The Effects of Source Water Quality on Drinking Water Treatment Costs: A Review and Synthesis of Empirical Literature

Watershed protection, and associated in situ water quality improvements, has received considerable attention as a means for mitigating health risks and avoiding expenditures at drinking water treatment plants (DWTPs). This study reviews the literature linking source water quality to DWTP expenditures. For each study, we report information on the modeling approach, data structure, definition of treatment costs and water quality, and statistical methods. We then extract elasticities indicating the percentage change in drinking water treatment costs resulting from a 1% change in water quality. Forty-six elasticities are obtained for various water quality parameters, such as turbidity, total organic carbon (TOC), nitrogen, sediment loading, and phosphorus loading. An additional 29 elasticities are obtained for land use classification (e.g., forest, agricultural, urban), which often proxy source water quality. Findings indicate relatively large ranges in the estimated elasticities of most parameters and land use classifications. However, average elasticities are smaller and ranges typically narrower for studies that incorporated control variables consistent with economic theory in their models. We discuss the implications of these findings for a DWTP's incentive to engage in source water protection and highlight gaps in the literature.