Estimating the impact of carbon inefficiency and overuse of energy on the economics of water companies: A case study for England and Wales

Abstract

In the face of climate change, it becomes crucial to motivate action and policies within water companies towards achieving carbon neutrality. Estimating the economic consequences of inaction can be a compelling catalyst for change. In this study, the carbon inefficiency and overuse of energy among a selection of English and Welsh water companies were assessed, along with their impact on the operational costs of producing and delivering drinking water over the period from 2010 to 2019. In doing so, a stochastic frontier analysis primal system was employed. The findings revealed that, on average, water companies exhibited a carbon inefficiency of 0.699. The overuse of energy relative to other inputs was estimated to be 71.4%. Consequently, water companies incurred a production cost increase of 0.089 £/m³. This research demonstrates that transitioning towards a low‐carbon urban water cycle is not merely an environmental beneficial endeavor; it also involves significant economic advantages.