Estimating the economic value of water in the industrial sector: A case study of the base metal and non-metallic mineral products industries

Articles in Press

Document Type : Applied Article

Author

Sadaf Jahangiri

Environmental Sciences Research Institute, Shahid Beheshti University, Tehran, Iran

10.22067/jwsd.v13i1.2602-1496

Abstract

Given the increasing scarcity of water resources and its vital role as an input in industrial production processes, this study estimates the economic value of water in two industries: the manufacture of basic metals and the manufacture of non-metallic mineral products. The research employs the production function approach based on the panel data econometric framework, using data from the Statistical Center of Iran for industrial establishments with 10 or more employees over the period 2004–2020 across six provinces, namely Khuzestan, Kermanshah, Kurdistan, Lorestan, Markazi, and Hamadan.

The results indicate that the economic value of one cubic meter of water in the manufacture of non-metallic mineral products is estimated at 2,882.96 thousand Rials, while in the manufacture of basic metals it is approximately 1,380.2 thousand Rials. In contrast, the production cost of one cubic meter of water is approximately 64.6 thousand Rials, whereas the tariff paid by industrial users is only 27.0 thousand Rials per cubic meter. These figures reveal a substantial gap between the actual economic value of water in the industrial sector, its production cost, and the tariff paid by industries. Specifically, the average ratio of the economic value of water to its production cost in the industrial sector is 33, while the ratio of the water tariff paid to its economic value is less than 1.27%. These findings highlight the necessity of reforming water pricing system and promoting the efficient use of water resources in order to reduce water consumption and improve water productivity in the industrial sector.

Keywords

Economic value of water

production function

water tariff

metal and non-metal industries

Iran

Subjects

• Water Management and Economy

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