| The world is facing a growing challenge in maintaining water quality and meeting increasing demands for water resources. This trend is evident in the Middle East where water scarcity has reached critical levels. To cope with shortage, many Middle Eastern countries are exploring unconventional water sources. However, most discussions and project analyses focus on the geopolitical dimension of the water crisis and supply planning, ignoring the additional social costs of water projects, like externalities. This study explores ways to include environmental impacts in the economic assessment of water supply options to determine how social costs, defined as private plus external costs, change the relative attractiveness of water supply alternatives. Using the marginal opportunity cost framework, the direct, external, and user costs of three water supply projects in Israel are valued: (1) groundwater extraction and depletion, (2) wastewater reclamation and reuse in agriculture, and (3) desalination. The study suggests that an analysis using private costs alone is misleading, since full social costing changes the relative attractiveness of the project alternatives. Therefore, Israeli policy makers may not always make socially efficient decisions about water supply. The research concludes by discussing the analysis within the broader policy context, highlighting the other policy options available to decision makers, additional research needs, and the difficulty of achieving sustainability in a political unstable region. |
