Key elements to recognize in the valuation of groundwater are:
The strategic value of groundwater (water that is located near 'high-value' uses such as urban or prime agricultural areas) as opposed to aquifers located in less strategic locations.
Aquifers with high-quality water that is not vulnerable to pollution (an aquifer that can be reserved more readily for strategic uses may have a higher inherent 'value' than a more vulnerable one).
The types of uses (aquifers that produce high-value environmental services, such as instream flows, may have a higher inherent value than others where such services are absent).
In most situations, groundwater is a common property resource with extremely high use value. The term 'common property' refers to the status of groundwater as a resource to which all overlying landowners generally have access. The term is not intended to reflect the legal status of groundwater as a 'public', 'common' or 'private' resource.
In some societies, groundwater is or has been linked to land ownership. In others it is viewed as a 'common heritage' (not to be confused with the British 'common law' system) to which all should have equal access, at least for basic needs. These conflicting positions are enshrined in religious doctrines such as the Shari'a (where the 'right to thirst' is a basic principle) and in western legal concepts dating back to Ancient Rome (in which groundwater ownership follows land ownership). At the same time, rights of access to groundwater have generally been linked to land ownership. Thus, there is often an unclear distinction between the 'private' nature of groundwater rights and the 'public' ownership of the resource itself. This contradiction is brought to the fore by increased recognition of the need for water to be used more efficiently. Market mechanisms can play a major role in achieving efficiency objectives, and more emphasis is now being given to the nature of water as an economic resource in global debates. This emphasis translates into initiatives to clarify water rights, encourage water markets and issue 'concessions' in some countries. However, the process may be stillborn if there is no recognition that water resources, by their very 'public' nature, require regulation and are not amenable to absolute free-market solutions. As these initiatives increase, tensions related to underlying ethical issues can also be expected to rise. If groundwater is viewed as a common heritage to which all have fundamental rights of access, the ethical basis of unregulated concessions or markets that allocate water depending on ability to pay becomes controversial.
Estimates of the value of groundwater have assumed great importance in the context of the massive investments required to avoid pollution, remediate polluted aquifers and control overdraft. Some objective basis, related to the total economic value of the resource (including wider social and environmental values), is required to determine how much to invest in specific situations. However, the available valuation methods are partial at best.
Techniques for quantifying the economic value of groundwater resources include:
Contingent valuation, which essentially involves asking people how much they would pay to maintain the resource or services dependent on it under carefully specified conditions.
Hedonic pricing, e.g. obtaining a measure of the value of groundwater through differences in the value of lands with and without access to it.
Derived demand and production cost analysis, essentially estimating the contribution of water to profits within a given set of economic activities.
Loss analysis, estimating the value of groundwater as equivalent to the total social costs incurred when drought or depletion constrain economic activity.
Averting behaviour in which the value of groundwater is estimated by the investments made to avoid water shortage.
Substitution, the value of groundwater as equivalent to the least cost alternative source of supply for meeting the same set of services.
Many of the above techniques have been discussed in detail for the United States of America (National Research Council, 1997) and in the context of Jordan (Schiffler, 1998).
The above quantitative techniques do not capture adequately many of the qualitative values associated with groundwater, the full range of services and benefits that it provides. They also assume perfect knowledge of the groundwater systems in space and time and the precise impact of uses (including disposal). Non-use and in situ values, such as the prevention of saline intrusion and the protection of the environment against low-frequency events, are particularly difficult to establish values for. For example, valuation of ecosystem losses due to changes in groundwater conditions is an inherently subjective exercise. Some sections of society approach the environment from a spiritual and religious perspective and, in doing so, place essentially infinite value on the natural resource base that sustains environmental conditions. Other sections of society focus on specific economic activities when valuing natural resources. Weighing the relative importance to give to these different perspectives is in itself a subjective value judgement, and one that is often implicit in the valuation methodology selected. A similar ethical divide surrounds questions of ability versus willingness to pay. Quantitative measures of willingness to pay established by any of the primary methods ignore questions of ability to pay. For example, the socio-economic status of respondents can colour their responses in contingent valuation surveys. Access to groundwater is often a critical factor in the quality of life for socio-economically marginal populations in developing countries. However, their ability to pay for maintaining groundwater resources is often minimal. How this contradiction can be resolved depends on whether groundwater is treated as a common heritage (to which all have equal and fundamental rights) or as an economic good.
Beyond the ethical debate lie practical questions regarding the degree of social and technical understanding of groundwater on which value estimates are established. A basic problem concerns the interlinked and sequential nature of groundwater uses. 'Waste' from one use is often the primary source of water for a subsequent use. Tracing the chain of uses is a difficult task, as is valuing the contribution of groundwater to each one. Beyond this, it is often difficult to determine whether values reflect low-frequency but high-consequence events adequately, e.g. determining whether a value for groundwater in agriculture reflects the consequences of droughts that occur with frequencies of 20, 50 or 100 years. This relates closely to issues of information and understanding. The general public may tend to view groundwater as an underground bowl replenished regularly by rain. Values derived from this viewpoint are unlikely to reflect the finite nature of many groundwater resources or their vulnerability to pollution. Similarly, it is difficult to determine the extent to which other forms of capital can substitute for groundwater should existing uses constrain availability. The limits of substitution may only become evident when a chain of sequential and interdependent uses is understood fully. In sum, the degree to which people understand groundwater and its contributions to economic, environmental and other services may well influence the value they place on the resource.
The aquifer systems under the most pressure from competing uses are typically those where municipal users are vying for adjacent groundwater being used by agriculture. In many instances, these systems are in arid and semi-arid zones where surface water alternatives are not available, e.g. the North China Plain and the Quetta Basin in Baluchistan, Pakistan. Reallocation is occurring, but it is generally forced, either as deeper water-supply wells capture water away from adjacent irrigation wells or as irrigation wells are closed down. The growing municipalities in the central section of the Huaihe Basin in China have been able to capture groundwater from peri-urban irrigation but not through any planned reallocation (United Nations, 1999). Reallocation of groundwater rarely occurs through the consensual transfer of use rights and in these instances it could be argued that the application of valuation methods would achieve little. Irrespective of the technical ability to capture groundwater, irrigated agriculture cannot compete with higher value municipal uses on economic grounds alone.
Concern has been voiced about the decline in water tables in key grain producing areas of the world. Brown (2002) cites China, India and the United States of America. However, others are less pessimistic. Custodio (2002) and Price (2002) call for more precise information on the hydrodynamic state of the aquifers in question.
However, this is not to say that the depletion of key aquifers in major grain producing areas is not significant. In areas of northern India and China, the resulting adjustment of local agricultural systems is causing migration from the land and social disruption (Moench, 2002). Equally, the long-term impact of aquifer drawdown is affecting surface flows and seepage, resulting in the loss of locally important wetlands. However, most of this evidence is anecdotal. Efforts to quantify the dependency of food security on groundwater using available national data can only be partial (Burke, 2002). Other more detailed attempts (FAO, in press) have illustrated the local problems with matching groundwater data and food production.
The concern that the reliance on groundwater irrigation is threatening global food security may be overplayed. Land irrigated by groundwater goes in and out of production incrementally as agricultural systems and markets respond to natural resource limits. The possibility that a shortfall in China's grain requirements would suddenly soak up the international market in traded grain may be remote, but what is troubling is the compounded effects of long-term drawdown and drought. In periods of recurrent drought when anticipated rainfall inputs are substituted by groundwater, the 'spike' in groundwater demand can result in sharp reductions at regional level. For example, stream flows in the western United States of America have been reconstructed based on dendrochronology (Meko et al., 1991). Over the last 300 years, the average drought has lasted 5 years and some have lasted 15 years. Water levels in the Ogallala aquifer have been declining during periods of 'normal' or above average precipitation and the western United States is facing one of its most keenly felt periods of drought. Therefore, global food production problems could conceivably occur if there were simultaneous long-term drought across several grain producing regions where groundwater levels have already been declining. Irrespective of this, groundwater depletion, particularly in shallow aquifers, is already having direct socio-economic and environmental effects. Some of these impacts may be lagged over several years or decades as aquifer hydraulics and hydrochemistry adjust to intensive pumping regimes. However, global analysis reveals little of the inherent tensions and opportunities that are experienced with groundwater irrigation on local scales.
