development Bank MAIA Mapping and Assessment for ANCA Advancing Natural Capital Accounting Integrated Ecosystem Accounting AQUASTAT FAO’s Global Information System on MLMWSS Ministry of Land Management, Water Water and Agriculture and Sanitation Services ARIES Artificial Intelligence for Environment NCAVES Natural Capital Accounting and and Sustainability Valuation of Ecosystem Services BC3 Basque Centre for Climate Change NPV net present value BOD5 five-day biochemical oxygen demand OECD Organisation for Economic Co-operation and Development CGIAR Consultative Group for International Agricultural Research SDG Sustainable Development Goal CWON Changing Wealth of Nations SEEA System of Environmental-Economic Accounting EC European Commission SNA System of National Accounts EDG electronic discussion group SRU Standard river unit EEA European Economic Area UN United Nations EnhaNCA Enhance Natural Capital Accounting Policy Uptake and Relevance UNESCO United Nations Educational, Scientific and Cultural Organization EPA Environmental Protection Agency UNSD United Nations Statistics Division FAO Food and Agriculture Organization USGS United States Geological Survey GPS Global Program on Sustainability WA+ Water Accounting Plus IBNET International Benchmarking Network for Water and Sanitation Utilities WHO World Health Organization IHE Delft IHE Delft Institute for Water Education WMO World Meteorological Organization IMF International Monetary Fund WRI World Resources Institute ISIC International Standard Industrial WWAP World Water Assessment Programme Classification WWF World Wildlife Fund IUCN International Union for Conservation of Nature VIII ADDING WATER TO THE CHANGING WEALTH OF NATIONS INTRODUCTION l 1 Introduction “What is water worth? There is no easy answer to this deceptively simple question. On the one hand, water is infinitely valuable—without it, life would not exist. On the other, water is taken for granted—it is wasted every single day.” Audrey Azoulay, Director-General of UNESCO This quote from the foreword to World Water The World Bank has a long-standing and ongoing Development: Valuing Water (UN 2021) captures interest in the valuation of water for decision-making both the challenge of and a key motivation for (for example, Young 1996; Briscoe et al. 1998; Komives water valuation. The underlying logic is that if we 2005; Ying et al. 2010; Damania et al. 2017; Andrés et understand how water is used, then we can better al. 2019; Kind et al. 2020; Andrés et al. 2021; World value water so that it may be used more carefully Bank 2022; Siikamäki et al. 2023). The World Bank and not wasted. also collects data on water supply, sanitation, and irrigation infrastructure as well as water resources,3 A better understanding of the uses and values of including information on water prices (World Bank water is needed. This is particularly the case in the 2014, 2022). parts of the world affected by water scarcity and the resulting competition for water between sectors and The challenges to monetary water valuation the environment (Falkenmark 1986; d’Odorico et al. are both theoretical and practical and require a 2020). With the availability of water changing (for multidisciplinary approach to understand and example, Konapala et al. 2020), groundwater being address them. In general, science is needed to depleted (for example, Thomas and Famiglietti provide information on water volume and quality, 2019; Jasechko et al. 2017), water quality declining while economics is needed to provide information (for example, Delpa et al. 2009), climate change on water price. The need for both can be seen when making floods and droughts more common and water value is expressed as a function of price and less predictable (for example, Kreibich et al. 2022), quantity, or mv = p * q, where mv is equal to monetary and the global undertaking to meet Sustainable value, p is price, and q is the quantity of water used. Development Goal 6 on water supply and sanitation The purpose of this report is to explore the feasibility (SDG 6), the management of water and investment of including water in the World Bank’s The Changing in water supply and sanitation are pressing issues Wealth of Nations (CWON) database. CWON aims (UN 2021). In the context of changing water demand to account for the wealth of nations from different and supply, it is recognized that both supply- and types of natural capital, using the System of National demand-side approaches are needed, and that Accounts (SNA)4 and its extension, the System of appropriate water pricing is one way to manage Environmental-Economic Accounting (SEEA),5 and demand (Grafton et al. 2020). 3 World Bank Water Data: https://wbwaterdata.org/; and IBNET: https://wbwaterdata.org/ibnet. 4 https://unstats.un.org/unsd/nationalaccount/sna2008.asp. 5 https://seea.un.org/. ADDING WATER TO THE CHANGING WEALTH OF NATIONS 1 l INTRODUCTION the balance sheet approach. It does this by examining are used synonymously and interchangeably to the challenges of water valuation in the context mean stocks. A stock is a physical volume of a of CWON, providing background information on substance measured at a point in time (for example, the science, economics, and accounting related the volume of water in a dam on January 1 of a to water as well as the SNA, the SEEA, and CWON particular year). As such, a large portion of this itself. This background is needed because while report is devoted to the explanation and definition readers may be familiar with CWON and one or of key terms so that a common understanding may more aspects of water valuation, they may not be be reached. The terminology used in this report familiar with all aspects of water valuation. This is will follow that used in the SEEA-Water Glossary, particularly the case for water accounting linked which is presented in Appendix 1 of this report. to the SNA and SEEA, which integrates the science This report provides short introductions to water and economics of water in a way that is unfamiliar valuation literature (section 1.1), CWON (section to many. 1.2), and the SNA (section 1.3). The SNA is included One source of confusion is that the terminology as the concepts and methods used to value assets in and concepts used in the discussion of water the SNA underpin those used in CWON. The report valuation are highly technical and vary between then examines water and ecosystem accounting, different disciplines, and sometimes within and in particular the SEEA, as a potential solution to disciplines (Box 1.1). A range of glossaries related some of the challenges to water valuation (section 2) to water are available and the terminology related 6 and assesses valuation options consistent with the to the valuation of natural resources is varied. SEEA and SNA (section 3). Section 4 examines the For example, the terms natural resource, natural data sources and methods available for generating capital, and environmental and ecosystem assets value estimates. Section 5 proposes a way forward. 6 See, for example, the International Glossary of Hydrology (WMO 2012), the FAO’s Global Information System on Water and Agriculture of AQUASTAT (https://www.fao.org/aquastat/en/), the UN Glossary of Environmental Statistics (https://unstats.un.org/unsd/publication/SeriesF/SeriesF_67E.pdf), and Water Accounting Plus (https://wateraccounting.un-ihe.org/wa-definitions-glossary). 2 ADDING WATER TO THE CHANGING WEALTH OF NATIONS INTRODUCTION l Box 1.1: Terminology he terminology used in the different disciplines involved in understanding water use and water T valuation varies. As part of the development of SEEA-Water, an electronic discussion group (EDG) compiled a glossary of terms to aid communication and reach a common understanding (SEEA-Water, paragraph 1.67). This glossary is presented in Appendix 1 and includes terms spanning the fields of hydrology, economics, and accounting. At the time it was considered the best alignment of the terminology of each field. The EDG considered many information sources, including the International Glossary of Hydrology7 (WMO 2012), the FAO’s Global Information System on Water and Agriculture of AQUASTAT,8 the United Nations (UN) Glossary of Environmental Statistics,9 and the SNA (EC et al. 2009) and SEEA (UN et al. 2003) glossaries. It should be noted that some of the glossaries have been updated since the adoption of SEEA-Water. The glossary is important because some terms mean different things in different contexts. For example, water use and water consumption. In the SNA water consumption is split into two components: the use of water by industries (termed intermediate consumption) and the use of water by households (termed final consumption). In a hydrological context what the SNA is calling water consumption would be termed water use or water withdrawal, and hydrological consumption would be all the water withdrawals less that amount returned to the surface water, groundwater, or soil water. The glossary enables different communities, countries, and organizations to understand how their definitions relate to those in SEEA-Water. Over time understanding should increase and the terminologies and related definitions become better aligned. 7 https://library.wmo.int/index.php?lvl=notice_display&id=7394#.Y3Fwe3ZxWUk. 8 https://www.fao.org/aquastat/en/databases/glossary/. 9 https://unstats.un.org/unsd/environmentgl/#:~:text=The%20UNSD%20Glossary%20of%20Environment,development%20indicators%2C%20and%20 environmental%20accounting. ADDING WATER TO THE CHANGING WEALTH OF NATIONS 3 l INTRODUCTION 1.1 WATER VALUATION • Large amounts of water are abstracted for own use by sectors other than those under ISIC Water valuation is contentious (for example, Schmidt Division 36 (water collection, treatment, and 2019; d’Odorico et al. 2020) and arises because of the supply), such as agriculture, mining, and energy characteristics of water and its use in the economy (see section 1.3 for definitions of industries and (UN 2012a; Easter et al. 1997; Young 1996; Fenichel sectors). Water abstraction for own use, while et al. 2016; Grafton et al. 2020; Wheeler et al. 2023). theoretically in the scope of the SNA, in practice is Key characteristics include the following: not. As such, own use of water is not necessarily • Water is a heavily regulated product for which recorded as an input to production, so the use of the price charged (if any) often bears little relation water by an industry and the value of water to an to its economic value or even the cost of supply. industry may be underestimated. For example, This situation is more common in water-scarce the value of water’s contribution to agricultural low-income countries where water may be production and agricultural land is not explicit supplied to some users at no charge. Such practices but is embedded in the operating surplus of the occur in part because the natural characteristics agricultural industry and the value of land. of water inhibit the emergence of competitive Because of these factors, the observed values of markets that establish economic value. water, and in particular the water supplied by the • Water supply often has the characteristics of water supply industry (which is usually done “at a natural monopoly because water storage and cost”), is not a true representation of exchange distribution have economies of scale. values and the net present approach commonly used for natural resources in the SNA is not possible. • Where and when water is scarce, the water may As such, alternative valuation methods are needed. be rationed or there are restrictions on particular types of uses (for example, parks and gardens are 1.2 NATURAL CAPITAL ASSETS not permitted to use water). AND CWON • Property rights, essential for competitive CWON is published every two to three years by markets, are often absent and not always the World Bank. It was last published in 2021 and easy to define when the uses of water exhibit provided estimates of wealth from 1995 to 2018 for characteristics of a public good (such as flood 146 countries (World Bank 2021). CWON contains mitigation) or a collective good (such as a sink for a portfolio of assets, including human capital wastes), or when water is subject to multiple and/ (broken down by gender) and natural capital (both or sequential uses (for example, first hydropower renewable and non-renewable), in addition to the and then irrigation). traditional measures of wealth (Figure 1.1). The • Water is a “bulky” commodity with a very low number of natural capital assets included in CWON weight-to-value ratio, inhibiting the development has grown over time (compare World Bank 2018 and of markets beyond local areas. World Bank 2021). 4 ADDING WATER TO THE CHANGING WEALTH OF NATIONS INTRODUCTION l FIGURE 1.1: THE SCOPE OF THE CHANGING WEALTH OF NATIONS, 2021 COMPREHENSIVE WEALTH Non- Produced renewable Human Net foreign Renewable natural capital capital natural capital assets capital Forest Machinery, Male/female Fossil fuels, Cropland and timber Protected Fisheries, Assets- structures, employed/ minerals pastureland and eco areas mangroves liabilities urban land self employed services Comprehensive data on natural capital is lacking this framework water can be a renewable or non- in most countries, and where information exists, renewable asset. Non-renewable water is sometimes the values reported vary in terms of their scope known as fossil water, which is defined by Foster (for example, which types of natural capital are and Loucks (2006) as “water that infiltrated usually measured), methods used, and quality (Brandon millennia ago and often under climatic conditions et al. 2021). While there are limits to the estimates, different from the present, and that has been stored natural capital typically declines as a share of a underground since that time.” Once this type of nation’s total wealth as it builds other forms of groundwater has been accessed via a well, it is capital (CWON 2021). vulnerable to contamination (Jasechko et al. 2017). Renewable water is surface water and soil water Five renewable natural capital assets are currently (“green” water) as well as the water found in aquifers included in CWON: agricultural land (cropland that are recharged by surface water. Recycled water and pasture), forests (timber and non-wood (“gray” water) is not considered a water asset as it is ecosystem services), protected areas, mangroves, derived from water extracted from the environment and marine fisheries. A range of additional assets and circulates within the economy. Ocean water is and extensions to the valuations of existing assets not considered an asset needing valuation as it is are being investigated for possible inclusion in essentially limitless and industrial processes (such the next CWON, including renewable energy and as desalination and pumping; Zhou and Richard carbon retention services (Figure 1.2). Within 2005) are needed to make it suitable for most uses. ADDING WATER TO THE CHANGING WEALTH OF NATIONS 5 l INTRODUCTION FIGURE 1.2: THE SCOPE OF THE CHANGING WEALTH OF NATIONS, 2024 COMPREHENSIVE WEALTH Non- Produced renewable Human Net foreign Renewable natural capital capital natural capital assets capital Forests Fossil fuels Agricultural Timber Labor force Machinery, Renewable Mangroves Fish stocks oil, gas, coal land 3 non-wood Male, female Assets- structures, energy  ecosystem Shoreline Marine wild Minerals Crop land, employed/ liabilities Urban land Hydropower services (by protection capture 13 minerals pastureland self-employed protection status) The natural capital assets used in CWON are (and is discussed later in this section). The SNA equivalent to the environmental assets defined balance sheets also include the value of contracts, in the SEEA Central Framework (see section 2). leases, licenses, and similar intangibles, and the In the SEEA Central Framework environmental net positions on financial assets and liabilities. For assets are defined as “the naturally occurring living water, this would include the value of water licenses and non-living components of the Earth, together and tradable water rights. constituting the biophysical environment, which may provide benefits to humanity” (SEEA Central The CWON approach to the valuation of natural Framework, paragraph 2.17). capital is consistent with the SNA and the methods it uses. For inclusion on the SNA balance sheet, an asset must provide a stream of income to the direct 1.3 THE SYSTEM OF NATIONAL owner of the asset or from the potential sale of ACCOUNTS AND ITS RELATIONSHIP TO CWON the asset. The SNA asset values use the concept of exchange value; that is, the value at which an asset The valuation in CWON is grounded in the balance or good, or service would be transacted if it were sheet approach of the SNA (CWON 2021). The SNA exchanged between a willing buyer and a willing balance sheet includes stocks of manufactured seller. The net present value (NPV) method is often (produced) assets and non-produced assets. Non- used to value non-renewable (such as minerals and produced assets are environmental assets, and fossil fuels) and renewable (such as forested land) include mineral and energy resources, land, forms of natural capital. Most entries in the national timber, and fish (Obst and Vardon 2014). Water is accounts use observed transactions at market prices. one environmental asset, but no country records a value for water in their balance sheet. The value Market transactions are defined as the “amounts of of land, which is included in the balance sheet of money that willing buyers pay to acquire something some countries, may embody the value of water from willing sellers” (2008 SNA, paragraph 3.119). 6 ADDING WATER TO THE CHANGING WEALTH OF NATIONS INTRODUCTION l The SNA notes that a market price depends on the resources and ecosystem services (Eigenraam and context in which the transaction occurs, including Obst 2018). In the SEEA, the assets do not need to in monopolistic or monopsonistic (single buyer be owned or provide a stream of income; they just from multiple sellers) situations (see SNA, paragraph have to exist. This expanded scope enables all water 3.119). As such, the market prices used in the SNA resources to be included in the accounts regardless reflect market imperfections from the perspective of of their ownership or use and expands the range economic theory (Barton et al. 2019). of valuation methods that can be used. The SEEA provides methods for the valuation of natural The SNA also records non-observed transactions resources and ecosystem services that are consistent for which market prices need to be estimated (for with the concept of exchange value and go beyond example, for public education). The SNA uses two the methods used in the SNA (UN 2012a; UN et al. general approaches for this: (1) market prices 2014; UN et al. 2021). of similar items (adjusted for quality and other differences as required) (2008 SNA, paragraph 3.123), CWON’s use of exchange value means that the and (2) where no appropriate market exists, prices benefits of aligning with SNA-compatible balance may be derived by the amount that it would cost to sheets go hand in hand with the limitations of this produce them (2008 SNA, paragraph 3.135). Most approach (World Bank 2021). In practice, natural services provided by the government to the public capital is usually more difficult to value in market are valued at cost (for example, education, health, terms as, for example, these assets often do not and defense). have defined owners, or readily observable market prices, and governance can distort prices. These Some environmental assets are directly traded in assets are nonetheless essential to human well-being markets, for example, mineral deposits and land. and enhance the value of more traditional assets In these cases, the SNA values them based on the as well as having intrinsic value beyond monetary observed market transaction. In some cases, assets considerations. As such, neither the SNA balance are not exchanged for cash (money). This includes sheet nor the current CWON wealth accounts provide forest resources, where these assets are valued using a full picture of natural capital and its depletion or resource rent and NPV (EC et al. 2009). Resource degradation. Failing to inform the owners, managers, rent and NPV are well-established techniques in and users of the true value of natural capital often economics and accounting. It is also the case that results in overuse or degrading asset values (Pearce some types of assets can be valued in more than one and Atkinson 1993). Many negative impacts on natural way, for example, the sale of mineral deposits, the capital are gradual and visible to markets long after rights to mineral deposits, or the NPV of the sale of the critical ecosystems degrade, making them subject minerals from the deposits. to the “tragedy of the horizon” (Carney 2015). The SEEA, which is discussed in more detail in While the SNA has its limitations, it can address section 2, extends the physical scope of assets and some of the challenges with water valuation. On the transactions beyond the SNA to include natural practical side, the SNA is a source of information ADDING WATER TO THE CHANGING WEALTH OF NATIONS 7 l INTRODUCTION in its own right, providing information on the engaged in the same, or similar, kinds of activity production and consumption of goods and services; at a particular location (SNA, paragraphs 5.2, the value added of industries, 10 including the water 5.46, 5.2) and is classified using the International supply, sanitation, and agricultural industries; and Standard Industrial Classification (ISIC).11 The water-related assets (for example, the value of water ISIC is a hierarchical structure with 21 sections supply and sanitation infrastructure). The SNA is followed by divisions, groups, and classes. For also supported by a large information system that example, agriculture (section A, division 1), mining has more detailed information than that included in (section B), manufacturing (section C), electricity the accounts. For example, the value of inputs used (section D, division 35), water supply (section E, in water-related industries, including the running division 36), sewerage (section E, division 37), public costs of the water supply industry (for example, the administration and defense (section O), education value of labor and energy) and the location of their (section P), and human health (section Q). Table 1.1 operations, and the market value of water used by defines the industries of most relevance to water agriculture. valuation, while a more complete list and discussion of industries are found in SEEA-Water (pp. 27– The SNA defines the economy and identifies and 32). The five sectors in the SNA are non-financial classifies its different parts. It defines the economy as corporations, financial corporations, government, “the entire set of resident institutional units.” Resident non-profit institutions serving households, and refers to the economic territory (country) in which households (SNA, paragraph 4.24). Establishments the institutional unit operates (SNA, paragraph 4.10), are classified as both an industry and a sector. For while an institutional unit is defined as “an economic example, a commercial farm producing rice would entity that is capable, in its own right, of owning be classified as an agricultural industry and as a non- assets, incurring liabilities and engaging in economic financial corporation. activities and in transactions with other entities” (SNA, paragraph 4.2). An institutional unit may be a single establishment, or a group of establishments known as an enterprise (see SNA chapter 5). An industry consists of a group of establishments 10 Value added is the contribution of each industry (as defined in the SNA) to gross domestic product. 11 https://unstats.un.org/unsd/publication/seriesm/seriesm_4rev4e.pdf. 8 ADDING WATER TO THE CHANGING WEALTH OF NATIONS INTRODUCTION l TABLE 1.1: DEFINITIONS OF INDUSTRIES AND SECTORS OF MOST RELEVANCE TO WATER VALUATION INDUSTRY OR ISIC ISIC DEFINITION RELATIONSHIP TO WATER VALUATION SECTOR NAME CLASSIFICATION Agricultural Section A, This refers to the exploitation of vegetal Agriculture is generally the largest user of industry division 1 and animal natural resources, comprising water via rain-fed agriculture, livestock, the activities of growing crops, raising and and irrigation. The water may be directly breeding animals, and harvesting timber and abstracted from water resources or be other plants, animals, or animal products obtained from the water supply industry. from a farm or their natural habitats. Mining industry Section B The extraction of minerals occurring Mine de-watering—pumping groundwater naturally as solids (coal and ores), liquids out of mines to allow the extraction of (petroleum), or gases (natural gas). minerals and fossil fuel—can be a large user Extraction can be achieved by different of water. The pumping of water is a use but methods such as underground or surface not necessarily a consumption of water* as mining, well operation, and seabed mining. some water is returned to the environment (with the groundwater usually returned to surface water). Manufacturing Section C, This section includes class 1104, which is the Bottled water is often a high-value but low- industry class 1104 manufacture of soft drinks; production of volume source of water for households. mineral waters and other bottled waters. Other manufacturing processes use water to a greater or lesser extent during production. Electricity Section D, This class includes the generation of Water is used for cooling in thermal electrical industry class 3510 bulk electric power, transmission from production and for hydroelectric power. generating facilities to distribution centers, Hydroelectric power generation is a very large and distribution to end users. It includes user of water but not a consumer of it.* This is the operation of generation facilities that because the water used for hydroelectricity produce electric energy, including thermal, is used “in-stream” and is almost immediately nuclear, hydroelectric, gas turbine, diesel, returned to the hydrological system after use. and renewable (emphasis added). Water supply Section E, class This class includes water collection, The water supply industry is a large user industry 3600 treatment, and distribution activities for (but not consumer*) of water and often the domestic and industrial needs. Collection main supplier of water to other industries, of water from various sources, as well as including agriculture, and households. distribution by various means, is included. The operation of irrigation canals is also included. Sewerage Section E, class This includes the operation of sewer systems The sewerage industry receives water from industry 3700 or sewage treatment facilities that collect, other industries via sewer systems or other treat, and dispose of sewage. means (for example, collection from septic tanks and cesspools), treats wastewater, and releases water, treated or untreated, into the environment and can also supply wastewater to other industries. Household From SNA This a group of people who share the same Households are generally large users of sector living accommodation, who pool some, or water from the water supply industry. all, of their income and wealth, and who consume certain types of goods and services Households may also directly abstract water collectively, mainly housing and food. from the environment (for example, from wells or rivers). *The difference between water use and water consumption is discussed in section 2.1 of this report. ADDING WATER TO THE CHANGING WEALTH OF NATIONS 9 l INTRODUCTION The SNA concept of own-account production is relevant be counted as water production even though there was to understanding water use and water valuation. Own- no transaction between economic units. Similarly, the account production is defined as the “production of abstraction of water by households from wells would all goods that are retained by their producers for their also be treated as production. The implication of this own final consumption or gross capital formation” is that the water produced in this way is valued and (SNA, paragraph 6.27). For water, this means that recorded, at least in theory, in the SNA as if there were water abstracted by the agricultural industry for use a transaction between different economic units. in its operations, for example, irrigating crops, would 2 Water Value in the Context of CWON To generate a value for water, information is needed resources into the economy (for example, from on the physical volumes of water in the environment surface water to the water supply industry), between and the water used by people and the economy. A different industries and sectors of the economy12 water price may be directly observed, such as when (for example, from the water supply industry to a household purchases water directly from a water households and from households to the sewerage utility or a farmer from an irrigation water supplier. industry), and from the economy to water resources. This is the price that would be recorded in the SNA Water accounting provides a framework for (section 1.3), but because of the characteristics recording these physical water flows and the value of water and water markets, this price is not an of exchanges. There are several types of water accurate reflection of value (section 1.1). The use of accounting frameworks in use. The SEEA is the “green” water in rain-fed agriculture is not recorded focus of this report because of its comprehensive in the SNA, although the value of agricultural coverage of physical water resources and the uses production and agricultural land is. of water in the economy and society. It also directly To estimate water value, the exchanges of water aligns with the valuation concepts and methods between the environment and economy, and within currently used in CWON, is the most commonly used the economy need to be estimated. A stylized water accounting system in the world (Vardon et al. representation of these exchanges is shown in 2023), and is an international statistical standard by Figure 2.1. There are flows of water: between types the United Nations (UN 2012a; UN et al. 2014; UN et of water resources (for example, between surface al. 2021). water and groundwater), from the different water 12 The difference between an industry and sector is explained in section 1.3. 10 ADDING WATER TO THE CHANGING WEALTH OF NATIONS WAT E R VA L U E I N T H E C O N T E X T O F C W O N l FIGURE 2.1: OVERVIEW OF THE HYDROLOGICAL SYSTEM AND ITS INTERACTIONS WITH THE ECONOMY ATMOSPHERE Precipitation Evapotranspiration Inland Water Resource System Downstream Upstream basins Surface water basins and and aquifers (reservoirs, lakes, aquifers outside outside territory Soil water rivers, snow, ice, territory of of reference and glaciers Natural transfers reference (e.g. infiltration, Inflows Outflows Outflows seepage, etc.) Groundwater SEA Collection of precipitation Abstraction Returns Evapotranspiration SEA Abstraction Abstraction Returns Returns Sewage Returns Returns Households Other industries (incl. agriculture) Rest of Water collection, Rest of the world Imports treatment, supply Exports the world economy economy Economy Source: After SEEA-Water (UN 2012a). ADDING WATER TO THE CHANGING WEALTH OF NATIONS 11 l WAT E R VA L U E I N T H E C O N T E X T O F C W O N After the SEEA, the most commonly used system is flows of water at the river-basin scale. Although WA+ Water Accounting Plus13 (WA+; Box 2.1) (Vardon et includes agricultural water use, a detailed breakdown al. 2023), with additional frameworks used within of water uses in other parts of the economy, or society countries (for example, Godfrey and Chalmers more generally, is not included. The production value 2012) and in corporate accounting (for example, resulting from all water uses is also not part of WA+. Burritt and Christ 2017). These other frameworks are As WA+ does not use the international classifications less suitable for global water valuation as they are of industry,14 sector,15 or product,16 the hydrological not based on common standards, their scope and data from WA+ cannot be easily linked to the coverage are limited, and the degree of integration economic information in the SNA or the information of physical and monetary data is more limited. In systems that underpin the SNA. In addition, WA+ does addition, these systems were not intended to derive not include the value of water supply and sanitation detailed national estimates of all water uses for all infrastructure or the running costs for providing these water users, nor to estimate the value of natural services. While business-level water accounting does capital, in this case water assets. account for these economic aspects and the concept of exchange value is consistent with the SNA, the These other systems tend to focus on either the spatial coverage is limited to water utilities with water economic or hydrological aspects of water and range accounts, which is seldom, if ever, national (Vardon in scale from individual water utilities to the basin et al. 2023). or country level. For example, WA+ is primarily a hydrological system, accounting for the physical 13 https://wateraccounting.un-ihe.org/welcome-water-accounting-plus-0. 14 The SNA and SEEA use the International Standard Industry Classification (ISIC), https://unstats.un.org/unsd/publication/seriesm/seriesm_4rev4e.pdf. 15 The sectors in the SNA and SEEA are financial corporations, non-financial corporations, government, households, and non-profit institutions supporting households. 16 The SNA and SEEA use the Central Product Classification (CPC), which lists all the goods and services produced and consumed in the economy, https://unstats.un.org/unsd/classifications/unsdclassifications/cpcv21.pdf. The CPC does not classify ecosystem services. 12 ADDING WATER TO THE CHANGING WEALTH OF NATIONS WAT E R VA L U E I N T H E C O N T E X T O F C W O N l Box 2.1: Water Accounting Plus W ater Accounting Plus (WA+) is an open-access platform developed for basin-level water accounting (Karimi et al. 2013). The framework was developed by the IHE Delft Institute for Water Education, the International Water Management Institute, and the UN Food and Agriculture Organization. WA+ combines remotely sensed data with global data sets and ground measurements to produce standardized tables, graphs, indicators, and maps. The WA+ framework is primarily depletion water accounting that tracks water consumption. However, it has much in common with the SEEA and is focused on basin-level hydrological processes. The abstraction (withdrawal) of water for use in the economy is recorded, with the amount of water used recorded by land use category and measured by tracking evaporation in space and time. Water is shown as abstracted and consumed by agriculture, industry, and domestic users. Industry may be equated with all industries other than agriculture used in the SEEA and domestic is equivalent to the household sector. The framework does not directly link to related economic data, but the data sources and methods can, and are, used to construct SEEA-based accounts— and in particular the asset account—and to estimate the use of soil water by agriculture. A key feature of WA+ is that it is an integrated modeling system, providing a framework along with data and methods that enable the framework to be populated. The framework comes with a glossary,17 supported by a range of online material and references,18 and an open-access online course.19 2.1 SEEA-WATER The physical scope of SEEA-Water is shown in Figure 2.1. The water resources and related flows shown The SEEA is an extension of the SNA (see section in Figure 2.1 are all defined and classified in SEEA- 1.3) and SEEA-Water (UN 2012a) is a module under Water. There are 22 standard water accounts in SEEA- the umbrella of the SEEA Central Framework (UN Water, covering water stocks and flows in physical et al. 2014). SEEA-Water is one of several thematic and monetary terms, as well as accounts for water publications under the SEEA umbrella (for example, quality and water emissions (for example, nitrogen, SEEA Applications and Extensions, SEEA-Energy, potassium, and phosphorous dissolved in water), and SEEA Agriculture, Forestry and Fisheries, and economic accounts for expenditure on protecting SEEA Ecosystem Accounting). The International and treating water. These are in addition to the value Recommendations for Water Statistics guides SEEA- of the water supply and sanitation infrastructure Water on the data sources and methods needed to and the input costs (for example, labor and energy) populate water accounts (UN 2012b). that are included in the SNA (see section 1.3). 17 https://wateraccounting.un-ihe.org/wa-definitions-glossary. 18 https://wateraccounting.un-ihe.org/publications-0. 19 https://wateraccounting.un-ihe.org/capacity-building. ADDING WATER TO THE CHANGING WEALTH OF NATIONS 13 l WAT E R VA L U E I N T H E C O N T E X T O F C W O N The main accounts of relevance to water valuation • Soil water is suspended in the uppermost belt of are for water assets and water supply and use. Before soil and can be discharged into the atmosphere describing these, it is necessary to define some terms by evapotranspiration, absorbed by plants, flow used in accounting. to groundwater, or flow to rivers (runoff). Part of the transpiration and absorption of water by The SEEA defines water assets as consisting “of fresh plants is used in economic production (such as and brackish water in inland water bodies, including the growing of crops, and trees for timber), as groundwater and soil water” (SEEA Central Framework, is the evaporation of water from land used for paragraph 5.474). This excludes water in oceans, seas, economic production. Transpiration also results and the atmosphere, although these assets are part of in biomass production that is not directly used in the overall accounting system. Within this overarching the economy. definition, three classes of water assets are described in SEEA-Water (UN et al. 2012a), with one asset, surface The water flows recorded in the SEEA asset account water, having subclasses: (Table 2.1) are defined as follows: • Surface water is water that flows over or is stored • Precipitation is the volume of atmospheric wet on the ground surface regardless of its salinity precipitation (such as rain, snow, and hail) before level or other dimensions of water quality. Surface evapotranspiration takes place. water includes water in artificial reservoirs, which • Evapotranspiration is the quantity of water are purpose-built for water storage, regulation, transferred from the soil to the atmosphere by and control; lakes, which are large bodies of evaporation and plant transpiration. standing water occupying a depression in the earth’s surface; rivers and streams, which is the • Inflows are the water that flows into a stream, water flowing continuously or periodically in lake, reservoir, container, basin, aquifer system, channels; snow and ice, which include permanent and so on. It includes inflows from other and seasonal layers of snow and ice on the ground territories/countries. surface; and glaciers, which are accumulations of snow of atmospheric origin. • Outflows are the flows of water out of a stream, lake, reservoir, container, basin, aquifer system, • Groundwater is water found in aquifers. An and so on. It includes outflows to other territories/ aquifer may be unconfined, by having a water countries and the sea. table and an unsaturated zone, or confined when it is between two layers of impervious or almost • Abstractions are the amounts of water removed impervious formations. Aquifers can discharge from any source, either permanently or into rivers, lakes, and wetlands and can manifest temporarily, in a given period of time by economic as base flow, be the sole source of river flow during units for final consumption and production dry periods, or be recharged by lakes or rivers activities. Water used for hydroelectric power during wet periods. generation and desalination20 is also considered to 20 Desalination is recorded as the abstraction of saltwater. 14 ADDING WATER TO THE CHANGING WEALTH OF NATIONS WAT E R VA L U E I N T H E C O N T E X T O F C W O N l be an abstraction. Total water abstraction can be a user elsewhere (see reused water). It includes broken down according to the type of source, such discharges of cooling water. as water resources and other sources, and the type • Reused water is wastewater delivered to a user of use (for example, by industries). for further use with or without prior treatment. • Returns represent the total volume of water Recycling within industrial sites is excluded. returned from the economy into surface water The volume of water resources and changes in and groundwater during the accounting period. the volume of water resources are recorded in the Returns can be disaggregated by the type of water physical asset account (Table 2.1). A water asset returned (for example, irrigation water and treated account is similar to a water balance (Vardon et and untreated wastewater) and by the industry al. 2012). The asset account records the opening that returned the water. and closing stocks of each water resource within a country or region and the sources of increase • Wastewater is water that is of no further and decrease in stocks. These increases can be to immediate value to the purpose for which natural inflows (such as precipitation) or human it was used or in the pursuit of which it was activity (such as the return of wastewater). Similarly, produced because of its quality, quantity, or a decrease can be due to natural outflows (such as time of occurrence. However, wastewater from evaporation) or human activity (for example, the one user can be a potential supply of water to abstraction of water for agricultural production). TABLE 2.1: PHYSICAL WATER ASSET ACCOUNT EA.131 Surface water Rivers Snow, Units (for example, million m3, Reser- and ice, and Ground- Soil megaliters, acre-feet) voirs Lakes streams glaciers water water Total Opening stocks Increases in stocks Returns from the economy Precipitation Inflows from upstream territories from other resources in the territory Decreases in stocks Abstraction Evaporation/actual evapotranspiration Outflows to downstream territories to the sea to other resources in the territory Other changes in volume* Closing stocks *These are due to, for example, the discoveries of water, or the use of different estimation techniques leading to increases or decreases in the volume of the opening or closing stock. As a last resort, it can also be used for the attribution of changes that cannot be attributed to other causes (that is, used as a balancing item). ADDING WATER TO THE CHANGING WEALTH OF NATIONS 15 l WAT E R VA L U E I N T H E C O N T E X T O F C W O N TABLE 2.2: SIMPLIFIED WATER SUPPLY AND USE TABLE Economy (imports and exports) All other industries Rest of the world Manufacturing Water supply Environment Households Agriculture Sewerage Physical or Energy Mining Total monetary units of measurement SUPPLY Natural resources Surface water Groundwater Soil water Products Potable water Non-potable Water Reused water Wastewater Return flows Surface water Groundwater Soil water USE Natural resources Surface water Groundwater Soil water Products Potable water Non-potable water Reused water Wastewater Return flows Surface water Groundwater Soil water Gray is nil by definition. 16 ADDING WATER TO THE CHANGING WEALTH OF NATIONS WAT E R VA L U E I N T H E C O N T E X T O F C W O N l The abstraction of water from the environment countries. This is shown in the supply and use tables and its use within the economy and return to the and allocated to the “rest of the world,” with imports environment are shown in supply and use tables. The reflected in the supply side of the table and exports full supply and use tables show many industries and in the use. The imports and exports can be via water types of flows. These large and complex tables are piped across borders. These exports are not exports of presented in Appendix 2, and a simplified supply and “virtual water”—the amount of water consumed that use table is shown in Table 2.2. This table can be used is embodied in, for instance, exported agricultural for physical and monetary units of measurement. An commodities (d’Odorico et al. 2019), although accounts example of a simplified supply and use table from from the SNA and SEEA-Water are used to calculate Botswana is shown in Appendix 3. “water footprints,” a type of “virtual water” (Hoekstra and Mekonnen 2012). As water use is shown by the industries and sectors used in the SNA (see section 1.3), this information is Transborder water is identified in SEEA-Water. directly linked to the SNA, enabling many indicators Water is divided by national borders. For surface to be produced. For example, the value added21 per water this is relatively straightforward. However, the cubic meter of water used for each industry. The delineation of groundwater is more difficult as water amount of wastewater generated and, if there are from a common groundwater source can be accessed linked emission accounts, the pollution load of the from either side of the national border. Since at least wastewater can also be shown by each industry. 145 countries share an aquifer with a neighboring country,22 allocating the stock of water to a particular The physical flow accounts have matching accounts country is important for valuation. in monetary terms. That is, instead of the flows of water being shown in physical units (for example, cubic meters, megaliters, or acre-feet), they are 2.2 SEEA ECOSYSTEM ACCOUNTING shown in values (for example, $, €, or ¥). In practice, Ecosystem services are the benefits that nature the monetary table is seldom compiled (section 2.4), provides to people (for example, Daily and Matson and when it is, the table is often limited to the fees 2008). Ecosystem accounting has been widely adopted and charges paid to the water supply and sewerage and gained increasing traction (Hein et al. 2020). industries. In this case, the total value of fees and It has also been embraced by influential reports charges is usually known but can only be attributed to (for example, Dasgupta 2021; World Bank 2021). a few industries or sectors (for example, agriculture, Ecosystem services are defined as “the contributions other industries, and households). of ecosystems to the benefits that are used in economic Transboundary flows are shown for both the and other human activity” in the SEEA Ecosystem hydrological and economic systems. The upstream Accounting (paragraph 2.14). Ecosystem services are and downstream flows are when water from one usually outside the scope of the SNA (Eigenraam and country goes to another and are recorded in the Obst 2018). The expanded coverage of water flows in water asset account (Table 2.1). For the economic the SEEA Ecosystem Accounting compared to the SNA system, water may be imported from or exported to is shown in Figure 2.2. 21 Industry value added is the contribution of each industry to gross domestic product.. 22 https://www.un-igrac.org/news/water-crossing-borders-64-worlds-countries-share-transboundary-aquifers-their-neighbours. ADDING WATER TO THE CHANGING WEALTH OF NATIONS 17 l WAT E R VA L U E I N T H E C O N T E X T O F C W O N FIGURE 2.2: EXPANDING COVERAGE OF THE SNA, SEEA-WATER, AND THE SEEA ECOSYSTEM ACCOUNTING 1a. Water flows in the SNA Economic unit Economic unit (e.g. water supply (e.g. households) industry) Water product (“natural water,” CPC 1800) 1b. Water flows in SEEA-Water (and the SEEA Central Framework) Water resource Economic unit (environment) Economic unit (e.g. water supply (e.g. river, lake, or (e.g. households) industry) artificial reservoir) Water product Water natural (“natural water,” resource CPC 1800) 1c. Water flows in the SEEA Ecosystem Accounting Ecosystem Economic unit Ecosystem Economic unit (e.g. river, lake, or (e.g. water supply (e.g. forest or river) (e.g. households) artificial reservoir) industry) Intermediate Final water Water product water provisioning provisioning (“natural water,” ecosystem service ecosystem service CPC 1800) Source: Vardon (2022). The SEEA Ecosystem Accounting is a spatially based, The SEEA Ecosystem Accounting represents the integrated information framework for organizing biophysical environment in terms of spatially distinct biophysical and monetary information about areas of different ecosystem types (for example, ecosystems (UN et al. 2021). The framework aims to forests, grasslands, wetlands, cultivated areas, make visible the contributions of the environment urban areas, rivers, coastal areas, and coral reefs). to the economy and people, and record the impacts Ecosystem types are classified using the Global of economic and other human activity on the Ecosystem Typology (Keith et al. 2020). Each spatial environment. The SEEA Ecosystem Accounting was area is accounted for in a manner that is broadly developed through a multidisciplinary process and analogous to the treatment of produced assets and was adopted as an international statistical standard the associated flow of services recorded in the SNA. by the UN in 2021. 18 ADDING WATER TO THE CHANGING WEALTH OF NATIONS WAT E R VA L U E I N T H E C O N T E X T O F C W O N l Ecosystem services come from ecosystem assets. • Flood control (river flood mitigation) services The water-related ecosystem assets provide several are the ecosystem contributions to regulating water-related ecosystem services and are listed in the river flows, groundwater, and lake water tables. SEEA Ecosystem Accounting as follows: They are derived from the ability of ecosystems to absorb and store water, and hence mitigate the • Water supply services reflect the combined effects of floods and other extreme water-related ecosystem contributions of water flow events. Peak flow mitigation services are supplied regulation, water purification, and other together with river flood mitigation services in ecosystem services to the supply of water of providing flood protection. appropriate quality to users for various uses including household consumption. • Nursery population and habitat maintenance services are the ecosystem contributions • Water purification (water quality regulation) necessary for sustaining populations of species services are the ecosystem contributions to that economic units ultimately use or enjoy restoring and maintaining the chemical condition either through the maintenance of habitats of surface water and groundwater bodies through (for example, for nurseries or migration) or the the breakdown or removal of nutrients and protection of natural gene pools. This service other pollutants by ecosystem components that may be an input to several different ecosystem mitigate the harmful effects of the pollutants on services, including biomass provision and human use or health. recreation-related services (for example, for fish • Water regulation (baseline flow maintenance) harvested from rivers or lakes). services are the ecosystem contributions to • Recreation-related services are the ecosystem regulating river flows, groundwater, and lake contributions, through the biophysical water tables. They are derived from the ability characteristics and qualities of ecosystems, that of ecosystems to absorb and store water, and enable people to use and enjoy the environment gradually release water during dry seasons or through direct, in-situ, physical, and experiential periods through evapotranspiration and hence interactions with the environment. This includes secure a regular flow of water. services to both locals and non-locals, that is, tourists (for example, canoeing on a river). • Water flow regulation (peak flow mitigation) services are the ecosystem contributions to • Visual amenity services are the ecosystem regulating river flows, groundwater, and lake contributions to local living conditions, through water tables. They are derived from the ability of the biophysical characteristics and qualities ecosystems to absorb and store water, and hence of ecosystems that provide sensory benefits, mitigate the effects of floods and other extreme especially visual (such as views of a river or snow, water-related events. Peak flow mitigation ice, and glaciers). This service combines with services are supplied together with river flood other ecosystem services, including recreation- mitigation services in providing flood protection. related services and noise attenuation services, to This is a final ecosystem service. underpin amenity values. ADDING WATER TO THE CHANGING WEALTH OF NATIONS 19 l WAT E R VA L U E I N T H E C O N T E X T O F C W O N • Spiritual, artistic, and symbolic services The SEEA Ecosystem Accounting makes a distinction are the ecosystem contributions, through the between the final and intermediate use of ecosystem biophysical characteristics and qualities of services. Water supply is the most important final ecosystems, that are recognized by people for ecosystem service, and it embodies many of the their cultural, historical, aesthetic, sacred, services described above. Final ecosystem services or religious significance. These services may “are those ecosystem services in which the user underpin people’s cultural identity and may of the service is an economic unit – i.e., business, inspire people to express themselves through government or household” (paragraph 6.24), while various artistic media. intermediate services “are those ecosystem services in which the user of the ecosystem services is an Other types of ecosystem assets may also supply ecosystem asset and where there is a connection to some of these services, for example, forests provide the supply of final ecosystem services” (paragraph a water purification service and riparian vegetation 6.26). This distinction is necessary to avoid double provides water flow regulation services. This raises counting (see section 4.4) and it is common for the the issue of potentially double counting the value of value of an intermediate service to be embedded in ecosystem services, which is addressed in sections a final service. For example, the value of the water 2.2 and 3.4 purification service can be embedded in the water supply service (Vardon et al. 2019). The long list of water-related ecosystem services illustrates the challenge of water valuation. For A basic ecosystem service account, adapted for CWON, it is difficult to estimate the value of all these water-related ecosystem services and ecosystem ecosystem services. The two most important services assets, is shown in Table 2.3. The rows represent the for valuation are water supply and water purification. services and the columns represent the supply by Water purification is important as the quality of water the water-related ecosystem assets and the use by is a key determinant of its possible uses (for example, different parts of the economy. for drinking water) and hence its value. 20 ADDING WATER TO THE CHANGING WEALTH OF NATIONS WAT E R VA L U E I N T H E C O N T E X T O F C W O N l TABLE 2.3: A SIMPLIFIED SUPPLY AND USE ACCOUNT FOR WATER-RELATED ECOSYSTEM SERVICES AND ASSETS Economy Environment Other ecosystems types Snow, ice, and glaciers All other industries Rivers and streams Physical or monetary Manufacturing Groundwater Water supply units of measurement. Households Agriculture Reservoirs Soil water The units of physical Energy measure will vary Mining Lakes Total by service SUPPLY Water supply services Water purification services Water regulationr Recreation-related services USE Water supply services Water purification services Water regulationr Recreation-related services Gray is nil by definition. 2.3 DIFFERENCES BETWEEN The asset classifications in SEEA-Water and the SEEA SEEA-WATER AND THE SEEA Ecosystem Accounting are similar but have some ECOSYSTEM ACCOUNTING minor differences (Table 2.4). Their classifications of surface water assets are the same, while the There are differences in classifications and classification of groundwater assets and oceans terminology and overlaps in the coverage of SEEA- and seas is more detailed in the SEEA Ecosystem Water and the SEEA Ecosystem Accounting (Vardon Accounting. A key difference between the two 2022). An implication of this is that care must be systems is that SEEA-Water includes soil water (“green taken to avoid double counting the value of water water”), whereas this is not explicitly included in the assets if the information on water value is taken assets in the SEEA Ecosystem Accounting. from the different types of SEEA-based accounts by countries. ADDING WATER TO THE CHANGING WEALTH OF NATIONS 21 l WAT E R VA L U E I N T H E C O N T E X T O F C W O N TABLE 2.4: COMPARISON OF THE ASSET CLASSIFICATIONS IN THE SEEA CENTRAL FRAMEWORK, SEEA-WATER, AND THE SEEA ECOSYSTEM ACCOUNTING SEEA CENTRAL NOTES FOR DETERMINING THE FRAMEWORK AND SEEA ECOSYSTEM ACCOUNTING SCOPE AND DEFINITIONS OF WATER SEEA-WATER ASSETS FOR VALUATION Surface water Freshwater Direct correspondence between SEEA- • Rivers and streams • F1 Rivers and streams Water, the SEEA Central Framework, and • Lakes • F2 Lakes the SEEA Ecosystem Accounting. • Artificial reservoirs • F3 Artificial reservoirs23 • Snow, ice, and glaciers • T6 Polar-alpine (cryogenic) Groundwater • SF1 Subterranean freshwater The SEEA Ecosystem Accounting subdivides • SF1 Anthropocentric groundwater into three classes. In SEEA- subterranean freshwater Water and the SEEA Central Framework • FM1 Semi-confined transitional groundwater includes all of these sources waters and could be similarly divided. Soil water • Water use in rain-fed agricultural SEEA-Water and the Central Framework and cultivated forest ecosystems only identify soil water, which is found in all ecosystem types with soil. However, in practice the use of soil water is only estimated for rain-fed agricultural ecosystems. The use of soil water can be shown by the ecosystem types used in the SEEA Ecosystem Accounting. Traditional SEEA-Water and the Central Framework • TF1 Palustrine wetlands do not explicitly recognize these assets • MFT1 Brackish tidal systems although water assets consist “of fresh and brackish water in inland water bodies, including groundwater and soil water” (SEEA Central Framework, paragraph 5.474). These would likely be recorded as abstractions from surface water (that is, lakes). Seas and oceans Marine SEEA-Water included seas and oceans as a • M1 Marine shelf source of water for desalination and cooling • M2 Pelagic ocean waters water as well as receiving return flows from • M3 Deep sea floors the economy and river outflows. The ocean accounts described in the SEEA Ecosystem Accounting do not consider marine ecosystems as a possible source of water. 23 Artificial reservoirs include all human-built water storages, from rainwater collection and small farm dams to large artificial reservoirs (for example, Hoover Dam, Kariba Dam, and Bhakra Nangal Dam). 22 ADDING WATER TO THE CHANGING WEALTH OF NATIONS WAT E R VA L U E I N T H E C O N T E X T O F C W O N l 2.4 UPTAKE OF WATER AND as “official” accounts (for example, MLMWSS 2018) or ECOSYSTEM ACCOUNTING in the academic literature (for example, Bagstad et al. 2020). The most common type of accounts produced According to the United Nations, in 2021, 89 was the physical supply and use tables (n=70) and countries were producing or developing SEEA- physical asset accounts (n=69). Few countries (n=13) based accounts, up from 54 countries in 2014. The 24 produced monetary supply26 and use tables and degree of uptake varies by region. Of the countries only two countries—Namibia and the Philippines— reporting SEEA-based accounts, Europe and North have produced a monetary asset account, but this America combined had the highest percentage of was a long time ago. The use of soil water is seldom countries at an advanced stage of implementation recorded (for example, ABS 2013). Weckström et (95 percent) and Africa the lowest (24 percent), al. (2020) noted that most countries had highly although in the 1990s many water accounts were aggregated industries and sectors shown in the water produced in southern Africa (for example, Lange supply tables, and only three countries—Australia, 1998; Lange et al. 2007). National-level ecosystem Denmark, and the Netherlands—included more accounting is still emerging (Bordt and Saner 2018), than 30 industries and sectors. A small number of with about 20 countries developing ecosystem industries limits the usefulness of water accounting accounts (Hein et al. 2020). There are numerous for computable general equilibrium modeling and local or regional examples of ecosystem accounting, input-output analysis. including water-related ecosystem services (for example, Keith et al. 2017; Capriolo et al. 2020; Taye For CWON, if more countries had water accounts et al. 2021; Deeksha and Shukla 2022), with a few at or accounted for water-related ecosystem services, the national level (Bordt and Saner 2019). then there would be a ready source of information on water value at a country level. However, no A review of water accounting identified just over country has monetary accounts for water assets, 200 water accounts (Appendix 4). The number of and at present, few countries have accounts of countries undertaking water accounting is estimated sufficient detail that would enable estimations of to be 67, with 49 of these countries having produced water value to be directly derived from country- accounts only once. The SEEA was the most popular level information. Because of this, other options for system in use (49 percent), followed by Water water valuation are needed, for estimates of water Accounting Plus25 (28 percent). Accounts were value to be made for 150 or more countries. produced by a range of organizations and published 24 United Nations. 2021 Global Assessment of Environmental-Economic Accounts. https://seea.un.org/sites/seea.un.org/files/global_assessment_2021_background_doc_update.pdf 25 https://wateraccounting.un-ihe.org/welcome-water-accounting-plus-0. 26 Australia, Botswana, Denmark, Israel, Jordan, Namibia, the Netherlands, Palau, the Philippines, Samoa, South Africa, Spain, and Zambia. ADDING WATER TO THE CHANGING WEALTH OF NATIONS 23 l WAT E R VA L U AT I O N O P T I O N S F O R C W O N 3 Water Valuation Options for CWON Valuing water assets for CWON can be approached Although water rights are a financial asset, in the from at least three perspectives: asset-by-asset, use- SNA the value of the water rights traded can be by-use, and service-by-service (ecosystem services). taken to represent the value of the water asset that underpins the financial asset. While some countries The first approach is the direct valuation of water and regions have tradable water rights—for assets from observed market transactions within example, Australia, Chile, Iran, South Africa, and countries. The other two approaches use valuations parts of the United States (UN 2021)—using these based on the water used by industries, sectors, and to value water is unfeasible for countries without households to derive a value for water assets using water rights, which is most countries. There is also resource rent and net present value. The use-by- concern about the functioning of some markets use approach would use country-level data, while for water rights (Garrick et al 2020). As such, using the service-by-service approach would use global water rights to value water assets for inclusion in data sources and models. The value of water assets CWON is not feasible in the short term, except for derived using the service-by-service approach would the few countries with water rights. likely be larger than that of the use-by-use approach as there are many ecosystem services derived from Land is traded in most, if not all, countries. As part of water assets, whereas the use-by-use approach the asset “land,” the SNA includes “water associated effectively only values the water supply ecosystem with land,” which relates to “any inland waters service. Section 4 provides information on the data (reservoirs, lakes, rivers, etc.) over which ownership sources and methods available to support each rights can be exercised and that can, therefore, be option, with a focus on their suitability for CWON. the subject of transactions between institutional units” (2008 SNA, paragraph 10.175). While not specifically mentioned, soil water is also part of 3.1 ASSET-BY-ASSET land in the context of the SNA, and soil water can The direct value of water assets is not usually only be accessed via land, for example, by growing observed in markets. However, while the water rain-fed crops (Comisari and Vardon 2012). Hedonic assets themselves are not traded, their value can be pricing could be used to decompose the value determined through the value of water rights, which of land into the value of water and land. This has are a “permit to use a natural resource” within the been done at local levels (for example, Moore et al. SNA (paragraph 17.324) and are distinct from the 2020). However, a large amount of data is needed for value of land (Comisari and Vardon 2013). A “permit hedonic pricing. The information needed includes to use a natural resource” is a type of financial asset the price of land traded, the total area of land able to in the SNA (paragraph 3.36). be traded,27 the physical characteristics of the land 27 Note that all land can be traded. For example, the area of land in national parks. 24 ADDING WATER TO THE CHANGING WEALTH OF NATIONS WAT E R VA L U AT I O N O P T I O N S F O R C W O N l including the level of rainfall, the value of economic with this production. This approach is similar to that production on the land, and other economic factors already used in CWON to value agricultural land. If a such as proximity to transport infrastructure. partial estimate of the value of agricultural water use was made, then this value would probably need to be This data would need to be obtained for each deducted from the value of agricultural land that is country and would have to be built “bottom-up.” The already included in CWON. data requirements represent a significant barrier to estimating the value of water assets using hedonic 3.3 SERVICE-BY-SERVICE pricing, hence this approach to valuing water assets is unsuitable for CWON at this time. An ecosystem service-by-service approach is already part of CWON. Siikamäki et al. (2023) 3.2 USE-BY-USE produced an estimate for the value of forests using ecosystem services, with prices derived from a The use-by-use approach is another bottom-up meta-analysis. The report estimated the value of approach. It would be done country by country using four water-related ecosystem services: erosion assessments of water use by different industries— control, flood protection, hydropower, and water agriculture, mining, manufacturing, energy, water services emanating from forests. These services supply, education, health, and so on—with water as were aligned with the reference list of services in one input to production. In this approach, the value the SEEA Ecosystem Accounting (see section 2.2) of the water used is embedded in the value added and related methods (see section 4). Final and by each industry, rather than just the price paid per intermediate ecosystem services (see section 2.2) unit volume used (which may be zero in the case of were not distinguished by Siikamäki et al. (2023), using “green” water in rain-fed agriculture). The use- hence double counting of value may occur (see by-use approach requires information from the SNA section 3.4). on industry value added and the amount of water used by each industry and the household sector, The assessment of forest value by Siikamäki et al. and the sources of water used by each industry and (2023) identified 47 papers including four water- households. The SEEA’s water supply and use tables related ecosystem services, with 27 papers on water provide this information, but these are only available services, which include water supply and water purification (filtration). Some of the studies used for a handful of countries at the level of detail needed contingent valuation that is not consistent with for this approach. For this reason, a use-by-use the concept of exchange value, but the estimates approach based on the SEEA’s supply and use tables from contingent valuation may be used as input is not feasible for 150 countries at this time. to the simulated exchange method that does A partial estimate based on water use in agriculture generate exchange values (NCAVES and MAIA 2022). would be possible, with the use of global hydrological Siikamäki et al. (2023) reviewed the studies that models, information on the value of agricultural used contingent valuation to ensure that the studies commodities produced, and the costs associated were consistent with exchange value. Some popular ADDING WATER TO THE CHANGING WEALTH OF NATIONS 25 l WAT E R VA L U AT I O N O P T I O N S F O R C W O N models, like InVEST, used to estimate the water services), then the value of the water assets will be supply ecosystem service are not fully aligned with greater than the value calculated using the use-by- the SEEA ecosystem services definition as these use approach as more factors are contributing to estimate the potential supply of water (essentially water value. runoff ) and not the use of water by industries and sectors. An examination of the 27 papers is needed 3.4 DOUBLE COUNTING to establish if the estimated volume of water supplied or purified aligns with the SEEA definition Whatever approach is taken to value water assets, of ecosystem services, and if there is any possible there is likely to be double counting of value within double counting of water-related service flows (see the natural capital assets already included in CWON Figure 2.2). or planned to be included in CWON. The ecosystem service-by-service approach can be, Double counting of the value of water assets would and in the case of forests has been, used to generate occur in the valuation of forests, agricultural land, values for natural capital assets. This approach and renewable energy. The forest valuation explicitly could be extended to all other ecosystem assets includes the value of water-related ecosystem beyond forests, including water-related ecosystem services (Siikamäki et al. 2023), while the value assets like surface water and groundwater. of water is embedded in the value of agricultural products used to value agricultural land (Gerber et If an ecosystem service approach is used to al. 2020). The value of soil water used for agricultural value water assets, then the number and type of production is also included in the value of land in the ecosystem services that contribute to value need to balance sheet of the SNA. The valuation of renewable be determined. If the valuation is based on the single energy, which is planned to be included in the next ecosystem service of water supply, then it would in CWON, will also include the value of water in the theory be equal to the value calculated by the use- generation of hydroelectricity. by-use approach, since the water supply ecosystem service is equivalent to the amount of water Another source of double counting would arise if abstracted for use (see section 2.2). It is important an ecosystem service approach is adopted and the to note that the use of “green” water in agriculture final and intermediate ecosystem services are not is already included in the value of agricultural land, distinguished. It is usual for the final ecosystem so is a source of double counting (see section 3.4). If service of water supply to use the intermediate the valuation of ecosystem services extends to other service of water purification, which could result in ecosystem services (for example, recreation-related double counting (see Figure 2.2). 26 ADDING WATER TO THE CHANGING WEALTH OF NATIONS DATA S O U RC E S A N D M E T H O D S l 4 Data Sources and Methods If the value of water is to be included in CWON, then It is usual for the water to be provided “at cost”—that it should be consistent with the valuation of other is, the payments made reflect only the capital and natural assets in CWON, which is based on the SNA running costs, and no payment is made for the water and exchange values (see section 1.3). At a country (for example, Wheeler et al. 2023). In many cases, level, ready-made estimates of water value from SNA water is provided for use at less than cost. This results balance sheets or water accounts are not available. in zero or negative resource rents, implying no value In the absence of such estimates, a range of data (for example, Obst et al. 2016). While the methods sources, models, and valuation methods consistent based on observable prices are problematic, the observed values can at least be recorded, and this with exchange values are needed. has been done by several countries and presented in SEEA-Water monetary supply use tables (for example, 4.1 VALUATION METHODS for Australia, the Netherlands, and Zambia). The SEEA Ecosystem Accounting provides a list of five For many countries, and in particular, low- and methods to calculate the value of natural resources and middle-income countries, water is “self-supplied.” ecosystem services that are consistent with exchange That is, rather than water being supplied to people values (UN et al. 2021). In the order of preference, and industries (including agriculture) via a water these methods are ones where the price is: distribution network, people and industries extract • Directly observable water from wells, rivers, and lakes or collect rainwater in tanks and dams. This own-account production— • Obtained from markets for similar goods while theoretically in the scope of the SNA (section and services 1.3)—is not usually recorded in the SNA in practice. • Embodied in a market transaction Because the observed prices are distorted and own- • Based on revealed expenditures (costs) for related account production may be missing, alternative goods and services methods for water valuation are required. The need • Based on expected expenditures or markets. for such methods is recognized in the SEEA Ecosystem Accounting and methods for water-related ecosystem The first valuation method is problematic for several services are outlined by NCAVES and MAIA (2022). For reasons (UN 2012a; see also section 1.1). First, water water provisioning and water purification services, at is an essential good, so while water is transacted in least four methods are possible: markets, the price of distributed water for drinking • Productivity change. For water provisioning, (“potable water” or “tap water”) or industry use (for this is done using partial and general equilibrium example, irrigated agriculture) is almost always models and looking at the impacts of a reduction subsidized. Second, water supply authorities are in water supply on the output in different sectors mostly state-owned enterprises, which do not seek to of the economy (for example, Calzadilla et al. 2013; maximize profit but to provide an essential service. Roson and Damania 2016; Mul et al. 2020). ADDING WATER TO THE CHANGING WEALTH OF NATIONS 27 l DATA S O U RC E S A N D M E T H O D S • Replacement cost methods. For water There are a range of sources and online databases provisioning, this is where a source of water is for the valuation of ecosystem services and water, valued based on the cost of obtaining the water for example, a review of water valuation literature from the lowest cost source (adjusted for water (EPA 2017), the Valuing Water Database,28 the quality) (for example, Edens and Graveland TEEB Valuation Database,29 and the Ecosystem 2013; Keith et al. 2017). An example would Services Valuation Database.30 These sources can be be using the cost of providing water through investigated and any studies on water valuation could desalination. For water purification, this would be used in a meta-analysis building on the work of be the capital (that is, infrastructure) and Siikamäki et al. (2023). running costs of purifying water to the same level of water quality (for example, La Notte et 4.2 GLOBAL DATA SOURCES al. 2012; Schenau et al. 2022) AND METHODS • Value of water rights. For water provisioning, As ready-made country-level information on water this is where they are separately identified assets, water use, and water-related ecosystem (from land values), and trading in water rights services is unavailable for most countries, global takes place such that a market is established. data and methods need to be investigated. These These rights are financial assets and may be data sources and methods could be applied to the connected to a permanent right to abstract use-by-use or service-by-service approaches. water or an annual allocation of water (Comisari and Vardon 2013). Kind et al. (2020) examined the feasibility of valuing • Avoided damage costs. For water purification, water using the currently available global water this is the reduction in water purification and databases and hydrological models. A list of global treatment costs that arises from having the water databases and hydrological models is found ecosystem service. in Appendix 5. Since the review by Kind et al. (2020), additional data sources and methods have become The damage to human health from water pollution available, including an upgrade of the WA+ platform (hence, lack of water purification service) is another (Box 2.1), the development of ARIES for SEEA31 potential approach that has been used in accounting (Box 4.1), and updates to IBNET (World Bank 2022). (for example, Angeles and Peskin 1998) and in Further investigation is needed to determine the accordance with the notion of exchange values (that suitability of these data sources and models for the is, it is a type of avoided loss). use-by-use or service-by-service approaches. 28 https://ceowatermandate.org/resources/valuing-water-database-2019/. 29 https://teebweb.org/publications/other/teeb-valuation-database/. 30 https://www.esvd.net/. 31 https://seea.un.org/content/aries-for-seea. 28 ADDING WATER TO THE CHANGING WEALTH OF NATIONS DATA S O U RC E S A N D M E T H O D S l Box 4.1: ARIES for SEEA A rtificial Intelligence for Environment and Sustainability (ARIES) was developed by the Basque Centre for Climate Change (BC3). It is an application using a suite of models for estimating ecosystem services based on available data and open-source software (k.LAB32). ARIES for SEEA was developed in a partnership between the UN and BC3 and provides a user interface to compile SEEA-based ecosystem accounts. The ARIES application specifically considers the users (or beneficiaries) of ecosystem services, which sets it apart from other ecosystem service models like InVEST,33 which do not use a definition of ecosystem services compatible with the SEEA. The ARIES for SEEA application can produce accounts and related maps for ecosystem extent, ecosystem condition, and selected ecosystem services. The ecosystem services currently available in ARIES for SEEA are crop provisioning, climate regulation, and soil erosion control. Crop provisioning and climate regulation are both available in physical and monetary terms, while only a physical estimate of erosion control is available. Nature- based tourism is planned to be added soon. The addition of the water supply ecosystem service in physical terms is being investigated based on the approach of Fasel et al. (2016) (Ken Bagstad, pers.com). ARIES for SEEA uses the global ecosystem34 and land cover classifications recommended in the SEEA Ecosystem Accounting. 32 https://integratedmodelling.org/hub/#/register. 33 Integrated Valuation of Ecosystem Services and Trade-offs, https://naturalcapitalproject.stanford.edu/software/invest. 34 IUCN Global Ecosystem Typology, https://portals.iucn.org/library/node/49250. ADDING WATER TO THE CHANGING WEALTH OF NATIONS 29 l WAY F O R WA R D 5 Way Forward This report confirms the findings of past research— are distorted, the methods for water valuation are there are theoretical and practical challenges to many and reflect different concepts of value, and estimating water value (Table 5.1). We know that data deficiencies and model assumptions mean that water is valuable, but it is difficult to put a monetary estimates of value will be uncertain. value to water assets. The prices paid for water TABLE 5.1: SUMMARY OF THE THEORETICAL AND PRACTICAL CHALLENGES WITH WATER VALUATION ASPECTS OF THEORETICAL PRACTICAL CHALLENGES WATER VALUE CHALLENGES Price Defining the economy and Establishing a price when: the environment • No market transaction occurs • Transactions occur but are subsidized Determining the concept of value to measure: • The value of water is embedded within other assets exchange or welfare values • The value of water is embedded in the value added of users Economic data gaps and deficiencies, for example: • Access to existing financial information of water suppliers and users • Lack of financial information on water suppliers and users • Spatially explicit or local-level data Multiple methods to estimate water prices Lack of integration with environmental data Quantity used Determining when water Environmental data gaps and deficiencies for measuring is physically exchanged exchanges of water, for example: between the environment • Between the environment and the economy and economy • Within the economy Determining when water • Spatially explicit or local-level data is of benefit to people but not physically exchanged Multiple methods and models to estimate water volume Lack of integration with environmental data 30 ADDING WATER TO THE CHANGING WEALTH OF NATIONS WAY F O R WA R D l The SEEA provides a clear theoretical framework the supply and use of water in the economy and for water valuation that has been agreed on through the value added by each industry using water. international processes. It clearly defines the This approach builds on the work of Kind et al. economy and environment, and the transactions (2020) and can leverage some country valuations recorded within and between the different parts of (for example, Edens and Graveland 2014; Fenichel the economy and environment are standardized. et al. 2016) and the countries with existing SEEA- The use of the SEEA also ensures conceptual based supply and use tables (such as Australia; harmony with the other assets already included or ABS 2022). planned to be included in CWON. Practically, the • Top-down approaches would estimate the SEEA provides a platform for reconciling different volumes of ecosystem services at a global level data sources. However, producing estimates for using global data and hydrological models to 150 or more countries would be difficult with estimate the volume of water and apply prices the available data sources and methods, and any from a meta-analysis of valuation studies to all estimates generated would be uncertain and have countries. This could be done for one or more many caveats. water-related ecosystem services and would extend the approach of Siikamäki et al. (2023). 5.1 OPTIONS FOR VALUATION Each option has its advantages and weaknesses. For an asset to be included in CWON, comparable Each would draw on the best available hydrological estimates of value need to be made for 150 or more and economic information. Global data sources countries, drawing on publicly accessible data and methods can provide much of the hydrological and accepted valuation methods. Three valuation information on the total amount of water abstracted options are identified: asset-by-asset, use-by-use, from the environment (section 4.2), as well as its use and service-by-service. by some industries, notably agriculture—the largest user of water. The direct valuation of water assets, the asset-by- asset approach, is not possible as there are few The price per unit volume (for example, million markets for water rights and tradable permits, nor cubic meters) of water is a challenge for both use- is there data that would enable the value of water to by-use and service-by-service. For the service-by- be separated from the value of land. service top-down approach, it is logical to start by using the prices from the meta-analysis of Siikamäki Two options remain for water valuation at the et al. (2023) that are already used to estimate the scale required for inclusion in CWON, a use-by-use water-related ecosystem services from forests. Any bottom-up approach or a service-by-service top- extension of this analysis (section 4.1) could be down approach: integrated into CWON to obtain a value for water • The bottom-up approach would estimate the total assets. For the use-by-use bottom-up approach, use of surface and soil water (and possibly some there is some country-level data on water prices groundwater) at the country level by examining and the volume of water use, but it is scattered, and ADDING WATER TO THE CHANGING WEALTH OF NATIONS 31 l WAY F O R WA R D significant effort would be needed to consolidate this be used. That is, a global-level service-by-service information. estimate could be prepared along with a selection of country-level use-by-use estimates. This would The advantage of the top-down approach is that it can provide experimental estimates of water value for be done relatively easily, while its weaknesses are that CWON as well as case studies to help understand the the place-to-place variations in value due to relative regional variation in water value and how the top- water scarcity are not apparent and many caveats down and bottom-up approaches compare. would be attached to any estimate. For this option, the degree of consistency with the SEEA of each of Simultaneously undertaking a service-by-service the studies used for valuation services, beyond those top-down and use-by-use bottom-up approach already assessed by Siikamäki et al. (2023), would would improve understanding of the valuation need to be assessed. This includes how the ecosystem issues and how water valuation could be used in services are defined, the methods used to estimate countries. The results of the bottom-up approach service flows, and the use of exchange values. If can be used to calibrate the top-down approach and ARIES for SEEA delivers a module for estimating the the bottom-up estimates for individual countries physical water supply ecosystem service in the near could replace those made from the top down. future, as planned, then there is a ready source of Reasons for discrepancies can be investigated and SEEA-aligned information for extending the coverage resolved. of these ecosystem services beyond forests. The use of other models and platforms is also possible. 5.2 CONCLUSION AND NEXT STEPS The advantage of the use-by-use bottom-up approach Three approaches for estimating water value is that the estimates are likely to more accurately consistent with the value of the other natural reflect the uses and values of water within countries capital assets in CWON were identified: asset- and that the development of water accounts, by-asset, use-by-use, and service-by-service. The particularly at subnational levels, is likely to be of service-by-service approach is based on the supply use for individual countries. The weakness is that of water-related ecosystem services and is the most few countries have existing water accounts (Vardon feasible at the scale required. However, it relies on et al. 2023) that can be used for this, and large incomplete environmental and economic data and resources would be needed to develop accounts for many assumptions in models, which will probably 150 or more countries. A case study approach could result in a low-quality estimate. New data sources be used, drawing on the existing water accounts and models are in development and are expected to of countries. These countries should represent be available in the near future, which should lead different income levels and water availability as well to higher-quality estimates in the service-by-service as geographical balance. This work would build on approach. The use-by-use approach is possible but previous country work in hydrology, water quality, practically difficult. Data is only available for a small water valuation, and water accounting. number of countries at this stage. In the future, the Both the bottom-up and top-down options could increasing adoption of natural capital accounting 32 ADDING WATER TO THE CHANGING WEALTH OF NATIONS WAY F O R WA R D l by countries should make this approach easier. The identified in this report. International agencies, asset-by-asset approach is currently not possible countries, and research organizations hold a due to a lack of information. wealth of data and methods and not all of these have been identified. To move forward with water valuation, a combination of use-by-use bottom-up and service-by-service top- • Identification of other possible approaches to down options could be used to generate estimates water valuation not considered in this report. for discussion. This would stimulate interest in the broader natural capital, water, and accounting • Development of partnerships to leverage the communities by providing experimental estimates use of existing knowledge, identify data gaps and of water value as well as case studies to help deficiencies, and seek additional resources for understand the regional variation in water value. improving data sources for estimating the value of This would aid the: water in a systematic and comprehensive manner. • Discovery of additional data sources and • Promotion of the collection of data and methods for water valuation to assist with methodological innovation to enable reliable estimates based on the three approaches estimates of water value to be regularly produced. ADDING WATER TO THE CHANGING WEALTH OF NATIONS 33 l REFERENCES References ABS (Australian Bureau of Statistics). 2013. 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It should be noted that some of the glossaries have been updated since the adoption of SEEA-Water in 2007. Abstraction: The amount of water that is removed Actual final consumption of households: The value from any source, either permanently or temporarily, of the consumption of goods and services acquired in a given period of time for final consumption and by individual households, including expenditures production activities. Water used for hydroelectric on non-market goods or services sold at prices that power generation is also considered to be abstraction. are not economically significant and the value of Total water abstraction can be broken down according expenditures provided by government and non- to the type of source, such as water resources and profit institutions serving households. (2008 SNA, other sources, and the type of use. (EDG) paragraph 9.81) Abstraction for distribution: Water abstracted for Aquifer: A geologic formation, group of formations, the purpose of its distribution. (EDG) or part of a formation that contains sufficient Abstraction for own use: Water abstracted for own saturated permeable material to yield significant use. However, once water is used, it can be delivered quantities of water to wells and springs. (USGS) to another user for reuse or for treatment. (EDG) Artificial reservoirs: Manmade reservoirs used for Actual evapotranspiration: The amount of water storage, regulation, and control of water resources. that evaporates from the land surface and is (EDG) transpired by the existing vegetation/plants when Brackish water: Water with a salinity content the ground is at its natural level of moisture content, between that of freshwater and marine water. (EDG) which is determined by precipitation. (EDG) Catchment (synonym: river basin): An area having a Actual final consumption of general government: common outlet for its surface runoff. (UNESCO/WMO The value of the government’s total final consumption International Glossary of Hydrology, 2nd ed., 1992) expenditure less its expenditure on individual goods or services provided as social transfers in kind to Cooling water: Water which is used to absorb and households. It is thus the value of the expenditures remove heat. that the government incurs on collective services. (Based on 2008 SNA, paragraph 9.103) 35 https://library.wmo.int/index.php?lvl=notice_display&id=7394#.Y3Fwe3ZxWUk. 36 https://www.fao.org/aquastat/en/databases/glossary/. 37 https://unstats.un.org/unsd/environmentgl/#:~:text=The%20UNSD%20Glossary%20of%20Environment,development%20indicators%2C%20and%20 environmental%20accounting. 40 ADDING WATER TO THE CHANGING WEALTH OF NATIONS APPENDIX 1 l Determinand: Parameter, water quality variable, or Gross capital formation: The total value of the gross characteristic of water quality. fixed capital formation, changes in inventories and acquisitions less disposal of valuables for a unit or Direct use benefits: Benefits derived from the use of sector. (2008 SNA, paragraph 10.31) environmental assets as sources of materials, energy, or space for input into human activities. (SEEA-2003, Groundwater: Water which collects in porous layers paragraph 7.36) of underground formations known as aquifers. (SEEA-2003) Economic unit: A unit that engages in production and/or consumption activities. Groundwater recharge: The amount of water added from outside to the zone of saturation of an aquifer Emission to water: The direct release of a pollutant during a given period of time. Recharge of an aquifer into water, as well as its indirect release by transfer to is the sum of natural and artificial recharge. (EDG) an off-site wastewater treatment plant. (Based on the Hydroelectric power generation, water use for: European Commission, 2000, Guidance document for Water used in generating electricity at plants where EPER implementation: According to Article 3 of the the turbine generators are driven by falling water. Commission Decision of 17 July 2000 (2000/479/EC) on (USGS, https://pubs.usgs.gov/chapter11/) the implementation of a European Pollutant Emission Register (EPER), https://wedocs.unep.org/handle/20.5 Hydrological cycle (synonym: water cycle): The 00.11822/1004?show=full) succession of stages through which water passes from the atmosphere to the Earth and returns to the Evapotranspiration: The quantity of water transferred atmosphere: evaporation from the land, sea, or inland from the soil to the atmosphere by evaporation and water, condensation to form clouds, precipitation, plant transpiration. (EDG) accumulation in the soil or in bodies of water, and re- Exports: Water that exits the territory of reference evaporation. (UNESCO/WMO International Glossary through mains or other forms of infrastructure. (EDG) of Hydrology, 2nd ed., 1992) Final consumption expenditure of households: Imports: Water that enters the territory of reference The expenditure, including imputed expenditure, through mains or other forms of infrastructure. (EDG) incurred by resident households on individual Inflow: Water that flows into a stream, lake, reservoir, consumption goods and services, including those container, basin, aquifer system, etc. It includes sold at prices that are not economically significant. inflows from other territories/countries and inflows (2008 SNA, paragraph 9.94) from other resources within the territory. (EDG) Freshwater resources: Naturally occurring water Intermediate consumption: The value of the goods having a low concentration of salt. (EDG) and services consumed as inputs by a process of production, excluding fixed assets, the consumption of Glaciers: An accumulation of ice of atmospheric 2020 which is recorded as consumption of fixed capital; the origin generally moving slowly on land over a long goods or services may be either transformed or used period. (UNESCO/WMO International Glossary of up by the production process. (Based on 2008 SNA, Hydrology, 2nd ed., 1992) paragraph 6.213) ADDING WATER TO THE CHANGING WEALTH OF NATIONS 41 l APPENDIX 1 Irrigation water: Water artificially applied to Point source of pollution: Emissions for which land for agricultural purposes. (UNESCO/WMO the geographical location of the discharge of the International Glossary of Hydrology, 2nd ed., 1992) wastewater is clearly identified, for example, emissions from wastewater treatment plants, power Lake: A generally large body of standing water plants, and other industrial establishments. occupying a depression in the Earth’s surface. (EDG) Population equivalents: One population equivalent Mine water (synonym: mining water use): Water (p.e.) means the organic biodegradable load having used for the extraction of naturally occurring a five-day biochemical oxygen demand (BOD5) minerals including coal, ores, petroleum, and natural of 60 g of oxygen per day. (OECD/Eurostat joint gas. It includes water associated with quarrying, questionnaire on inland water) dewatering, milling, and other on-site activities carried out as part of mining. Excludes water used Potential evapotranspiration: The maximum for processing, such as smelting and refining, or quantity of water capable of being evaporated in a slurry pipeline (industrial water use). (USGS, http:// given climate from a continuous stretch of vegetation pubs.usgs.gov/chapter11/chapter11M.html) covering the whole ground well supplied with water. It thus includes evaporation from the soil and Non-point source of pollution: Pollution sources transpiration from the vegetation of a specified region that are diffused and without a single point of origin in a given time interval, expressed as depth. (EDG) or not introduced into a receiving stream from a specific outlet. The pollutants are generally carried Precipitation: The total volume of atmospheric off the land by stormwater runoff. The commonly wet precipitation, such as rain, snow, and hail, on a used categories for nonpoint sources are agriculture, territory in a given period of time. (EDG) forestry, urban areas, mining, construction, dams and channels, land disposal, and saltwater intrusion. Recycled water: The reuse of water within the same (UNSD, online glossary of environment statistics) industry or establishment (on site). (EDG) Option benefits: Benefits derived from the continued Reused water: Wastewater delivered to a user existence of elements of the environment that may for further use with or without prior treatment. one day provide benefits for those currently living. Recycling within industrial sites is excluded. (EDG) (SEEA-2003, paragraph 7.37) River basin (see also catchment): An area having a Outflow: Flow of water out of a stream, lake, reservoir, common outlet for its surface runoff. (EDG) container, basin, aquifer system, etc. It includes outflows to other territories/countries, to the sea, and Rivers and streams: Bodies of water flowing to other resources within the territory. (EDG) continuously or periodically in a channel. (EDG) Perennial river: A river which flows continuously Runoff: The part of precipitation in a given country/ throughout the year. (Based on UNESCO/WMO territory and period of time that appears as stream International Glossary of Hydrology, 2nd ed., 1992) flow. (EDG) 42 ADDING WATER TO THE CHANGING WEALTH OF NATIONS APPENDIX 1 l Sewage sludge: The accumulated settled solids have to be paid by the distributor to replace the good separated from various types of water, either moist at the time it is sold or otherwise disposed of. (2008 or mixed with a liquid component, as a result of SNA, paragraph 6.146) natural or artificial processes. (OECD/Eurostat joint Transboundary waters: Surface or ground waters questionnaire on inland water) which mark, cross, or are located on boundaries Social transfers in kind: Individual goods and between two or more states; wherever transboundary services provided as transfers in kind to individual waters flow directly into the sea, these transboundary households by government units (including social waters end at a straight line across their respective security funds) and non-profit institutions serving mouths between points on the low-water line of the households, whether purchased on the market or banks. (UNECE, 1992, https://unece.org/fileadmin/ produced as non-market output by government units DAM/env/water/publications/brochure/Water_ or non-profit institutions serving households. The Convention_e.pdf) items included are (a) social security benefits and Transport margin: Transport charges payable reimbursements; (b) other social security benefits separately by the purchaser in taking delivery of in kind; (c) social assistance benefits in kind; and (d) goods at the required time and place. (2008 SNA, transfers of individual non-market goods or services. paragraph 6.141) (Based on 2008 SNA, paragraph 8.141) Urban runoff: That portion of precipitation on urban Soil water: Water suspended in the uppermost belt areas that does not naturally percolate into the ground of soil or in the zone of aeration near the ground or evaporate, but flows via overland flow, underflow, surface that can be discharged into the atmosphere by or channels, or is piped into a defined surface water evapotranspiration. (EDG) channel or a constructed infiltration facility. Standard river unit (SRU): A river stretch of one Use of water received from other economic units: kilometer with a water flow of one cubic meter per The amount of water that is delivered to an economic second. (SEEA-2003, paragraph 8.128) unit from another economic unit. (EDG) Supply of water to other economic units: The Wastewater: Water which is of no further immediate amount of water that is supplied by one economic value to the purpose for which it was used or in the unit to another and recorded net of losses in pursuit of which it was produced because of its quality, distribution. (EDG) quantity, or time of occurrence. However, wastewater Surface water: Water which flows over, or is from one user can be a potential supply of water to stored on, the ground surface. It includes artificial a user elsewhere. It includes discharges of cooling reservoirs, lakes, rivers and streams, glaciers, snow, water. (EDG) and ice. (EDG) 2020 Water body: A mass of water distinct from other Trade margin: The difference between the actual or masses of water. (UNESCO/WMO International imputed price realized on a good purchased for resale Glossary of Hydrology, 2nd ed., 1992) (either wholesale or retail) and the price that would ADDING WATER TO THE CHANGING WEALTH OF NATIONS 43 l APPENDIX 1 Water consumption: That part of water use period of time after use. Returns can be classified which is not distributed to other economic units according to the receiving media (water resources and does not return to the environment (to water and sea water) and to the type of water (such as resources, sea, and ocean) because during use it treated water and cooling water). (EDG) has been incorporated into products or consumed Water supply: Water leaving/flowing out from an by households or livestock. It is calculated as the economic unit. Water supply is the sum of water difference between total use and total supply; thus, supply to other economic units and water supply to it may include losses due to evaporation occurring the environment. (EDG) in distribution and apparent losses due to illegal tapping as well as malfunctioning metering. (EDG) Water supply to the environment: See water returns. Watercourse: A natural or manmade channel through Water supply within the economy: Water which or along which water may flow. (UNESCO/WMO is supplied by one economic unit to another. Water International Glossary of Hydrology, 2nd ed., 1992) supply within the economy is net of losses in distribution. (EDG) Water losses in distribution: The volume of water lost during transport through leakages and evaporation Water use: Water intake of an economic unit. Water between a point of abstraction and a point of use, and use is the sum of water use within the economy and between points of use and reuse. Water lost due to water use from the environment. (EDG) leakages is recorded as a return flow as it percolates to an aquifer and is available for further abstraction; Water use from the environment: Water water lost due to evaporation is recorded as water abstracted from water resources, seas, and oceans, consumption. When computed as the difference and precipitation collected by an economic unit, between the supply and use of an economic unit, it including rain-fed agriculture. (EDG) may also include illegal tapping. (EDG) Water use within the economy: Water intake of Water returns: Water that is returned to the one economic unit, which is distributed by another environment by an economic unit during a given economic unit. (EDG) 44 ADDING WATER TO THE CHANGING WEALTH OF NATIONS Physical supply table for water Flows from Flows Abstraction of water; production of water; generation of return flows the rest of from the Total supply the world environment Agriculture, Mining and Electricity, gas, Water collection, treatment, Sewerage Other Imports forestry, and quarrying, steam, and air and supply industries fishing manufacturing conditioning and supply Total (excluding Household construction household activity activity) Sources of abstracted water Inland water resources Surface water 440.6 440.6 Groundwater 476.3 476.3 Soil water 50 50 Appendix 2 Total 966.9 966.9 Other water sources Precipitation 101 101 Sea water 101.1 101.1 Total 202.1 202.1 Total supply abstracted water 1,169 1,169 Abstracted water For distribution 405.6 405.6 For own-use 108.4 114.6 404.2 23 10,8 100.1 2.3 763.4 Wastewater and reused water Wastewater Wastewater to treatment 17.9 117.6 5.6 1.4 235.5 0 49.1 427.1 Own treatment 0 Reused water produced For distribution 42.7 42.7 For own use 10 10 Return flows of water To inland water resources Surface water 300 0.5 52.5 0.2 352.7 Ground water 65 23.5 47.3 4.1 175 0.5 311.3 Soil water 0 Physical water supply and use accounts—Example from the SEEA Central Framework Total 65 23.5 300 47.3 4.6 227.5 0.7 664 To other sources 5.9 100 0.2 256.3 362.2 Total return flows 65 29.4 400 47.3 4.8 483.8 0.7 1,026.2 Evaporation of abstracted water, transpiration, and water incorporated into products Evaporation of abstracted water 76.2 43.2 2.5 1.8 10 0.7 3.6 138 Transpiration Water incorporated into products Total supply 267.5 314.8 812.3 479.1 261.1 627.3 55.7 0 1,169 3,986.8 ADDING WATER TO THE CHANGING WEALTH OF NATIONS APPENDIX 2 l 45 46 l Physical use table for water 2020 Flows Flows from Final Flows to the Abstraction of water; intermediate consumption; return flows from the the rest of Total use consumption environment environment the world APPENDIX 2 Agriculture, Mining and Electricity, gas, Water collection, treatment, Sewerage Other Households Exports forestry, and quarrying, steam, and air and supply industries fishing manufacturing conditioning and supply Total (excluding Household construction household activity activity) Sources of abstracted water Inland water resources Surface water 55.3 79.7 301 4.5 0 0.1 440.6 Groundwater 3.1 34.8 3.2 423.1 9.8 100.1 2.3 466.5 Soil water 50 50 Total 108.4 114.5 304.2 427.6 9.8 0.1 2.3 957.1 Other water sources Precipitation 0 1 100 100 Sea water 100 1.1 101.1 Total 0 0 100 1.1 1 100 0 201.1 ADDING WATER TO THE CHANGING WEALTH OF NATIONS Total use abstracted water 108.4 114.5 404.2 428.7 10.8 100.1 2.3 1,158.2 Abstracted water Distributed water 38.7 45 3.9 27.4 0 0 51.1 239.5 0 405.6 Own use 108.4 114.6 404.2 23 0 100.1 2.3 10.8 763.4 Wastewater and reused water Wastewater Wastewater received from 0 427.1 0 427.1 other units Own treatment 12 40.7 0 Reused water Distributed reuse Own use Total 12 40.7 0 0 0 427.1 0 0 0 479.8 Return flows of water Returns of water to the environment To inland water resources 668.6 668.6 To other sources 362.4 362.4 Total return flows 1,031 1,031 Evaporation of abstracted water, transpiration, and water incorporated into products Evaporation of abstracted water 138 138 Transpiration Water incorporated into products Total use 267.5 314.8 812.3 479.1 10.8 627.3 55.7 250.3 0 0 1,169 3,986.8 Source: SEEA Central Framework. APPENDIX 3 l Appendix 3 Botswana as an example of water accounting supply and use tables Figure A3.1 shows the physical supply and use of water in Botswana for 2014–15. The water accounts for Botswana are simplified supply and use tables. Many of the flows recorded and shown in Figure A3.1 were estimated, for example, the direct abstraction of water by households used coefficients of water use, while the flows returning from the economy to the environment use hydrological modeling. The scope of the accounts was also limited to surface water and groundwater; the use of soil water by rain-fed agriculture was not estimated.38 An interesting feature of Botswana’s account is that it shows the imports of water, which are supplied by the water supply industry in South Africa. These imports are not all of the water flows that enter from upstream countries. FIGURE A3.1: BOTSWANA—PHYSICAL WATER SUPPLY AND USE, 2014–15 (MILLION M3) Sea Water supply 2.0 9.8 10.3 0.1 12.0 41.2 Mining Mining Government Agriculture Other industries Households 68.2 31.1 0.7 87.8 7 21.1 Rest of Inland water resources world Wastewater Reuse water Water Return flows Source: Botswana Water Accounting Report (MLMWSS 2018). 38 The use of soil water by rain-fed agriculture was considered out of scope but could be estimated using tools such as WA+ and CropWat. https://www.fao.org/land-water/databases-and-software/cropwat/en/. ADDING WATER TO THE CHANGING WEALTH OF NATIONS 47 l APPENDIX 4 Appendix 4 Review of water accounting A4.1 INTRODUCTION A4.2 DATA SOURCES AND METHODS A global review was undertaken to assess the A three-step process was employed to identify water uptake of water accounting. The review is based accounts (Figure A4.1). The first step was a search of on a database of water accounts compiled by the known lists or sources of water accounts on the UN Australian National University as part of ongoing SEEA website.39 The second step was a Google search research into SEEA-based accounting. The summary and the third step was a search of the academic results of the review are presented in section 2.4 of literature via Scopus and Google Scholar. The second the main report, with more presented in Vardon et and third steps ensured a broader coverage of water al. (2023). This appendix provides the data sources accounting as the UN and World Bank sources were and methods for the review. primarily of accounts produced by governments or international agencies supporting governments using a SEEA-based accounting approach. FIGURE A4.1: SEARCH PATHWAYS STEP 1 List of countries with water accounts SEEA-UN 2021 National National/regional global assessment links accounts List of countries SEEA-UN with EEA website Knowledge base NCAVES, NCA, ANCA Reviews STEP 2 WAVES WB National accounts knowledge base FAO, IWMI, Google search Google search IHE Delft, WWAP Water accounting River basin accounts collaboration ADB STEP 3 National accounts Scopus search Literature review Academic papers/reports River basin accounts (Keywords: “Water account*”, “environemental-economical account*”+water, “natural capital account*” Reviews +water, “ecosystem account*”+water, “ecosystem services water”, “water provisioning service”) Source: Vardon et al. (2023). 39 https://seea.un.org/. 48 ADDING WATER TO THE CHANGING WEALTH OF NATIONS APPENDIX 4 l The first step was a thorough search of the UN mental account*” +water; “natural capital account*” SEEA website. From the results of the 2021 Global +water; “ecosystem account*” +water; “ecosystem Assessment (which collected a wealth of information services water”; and “water provisioning service.” on the status and progress of implementation of the No other restrictions were set. As a result, more SEEA in countries), a list of countries with water than 2,000 journals and documents of all types were accounts was made. Following the links provided on found, of which about 500 had the keyword “water the SEEA website or by searching the official website of account*” in the title. These were scanned to find responding institutions provided in the list, national water accounts and most of the accounts found were water accounts were accessed and downloaded. A for river basins. similar search was expanded to other countries on The water accounts found were entered into a Microsoft the list that reported having other environmental Access database that was developed specifically to store accounts or ecosystem accounts. In addition, and classify the accounts. The database was structured the knowledge base of the SEEA-UN website was into six tables connected to each other by a unique searched for related literature and project documents letter account. The six tables were: supported by the UN, including the “Natural Capital Accounting and Valuation of Ecosystem Services” • General information: Publishing agency, institu- (NCAVES), the “Enhance Natural Capital Accounting tionalized status, search strategy, sources of water Policy Uptake and Relevance” (EnhaNCA), and account, and reviewed documents with links. “Advancing Natural Capital Accounting” (ANCA). • Boundaries and methodology: Type of water The second step was a Google search for initiatives accounts, adopted framework and methodology, of other international organizations. This led to and spatial boundaries. the knowledge base of WAVES and various water • Sector and industry coverage: Industries accounting initiatives led by the Asian Development covered by ISIC classification; typical sector Bank (ADB), the Food and Agriculture Organization split shown in agriculture, energy, and mining (FAO) in cooperation with the World Water industry; and agricultural commodities covered. Assessment Programme (WWAP), the International • Timeframe: Publishing year, reference year, Water Management Institute (IWMI), and the IHE length of the time series, and gaps. Delft Institute for Water Education (IHE Delft). While the WAVES knowledge base provides access to mostly • Physical scope: Key physical indicators national-level water accounts, the other sources including import and export of water, water focused more on water accounts for river basins. sources, losses, evaporation, return of water and The Google search also helped find water accounts wastewater, types of produced water assets, and of some countries or regions, especially those with split shown for treated and untreated water for highly visible webpages for water accounts, such as water treatment plants, wastewater treatment Australia and Europe. plants, and desalination plants. The third step involved carrying out a systematic • Economic scope: Key economic indicators search in the Scopus database and Google Scholar including the running cost of water treatment, to find water accounts and reviewing documents wastewater treatment, and desalination; from academic and other sources. The following the value of produced water assets; and other keywords were used: “water account*”; “environ- economic information such as the value of mental account*” +water; “environmental and irrigated agriculture, rain-fed agriculture, economic account*” +water; “economic-environ- and hydroelectricity. ADDING WATER TO THE CHANGING WEALTH OF NATIONS 49 50 l WATER RISK AQUASTAT EUROSTAT OECD. STAT WISE WRR UNSD WASH FILTER APPENDIX 5 Publisher FAO European OECD EEA WRI UN WWF UNICEF/WHO Commission Geographic Global Europe Global Europe Global Global Global Global coverage Spatial National/ National/state/ National National, RBD, Regional, National Sub-basins National resolution regional RBD sub-unit national Appendix 5 Time 1958–2017 1970–2016 1970–2016 2002–2012 1959–2011 1990–2016 2000 – present 1950–2019 coverage + future + future projections projections Relevant • Sectoral • Sectoral • Renewable • Sectoral water • Renewable • Sectoral water • Renewable Proportion of ADDING WATER TO THE CHANGING WEALTH OF NATIONS variables surface water surface water freshwater abstractions freshwater abstracted freshwater population using: abstracted abstractions resources • Water use resources • Net resources • Drinking water • Groundwater • Fresh • Total water per supply • Annual water freshwater • Water scarcity services abstracted groundwater abstractions category and withdrawals supplied • Aridity • Sanitation • Freshwater abstracted • Return flow economic • Water stress • Renewable services • Water depletion abstracted as • Renewable sector index freshwater • Water use • Baseline water • Piped drinking the proportion freshwater • Modeled water resources water sources stress of renewable resources Global water databases and hydrological models availability • Sanitation water • Access to safe and use for facilities drinking water • Renewable current and connected to freshwater future climate • Future water sewer networks resources conditions discharge and water stress Main data • National • OECD/ • OECD / • Obligated • AQUASTAT/ • National • OECD • National sources statistical Eurostat joint Eurostat joint national WFD PCR-GLOBWB statistical • CGIAR statistical institutes questionnaire questionnaire reports of and other institutes institutes • WRI • Modeled • National • National EEA member sources • UNSD/UNEP countries and • WaterGAP values statistical statistical questionnaire institutes institutes cooperating • UN IGRAC • Eurostat/ • AQUASTAT countries UNSD/OECD • Agricultural • AQUASTAT • UNICEF/ WHO institutes • Various • Universities scientific publications Source: Kind et al. 2021.