Science of the Total Environment 408 (2010) 4396–4402

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Science of the Total Environment

j o u r n a l h o m e p a g e : w w w. e l s ev i e r. c o m / l o c a t e / s c i t o t e n v

Economic feasibility study for wastewater treatment: A cost–benefit analysis

María Molinos-Senante a,⁎, Francesc Hernández-Sancho a, Ramón Sala-Garrido b
a
Department of Applied Economics II, Faculty of Economics, University of Valencia, Campus dels Tarongers, 46022 Valencia, Spain
b
Department of Mathematics for Economics, Faculty of Economics, University of Valencia, Campus dels Tarongers, 46022 Valencia, Spain

a r t i c l e i n f o a b s t r a c t

Article history: Water resource management should be made from a multidisciplinary perspective. In this sense, economic
Received 30 March 2010 research into the design and implementation of policies for the efficient management of water resources has
Received in revised form 21 June 2010 been emphasized by the European Water Framework Directive (WFD). Cost–benefit analysis (CBA) is one of
Accepted 3 July 2010
the more widely accepted economic instruments since it is a rational and systematic decision-making
Available online 29 July 2010
support tool. Moreover, the wastewater treatment process has significant associated environmental benefits.
However, these benefits are often left uncalculated because they have no market value. In this paper, using
Keywords:
Cost–benefit analysis
the concept of shadow price, a quantification of the environmental benefits derived from wastewater
Economic feasibility treatment is made. Once the environmental benefits are estimated and the economic costs of the treatment
Environmental benefits processes are known, a CBA is made for each of the wastewater treatment plants (WWTPs) under study. In
Shadow prices this way, a useful economic feasibility indicator is obtained for WWTP operation.
Wastewater treatment © 2010 Elsevier B.V. All rights reserved.

1. Introduction
As environmental quality and sustainable use of natural resources
have been recognized as a real social need, authorities have tried to
find the most appropriate tools for environmental protection. In most
industrialized countries, the so-called direct regulation instruments
have been traditionally applied. Yet, this type of instrument has
generally failed to achieve a high level of environmental protection
and there have been high costs for all of society (Zhang & Wen, 2008).
As a result, a number of authors (Gayer & Horowitz, 2006; Wissel &
Watzold, 2010; Song et al., 2010; among others) argue that market
principles should be used as decision support tools for the implemen-
tation of policies and selection of measures to assist environmental
protection.
In the field of water resource management, the EU Water Framework
Directive (WFD) has introduced a new approach to water planning for
the achievement of the environmental objectives of obtaining a good
ecological status for European water bodies. The directive allocates a
very important role to economic analysis (Helming & Reinhard, 2009).
For dealing with the requirements demanded by the WFD,
especially those related to the cost recovery for water services,
economic valuation is presented as a useful tool for implementing
efficient and effective policies and strategies for the management of
water resources (Moran & Dann, 2008). The WFD requires that cost–
benefit analyses (CBA) are made with the aim of identifying cases in
which the adoption of measures to achieve a good ecological status for
⁎ Corresponding author. Tel.: +34 963828349; fax: +34 963828354.
E-mail address: Maria.Molinos@uv.es (M. Molinos-Senante).
water bodies implies disproportionate costs. In this sense, all of the
benefits, including those which have a nature of ‘non-market’, i.e.,
those whose value is not determined by the market, but have a high
value because they uniquely contribute to improving people welfare,
and costs must be integrated into a CBA as a decision support tool.
Historically, the application of CBA in the evaluation of projects has
been amended in the function of the objectives of the development
policies. There are three stages:
1) Traditional approach: a clear economic approach that aims to
increase the level of welfare in monetary terms. This approach was
applied until the late 1960s.
2) Socio-economic approach: arises when the concept of social equity
is incorporated. The aim is to achieve equitable income
distribution.
3) CBA with environmental externality valuation is the third
approach and results from the incorporation of environmental
criteria are included in the decision-making process. This type of
CBA originated in the 1980s (Pearce & Nash, 1981; Pearce &
Markandya, 1988; Sugden & Williams, 1988; among others) and
became more widespread in the 1990s (Gramlich 1990; Johans-
son, 1993; Hanley & Spash, 1993; Weiss, 1994; among others).
In the water resource context, it is known that wastewater
treatment has important associated environmental benefits, and in
economic terms we could define these as positive externalities.
However, in most cases these environmental benefits are not
quantified because they have no market value. In spite of this, the
monetary valuation of these externalities is necessary to justify the
economic feasibility of wastewater treatment projects.

0048-9697/$ – see front matter © 2010 Elsevier B.V. All rights reserved.
doi:10.1016/j.scitotenv.2010.07.014
 M. Molinos-Senante et al. / Science of the Total Environment 408 (2010) 4396–4402 4397

In this sense, the economic valuation of externalities in the field of from the wastewater treatment process is carried out by calculating
water reuse is acquiring particular importance. An example of this the shadow prices associated with undesirable outputs obtained in
growing interest is found in the paper of Godfrey et al. (2009), who the wastewater treatment process. Once the environmental benefit in
made a CBA applied to a greywater reuse system in India. Monetary monetary terms is estimated and the economic cost of the wastewater
values of external benefits and costs in terms of environmental and treatment is known, a CBA is carried out to obtain a representative
health benefits were derived by using conventional economic indicator of the economic feasibility for each WWTP.
methods for valuation like hedonic prices and contingent valuation. The remainder of the paper is organized as follows. Section 2
Likewise, Seguí et al. (2009) used travel cost method to determine the describes the methodology used to determine the net profit. Likewise,
environmental benefits arising from wastewater reuse in the context this section provides the methodology used to quantify the environ-
of a wetland restoration project. Chen & Wang (2009) propose a net mental benefits of the wastewater treatment process. In Section 3, the
benefit value model for the cost–benefit evaluation of reuse projects data are described for implementing a shadow pricing model for the
which is applied in a residential area of China. wastewater treatment plants under study. In Section 4 empirical
Different methodologies for the quantification and internalization results in relation to operating cost, environmental benefits and net
of environmental externalities arising from investment projects have profit are described and, finally, Section 5 shows the conclusions.
been developed from economic theory. The literature shows that, in
most applications related to water resources, the quantification of 2. Methodology
these externalities has been made using the contingent valuation
method (CVM) (Bergstrom et al., 2000; Bateman et al., 2006; Birol The CBA is made to compare the economic feasibility associated
et al., 2006; Del Saz et al., 2009; among others). with the implementation of different proposals. CBA starts from the
Although many authors consider the CVM a consolidated technique premise that a project should only be commissioned if all the benefits
since it is supported by numerous practical applications, in the scientific exceed the aggregate costs. Accordingly, the benefits of each proposal
community there is no unanimous consensus on the validity of this are compared with their costs by using a common analytical
methodology as a tool for the valuation of environmental goods (Boyle methodology. The net profit of each option is the difference between
et al., 1993; Diamond & Hausman, 1994; Shabman & Stephenson, 2000; benefits and costs (see Equation 1).
among others).
In fact, from the pioneering work by Färe et al. (1989) and NP = ∑Bi −∑Ci ð1Þ
successive developments (Färe et al. 1993, 1996, 2006; Yaisawarng
and Klein, 1994; among others) a valuation methodology has been where NP is the net profit, Bi is the value of the benefit item i, and Ci is
developed for undesirable outputs with no market value. By using the the value of the cost item i. For a given project, if the result of the
concept of distance function, a shadow price is calculated for those calculation is NP N 0, then the project is economically viable, while if
goods arising from human and productive activities that have no the result of the calculation is NP b 0 then the project is not viable in
market value, but create substantial environmental impacts. Some economic terms. The best option offers the highest net profit (Chen
empirical applications of this method are found in papers by Coggin and Wang, 2009).
and Swinton (1996), Swinton (1998), Reig et al. (2000), Nguyen Van In the field of wastewater treatment, an economically feasible
Ha et al. (2007), and Hernández et al. (2010). WWTP means that all the benefits arising from this process exceed its
It is important to emphasize that these undesirable outputs can be total costs and, therefore, it is shown that wastewater treatment is a
considered negative environmental externalities associated with a positive process not only from an environmental point of view, but
production process. Shadow prices calculated according to this also economically.
methodology represent the value of external effects that could Obviously, for the implementation of a CBA, benefits and costs
damage the environment in the case of inadequate management. must be expressed in the same units. However, in projects with
This is equivalent to the value of the positive externalities associated environmental externalities this rarely happens. Due to the hetero-
with avoiding the discharge of pollution into the environment. geneity in the measurement units of costs and benefits, it is necessary
The advantages of this externality valuation methodology include to use monetary units as a method of homogenization — and this
the following: (i) shadow prices could be used to determine income enables the application of a CBA.
gained in case of privatization of some resources, (ii) authorities can
use the information provided by the shadow prices to set rates for the 2.1. Cost of wastewater treatment process
use of environmental services, or to compare the current rates with the
marginal revenue generating (Färe et al. 2001), (iii) can help society to The quantification of the costs associated with the operation of
understand the benefits generated as a result of environmental WWTPs is straightforward because these costs are strictly controlled
improvement programs and (iv) shadow price models can allow by the operating companies. In this paper, operation costs have been
economists a further check into estimated measures of willingness to grouped into five categories — as shown in Table 1.
pay from alternative models such as the CVM, or capitalization
methods (Färe et al. 2001). Shadow price quantification has very low Table 1
costs in comparison to always expensive surveying processes. Sample description (Source: EPSAR).
In spite of these advantages, the quantification of environmental Average Deviation Maximum Minimum
externalities using shadow price methodology also has some limita-
Inputs (€/year) Energy 113,233 50,470 219,847 46,082
tions in relation to stated preference methods, such as CVM and
Staff 205,375 116,874 519,225 57,117
choice experiment method. These methods could be more appropri- Reagents 86,545 64,553 199,846 18,793
ate than the shadow price method when we try to estimate the total Waste 97,448 105,198 347,832 18,793
economic value that are the only techniques that in theory are capable management
Maintenance 129,735 80,564 295,101 9201
of estimating both use and non-use values.
Desirable output Treated 2,879,352 2,029,767 7,895,321 1,050,327
The aim of this paper is to obtain a useful indicator of the economic (m3/year) water
feasibility of the operation and maintenance of the wastewater Undesirable outputs SS 1,111,429 1,085,214 2,116,821 341,727
treatment plants (WWTPs). Considering the pros and cons of different (kg/year) COD 2,072,557 1,737,257 4,701,455 773,965
environmental externality valuation methodologies, in this empirical N 83,789 63,722 233,847 20,860
P 16,124 15,977 64,593 2482
application the quantification of the environmental benefits derived
4398 M. Molinos-Senante et al. / Science of the Total Environment 408 (2010) 4396–4402

The energy cost (x1) includes the cost related to the fixed part of The translog function offers the greatest flexibility, and is therefore
the energy consumption (power term) and the variable part (energy the most used. When applied to a problem with k units, n inputs and
consumption) of the installation. Staff costs (x2) reflect wages, social moutputs the formula is:
security charges, taxes, and social insurance. The term reagents (x3)
includes the cost of the reagents required for water and sludge. Waste k k 0
N
k
M
k
costs (x4) include the costs associated with waste and sludge ln D0 ðx ; u Þ = α0 + ∑ βn ln xn + ∑ αm ln um ð3Þ
n=1 m=1
management. Finally, the cost of maintenance (x5) is considered —
including concepts such as equipment and machinery maintenance 1 N N
k k
+ ∑ ∑ βn n 0 ðln xn Þðln xn 0 Þ
and replacement. 2 n = 1 n0 = 1
In general, WWTP operating costs are influenced by the effluent
1 M M
k k
quality. In this sense, one can roughly distinguish three types of + ∑ ∑ αm m 0 ðln um Þðln um Þ
2 m = 1 m0 = 1
treatment: (i) primary treatment which involves screening, grinding
and sedimentation to remove the floating and settleable solids found N M
k k
in wastewater, (ii) secondary treatment that is accomplished by a + ∑ ∑ γn m ðln xn Þðln um Þ:
n=1 m=1
biological process and sedimentation allowing to remove organic
material that is either colloidal in size and dissolved, and (iii) tertiary
To calculate the parameters (α, β, γ) the following linear program
treatment which permits the removal of specific contaminants not
was used:
normally removed during conventional secondary treatments such as
nutrients and pathogens. According to EPSAR (2009), the average K h i
k k
WWTP operating costs are 0.12, 0.26 and 0.32 €/m3 for primary, MaxZ = ∑ ln D0 ðx ; u Þ− ln 1
secondary and tertiary treatments respectively. k=1
s:t: :
k k
2.2. Environmental benefits of the wastewater treatment process ðiÞ ln D0 ðx ; u Þ ≤ 0
k k
∂ ln D0 ðx ; u Þ
The quantification, in monetary terms, of the environmental ðiiÞ ≥ 0; ðm = 1Þ
benefits derived from wastewater treatment is much more complex ∂ ln ukm
ð4Þ
than calculating costs — because these benefits are not captured by k
∂ ln D0 ðx ; u Þ
k

the market. ðiiiÞ ≤ 0; ðm 0 = 2; 3; 4:::Þ

∂ ln ukm 0
In this paper, and in accordance with Hernandez et al. (2010),
M N N
quantification of environmental benefits has been made by calculating ðivÞ ∑ αm = 1; ∑ βnn0 = ∑ γnm = 0
0
the shadow prices of undesirable outputs obtained from wastewater m=1 n =1 n=1

treatment. Wastewater treatment can be considered a production 0

ðvÞ αmm0 = αm0 m ; m = 1; :::; M; m = 1; :::; M
process in which a desirable output (treated water) is obtained 0
βnn0 = βn0 n; n = 1; :::; N; n = 1; :::; N:
together with a series of pollutants (organic matter, phosphorus, and
nitrogen, etc.). Contaminants extracted from wastewater are consid-
ered undesirable outputs because if they were dumped in an The relationship of duality between the distance function and the
uncontrolled manner they would cause a negative impact on the revenue function (Shephard, 1970) creates the link between relative
environment. and absolute prices (Färe et al. 1993). The relationship between the
The shadow price valuation methodology for undesirable outputs two functions can be expressed as:
(Färe et al. 1989) is based on the concept of the distance function.
Conceptually, a distance function generalizes the concept of conven- Rðx; uÞ = Max fru : D0 ðx; uÞ ≤ 1g ð5Þ
u
tional production functions and measures the difference between the
outputs produced in the process under study and the outputs of the Table 2
more efficient process. It is considered that the most efficient process Operating costs of WWTPs expressed in €/m3.
is that which minimizes input consumption and undesirable output
WWTP Energy Staff Reagents Waste Maintenance Total
generation while maximizing the generation of desirable output. The management
distance function provides the distance of a vector of outputs from the
1 0.0342 0.0801 0.0371 0.0212 0.0471 0.2197
maximum output frontier and starts from a vector of constant inputs.
2 0.0156 0.0442 0.0245 0.0108 0.0292 0.1243
Assuming that the production process uses a vector of N inputs x ∈ RN + 3 0.0221 0.0628 0.0288 0.0385 0.0398 0.1920
to produce a vector of M outputs u ∈ RM +, the distance function is 4 0.0243 0.0563 0.0181 0.0458 0.0243 0.1688
defined as: 5 0.0432 0.0611 0.0185 0.0149 0.0383 0.1760
6 0.0329 0.0425 0.0162 0.0105 0.0235 0.1256
7 0.0214 0.0499 0.0123 0.0084 0.0238 0.1158
8 0.0521 0.0851 0.0209 0.0194 0.0411 0.2186
9 0.0708 0.0698 0.0305 0.0453 0.0471 0.2635
D0 ðx; uÞ = Min fθ : ðu = θÞ ∈ PðxÞg ð2Þ 10 0.0952 0.1243 0.1137 0.2542 0.1617 0.7491
11 0.0469 0.0952 0.0535 0.0085 0.0668 0.2709
12 0.0864 0.1038 0.0419 0.0541 0.0652 0.3514
13 0.0278 0.0482 0.0128 0.0136 0.0252 0.1276
where P(x) is a vector of outputs that are technically viable and use 14 0.0367 0.0896 0.0096 0.0686 0.0183 0.2228
the vector of inputs x, (u/θ) is output ratio in production frontier, 15 0.0507 0.1274 0.0403 0.0232 0.0645 0.3061
while θ is a ratio between zero and one, that is, D0 (x,u) ∈ [0,1]. Thus, 16 0.0841 0.0554 0.0575 0.0115 0.1009 0.3094
17 0.0965 0.1758 0.0915 0.1537 0.1272 0.6447
D0 (x,0) = 0 and D0 (x,u) = 1 if u belongs to production frontier, i.e.,
18 0.1758 0.2441 0.0821 0.0527 0.1407 0.6954
the most efficient. High values of D0 indicate a good approximation to 19 0.0369 0.1142 0.0715 0.0413 0.1232 0.3871
the production frontier and therefore high efficiency. That is, a 20 0.0573 0.0718 0.0274 0.0928 0.0538 0.3031
production process using a minimum of inputs to produce a particular 21 0.0628 0.0473 0.0144 0.0181 0.0373 0.1799
output (in our case wastewater treated with a certain quality) will be 22 0.0265 0.0435 0.0142 0.0068 0.0248 0.1158
Average 0.0392 0.0712 0.0301 0.0342 0.0453 0.2200
placed on the production frontier (Hernández and Sala, 2009).
 M. Molinos-Senante et al. / Science of the Total Environment 408 (2010) 4396–4402
Fig. 1. Operating cost distribution.
D0 ðx; uÞ = Max f ru : Rðx; uÞ ≤ 1g
r
where R(x, u) is the revenue function and r represents output prices.
Under the assumption that distance and revenue functions are
differentiable, the Lagrange multiplier method and Shephard's dual
lemma enable us to calculate shadow prices. This deduction of
shadow prices for undesirable outputs means assuming that the
shadow price of an absolute desirable output coincides with the
market price. If m is a desirable output whose market price is rm equal
to its shadow price (r0m), and if m' is an undesirable output and rm′ is
the shadow price of each undesirable, for all m' ≠ m the absolute
shadow prices are given by (Färe et al. 1993):
 operating costs between these two groups.
o ∂Do ðx; uÞ ∂um
rm0 = rm  :
∂Do ðx; uÞ ∂um0
This paper proposes an application of the methodology described
above in the field of wastewater treatment in order to make a cost–
benefit analysis that includes environmental externalities. The results
will provide information about the economic feasibility of WWTP
operation.
3. Sample data
The sample used in this empirical application consists of 22 WWTPs
in the region of Valencia on the Spanish Mediterranean coast.
Statistical information for the year 2007 has been supplied by the
regional wastewater treatment authority (EPSAR). The volume treated
by each WWTP varies between 1,000,000 and 8,000,000 m3/year
(Table 1).
Wastewater treatment process is characterized by a desirable
output production, treated water (u1), and four undesirable outputs:
suspended solids (SS) (u2), chemical oxygen demand (COD) (u3),
nitrogen (N) (u4), and phosphorus (P) (u5). Necessary inputs to carry
out the treatment are: energy (x1), staff (x2), reagents (x3), waste
management (x4), and maintenance (x5).
Table 3
Operating costs depending on nutrient removal treatment in €/m3.
WWTP Number WWTP Energy
Without nutrient removal treatment 10 0.0312
With nutrient removal treatment 12 0.0356
4399
4. Results
4.1. Operation costs
As a starting point for a CBA, WWTP operating costs in €/m3 are
listed below. These costs have been grouped into five categories:
energy, staff, reagents, waste management, and maintenance (see
Table 2).
As shown in Table 2, the operating costs of the studied WWTPs are
very variable, since the minimum value is 0.1158 €/m3, while the
maximum is 0.7491 €/m3 (6.5 times higher). The weighted average,
according to the treated volume of wastewater is 0.2200 €/m3.
Fig. 1 shows the operating cost distribution in weighted averages
depending on the treated wastewater volume by each WWTP. The
most important item is staff, representing approximately one third of
the total costs. Maintenance and energy costs are the next in
importance and represent 21% and 18% respectively. Waste manage-
ð6Þ ment and reagent costs have a similar percentage weight, contribut-
ing 15% and 14% respectively to the total cost.
Taking into account the large differences in WWTP operating costs
(Table 2) and the fact that some include specific nutrient removal
treatment while others lack this process, it is interesting to study
operating costs in the function of the type of treatment made by the
WWTPs under study. According to treatment description provided in
subsection 2.1, the first group of WWTPs has tertiary treatment while
the other has secondary treatment. This is important because the
presence or absence of nutrients in treated wastewater is a key aspect
in relation to environmental benefits derived from wastewater
treatment processes.
On this basis, two groups of WWTPs have been differentiated:
plants that have specific nutrient removal treatment; and those that
do not. We hypothesized that there are significant differences in
Table 3 shows the distribution of the average operating costs,
ð7Þ
weighted by the volume of wastewater treated for both groups.
It is shown that WWTPs with specific nutrient removal treatment
have average operating costs higher than those that only remove
nutrients associated with the growth of micro-organisms. A variance
analysis was made to assess whether these cost differences are
statistically significant. The obtained p-value is 0.306, and therefore
with 95% confidence we can say that the differences for the average
operating costs between the two groups of WWTPs are not significant.
Only if we analyze in detail the operating cost structure for each
group of WWTPs can it be seen that plants with a specific nutrient
removal treatment have much higher costs for reagents. The
divergence between both groups of WWTPs in this input is 0.0158
€/m3, representing 50% of the total operating cost difference between
the two groups of plants.
To see if these cost differences in reagents are really significant, a
variance analysis was made. The obtained p-value was 0.0084, and
therefore with 95% confidence it is demonstrated that reagent cost
differences are statistically significant. This result is logical if we bear
in mind that for the plants under study, phosphorus removal is
achieved by chemical precipitation with the addition of various
chemical reagents.
Once the WWTP operating costs are quantified, the next step in
performing the CBA is determining the environmental benefits
derived from the wastewater treatment process for each plant.
Staff Reagents Waste management Maintenance Others Total
0.0651 0.0213 0.0235 0.0345 0.0071 0.1827
0.0705 0.0371 0.0272 0.0354 0.0091 0.2149
4400 M. Molinos-Senante et al. / Science of the Total Environment 408 (2010) 4396–4402

Table 4
Shadow prices of undesirable outputs in €/kg.

COD SS N P

−0.1312 −0.0051 −8.0604 −30.9442

4.2. Environmental benefits

The environmental benefits, expressed in monetary terms, have

been estimated by calculating the shadow prices of undesirable
outputs obtained in the wastewater treatment process. These shadow
prices reflect the value of the environmental damage resulting if these
pollutants were dumped in an uncontrolled manner, i.e., these prices
represent an approximation of the environmental benefits derived
from the treatment process.
In this sense, we consider wastewater treatment as a productive
process in which five inputs (energy, staff, reagents, waste manage-
ment, and maintenance) are used to produce a desirable output (clean
water) together with four undesirable outputs (nitrogen, phosphorus,
suspended solids, and chemical oxygen demand).
Following the methodology described above, function distance
and shadow prices for undesirable outputs are estimated for each
WWTP under study. Table 4 shows the obtained values (expressed in
weighted average according to treated wastewater volume) for the
four undesirable outputs considered.
According to the literature (Nguyen Van Ha et al. 2007; Hernandez
et al. 2010; among others), shadow prices obtained for undesirable
outputs are negative as they are not associated with marketable
outputs. However, from an environmental point of view these shadow
prices can be interpreted positively because they represent damage
avoided, or an estimation of the environmental benefits obtained by
treating wastewater.
By considering the volume of pollutants removed in the treatment
process (kg/year), the volume of treated wastewater (m3/year), and
the shadow prices obtained for each pollutant (see Table 4), the
overall environmental benefit resulting from wastewater treatment is
calculated as shown in Table 5. According to this table, the WWTPs
produce highly variable environmental benefits since the minimum
value is 0.0099 €/m3, while the maximum value is 1.0039 €/m3. The
Fig. 2. Environmental benefit according to pollutant removal.
weighted average, depending on the treated volume of wastewater, is
0.3609 €/m3.
Fig. 2 shows the environmental benefits derived from the
elimination of pollutants. The greatest environmental benefit is
associated with nitrogen removal because it represents 66% of the
total profit. Phosphorus is the next most important pollutant, with a
21% percentage weight of the total benefit. The environmental benefit
accounted for by organic matter (COD) is only 12.4% because, despite
the fact that a large volume is removed, its shadow price is
comparatively low. A similar situation occurs with suspended solids,
as they have a very low shadow price and so make little contribution
(0.2%) to the environmental benefit — even after large quantities are
removed from wastewater (Table 4).
Once both environmental benefits and operating costs have been
identified and quantified, we can calculate the net profit associated
with the wastewater treatment process for each WWTP under study.
4.3. Net profit
In this section, net profit is calculated by comparing the total
benefits derived from wastewater treatment with the operating costs
for each WWTP of the sample. It is important to remember that CBA

Table 6
Table 5 Net profit from wastewater treatment process in €/m3.
Environmental benefit of wastewater treatment in €/m3.
WWTP Net profit without Net profit with 50% Net profit with 100%
WWTP SS COD N P Environmental water selling water selling water selling
benefits (scenario i) (scenario ii) (scenario iii)

1 0.0001 0.0009 0.0071 0.0016 0.0099 1 −0.2102 −0.0377 0.1348

2 0.0005 0.0156 0.0968 0.0802 0.1932 2 0.0713 0.2438 0.4163
3 0.0001 0.0026 0.0144 0.0238 0.0408 3 −0.1489 0.0236 0.1961
4 0.0001 0.0020 0.0084 0.0028 0.0134 4 −0.1536 0.0189 0.1914
5 0.0023 0.0129 0.1921 0.0691 0.2765 5 0.1020 0.2745 0.4470
6 0.0015 0.0127 0.3288 0.0959 0.4389 6 0.3156 0.4881 0.6606
7 0.0002 0.0070 0.0526 0.0113 0.0711 7 −0.0433 0.1292 0.3017
8 0.0001 0.0018 0.0176 0.0022 0.0217 8 −0.1939 −0.0214 0.1511
9 0.0018 0.0200 0.2928 0.0977 0.4123 9 0.1503 0.3228 0.4953
10 0.0004 0.1999 0.0682 0.1676 0.4362 10 −0.3117 −0.1392 0.0333
11 0.0003 0.0071 0.0647 0.0163 0.0885 11 −0.1790 −0.0065 0.1660
12 0.0006 0.0327 0.2898 0.0451 0.3682 12 0.0187 0.1912 0.3637
13 0.0008 0.0156 0.7780 0.1937 0.9881 13 0.8630 1.0355 1.2080
14 0.0001 0.0021 0.0042 0.0042 0.0106 14 −0.2097 −0.0372 0.1353
15 0.0006 0.0134 0.0593 0.1326 0.2059 15 −0.0990 0.0735 0.2460
16 0.0008 0.2033 0.5184 0.1215 0.8441 16 0.5370 0.7095 0.8820
17 0.0017 0.0231 0.2449 0.1150 0.3847 17 −0.2573 −0.0848 0.0877
18 0.0003 0.0332 0.0664 0.0351 0.1350 18 −0.5588 −03863 −0.2138
19 0.0005 0.0180 0.4018 0.2570 0.8396 19 0.4555 0.6280 0.8005
20 0.0005 0.0594 0.8087 0.1353 1.0039 20 0.7030 0.8755 1.0480
21 0.0004 0.0729 0.3518 0.0275 0.4527 21 0.2747 0.4472 0.6197
22 0.0004 0.0676 0.5907 0.0462 0.7049 22 0.5925 0.7650 0.9375
Average 0.0006 0.0448 0.2390 0.0765 0.3609 Average 0.1413 0.3138 0.4863
 M. Molinos-Senante et al. / Science of the Total Environment 408 (2010) 4396–4402
must include both internal and external costs and benefits. Therefore,
the total benefit derived from wastewater treatment is the sum of the
environmental benefits and profits from the sale of the treated water.
As explained previously in the methodology, the quantification of
shadow prices of undesirable outputs requires assuming that the
shadow price of the desirable output (in our case treated water)
coincides with its market price. In this sense, and based on the Spanish
Environmental Ministry report (MMA., 2007) the value of 0.345 € /m3
as the market price of treated water has been allocated.
The Spanish region where WWTPs under study are located has
water deficit problems, especially in summer season. However, the
fact that all treated water could be sold is an unrealistic assumption
since the social acceptance of reclaimed water is still limited.
Therefore, the net profit under three different scenarios has been
determined: (i) no sale of treated water, (ii) sale of 50% of the treated
water and (iii) sale of 100% of the treated water (Table 6).
According to Table 6, for the three scenarios considered, the net
profit for all the WWTPs gives an average positive result and this
shows that wastewater treatment is beneficial from an environmental
and economic point of view. For the first scenario, without reclaimed
water selling, the term benefit is made only by the environmental
benefit. In this case, the percentage of plants with a negative net profit
is 50%. The operation of these WWTPs would not be feasible from an
economic point of view and, therefore, should be studied in greater
detail in order to improve their situation. However, it is important to
note that the average net profit of the 22 studied plants is positive
with a value of 0.1413 €/m3. This result shows that wastewater
treatment processes can be economically feasible although there is no
sale of reclaimed water. Under the assumption that 50% of reclaimed
water is sold (scenario ii), the average net profit is increased to 0.3138
€/m3. For this scenario, 15 of the 22 WWTPs studied (68%) showed a
positive net profit. Finally, if all the reclaimed water is sold (scenario
iii), the average net profit is 0.4863 €/m3 and all of the total WWTPs
(only one exception) have a positive net profit.
5. Conclusions
This paper presents a cost–benefit analysis of wastewater
treatment with a valuation of environmental externalities. This
methodology enables economic feasibility studies to be made for
wastewater treatment and water reuse projects that take into account
the monetary value of the so-called environmental externalities.
Under the assumption that wastewater treatment is a productive
process in which a desirable output (treated water) is obtained with a
series of undesirable outputs (suspended solids, phosphorus, nitro-
gen, etc.) we have calculated a shadow price for these undesirable
pollutants. The value of these represents the environmental damage
avoided, or environmental benefit derived, from the removal of
pollutants during wastewater treatment.
Taking into account the generation of four undesirable outputs, an
empirical application is presented for a sample of 22 WWTPs located
in the Spanish region of Valencia. The obtained results show that the
maximum environmental benefits are associated with nutrient
removal from wastewater, while the removal of suspended solids
contributes the lowest percentage to the overall environmental
benefit.
The results obtained from CBA provide information about the
economic feasibility of the treatment processes. Regarding the
possible sale of regenerated water, three scenarios obtaining the
average value of the net profit for each of them have been studied.
Although both operating costs and environmental benefits derived
from treatment are highly variable between WWTPs, the average
value of the net profit for the three scenarios is positive. This
demonstrates that the operation of the WWTPs under study is
economically viable although there is no sale of reclaimed water.
4401
Acknowledgement
The authors wish to acknowledge the statistical assistance from
the Entitat de Sanejament d'Aigües (EPSAR) and the financial aid
received from the Spanish government (NOVEDAR-Consolider Project
(CSD2007-00055) and FPU program (AP2007-03483)) and the
Generalitat Valenciana government (ACOMP/2010/138). They would
also like to thank two anonymous referees for their valuable
comments and suggestions.
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