'Two sides of the same coin'? Bridging water accounting and valuation for better decision-making

Understanding the values of water has been part of national and global agendas for decades, to the point where the United Nations dedicated its annual March 22 World Water Day and Annual Report to 'Valuing Water' (United Nations 2021b). The report provided an overview of different notions of 'value' and standard valuation approaches. This reflected a growing interest in improved water accounting and valuation, building on decades of academic and policy innovations (Molden and Sakthivadivel 1999, Vardon et al 2007, Nagy et al 2017, Vardon et al 2018) and developments in the System of Environmental-Economic Accounting (SEEA) (United Nations 2012, 2021a; United Nations 2014). Because water can be framed in multiple ways—a natural resource, a commodity, an ecosystem service, a public good/service, and even as a Human Right or a living entity (Bates et al 2023, Grafton et al 2023a), valuing and accounting for water requires a holistic understanding drawing from fields as diverse as anthropology, environmental science, ecology, law, economics and finance, among others (Turner and Daily 2008, Roberts et al 2020, Cassegård 2021).

While water valuation and accounting are superficially similar, their principles, purposes and methods are different. In accounting, money is a medium of exchange and store of wealth, whereas in economics monetary figures are also used as a measure of welfare (United Nations 2014). Given the growing complexity in decision-making processes informed by water valuation and accounting, it is paramount that a common language is agreed upon that differentiates the multiples notions of value and uses of money-based metrics.

Our contribution is to highlight the typology of 'value' in relation to water in both water accounting and water valuation, and to show how these methods can be bridged, or brought together, to support water reform processes to mitigate water insecurity. Our work builds on the comprehensive reviews and literature on water values and water valuation (Hanemann 2006, Young and Loomis 2014, Pascual et al 2023, Grafton et al 2023b) and water accounts and accounting (Vardon et al 2007, Nagy et al 2017, Souliotis and Voulvoulis 2021, Vardon et al 2023, Vardon 2024). By connecting 'two sides of the same coin', we highlight how water accounting and water valuation can be better aligned to support improved decision-making and evaluation of trade-offs resulting from different policy interventions.