Bulk water extraction charge calculator: a tool for sustainable water management in Ontario

Abstract

Given growing anthropogenic pressures on water resources and uncertain climatic conditions, sustainable water management using effective demand management strategies will be crucial to tread the path towards sustainable development. This paper makes a contribution to the interdisciplinary realm of water management by designing a flexible tool that overcomes the weaknesses of current extraction charges and reliance on general taxes to finance water management initiatives. These dynamic water extraction charges are envisioned to be important policy instruments to increase water security in Ontario. To ensure sustainable use of provincial water resources, the province of Ontario not only extended the moratorium imposed in 2016 on new groundwater extraction permits for water bottling until 1 January 2020, but is also reviewing its water taking policies. While the moratorium and the extraction charge hike of $500/Million liters is focused on water bottlers, the need for more long-term comprehensive policy approaches to sustainable management is apparent. Economic theory suggests that pricing a resource by reflecting its economic value and scarcity can incentivize optimal consumption. While economic instruments like extraction charges exist in Ontario, a methodological calculation linking the level of these charges to the actual costs and hydrological water risks is largely lacking. Addressing this gap, this paper designs a calculator that operationalizes the conceptual pricing framework for Ontario to transparently arrive at water extraction charges. The public cost data for water resource management initiatives are considered along with extreme water contamination events as contingency environmental costs. Using data from Statistics Canada for annual volume of water withdrawn, the base provincial water extraction charge for all permit liable sectors is calculated to be $23.08/Million liters. Moreover, price multipliers reflecting the sub-watershed scale water quantity risks (identified in sub-watershed source protection assessment reports) along with sector and source specific risks were embedded in the calculator.