Water and energy: an economic binomial

The value and context of the connection between water and the economy was analysed in one of the final speeches in the Thematic Week devoted to energy.

Diego Azqueta (from the department of Economics and Economic History at Alcalá de Henares University) expressed some economic hypotheses about water and energy in the Water Tribune.

According to Azqueta, water and energy are interrelated commodities in their production and they have environmental effects. Water and energy are commodities from an economic point of view and they are scarce commodities. When producing them, we should decide how much water and energy we need and, above all, what the environmental, social and economic cost will be.
The EXTERNE project analyses the effects of the ways of generating electricity. This study is focused on two areas: the analysis of the complete life cycle of the electricity and the path of effect.

According to this work, there are two great environmental effects. The first is in the area of people’s health. In this case, the effect is located geographically close to where the electricity is generated. The second is the impact of the change through climate change which independently affects the place where the source of the energy can be found.

In the cost-benefit analysis, Diego Azqueta explained that it is necessary to look not just at the economic aspects but also at the environmental ones and he gave a specific studied example: the river Cidacos. In this case, it was proposed to give up water harnessing in exchange for improving the ecological wealth. This comes with a price, but they came to the conclusion that it was more profitable to produce “up-river” because the cost of purification dropped noticeably.

Diego Azqueta’s recommendation is to produce where the resources are because it is more profitable from an economic and environmental point of view. “We have a cost distribution for the water footprint that is really aberrant”, opined the economist.
Azqueta proposed the assignment of resources in an optimal fashion, but the big problem is that policies are being propitiated that contemplate, above all, energy independence and food safety. This policy restricts other market alternatives and is socially, economically and environmentally inefficient, the economist explained.