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The regulation of water services shares many similarities with that of other utilities such as electricity or telecommunications. As a result, similar methods are often used by regulators to assess the efficiency of companies in those sectors. Data Envelopment Analysis (DEA) is one of those widely applied methods. This paper aims to determine the adequacy of DEA as a regulatory tool for urban water services, with a special focus on the quality of the available data. In order to obtain useful conclusions, two DEA simulations were performed with audited data from 194 water utilities, officially made available by the Portuguese water regulatory authority (ERSAR). Both simulations will demonstrate that the inherent inaccuracies found in some of the key data provided by water utilities represent a significant obstacle to obtain meaningful results with the DEA technique. This could represent a paradigm shift for some of the regulatory authorities currently using DEA or similar techniques, as the complexity of the method does not seem to be justified by a better analysis of the comparative performance of the different services. [ABSTRACT FROM AUTHOR]

In the context of the EU Water Framework Directive, a cost-effectiveness analysis (CEA) was performed to compare centralized and decentralized wastewater treatment strategies aimed to improve the ecological status of a Spanish river. The implementation of several hybrid membrane bioreactors within the urban framework for sewer mining (SM) was compared with the more common wastewater treatment plant enlargement option. The assessment ranked six alternatives based on 12 potential scenarios, aimed at narrowing the uncertainty of the CEA. The cost analysis illustrated that SM is the most expensive option in regard to both investment and operation and maintenance costs. However, the effectiveness of the alternatives evaluated depends significantly on the scenarios considered, with SM the most effective in most cases. Finally, the cost-effectiveness ratio showed SM as the best cost-effective alternative. CEA provides an ecological-economic indicator useful to prioritize wastewater treatment alternatives to achieve a given objective. [ABSTRACT FROM AUTHOR]

The measurement of performance within the water industry holds significant importance for policymakers, as it can help guide decision-making for future development and management initiatives. In this study, we apply data envelopment analysis (DEA) cross-efficiency techniques to evaluate the productivity change of the Chilean water industry during the years 2010-2018. Water leakage and unplanned interruptions are included in the analysis as quality of service variables. Moreover, we use cluster analysis and regression techniques to better understand what drives productivity change of water companies. The results indicate that the Chilean water industry is characterized by considerable high levels of inefficiency and low levels of productivity change. This is due to the existence of technical regress whereas gains in efficiency were small. Concessionary water companies were found to be more productive than full private and public water companies. Best and worst performers need to make efforts to reduce production costs and improve service quality. Other factors such as customer density and ownership type statistically affect productivity., (© 2023. The Author(s).)

Evaluating the eco-efficiency of wastewater treatment plants (WWTPs) is crucial for enhancing environmental and economic performance in the water utility sector. Previous studies in this area estimated WWTP eco-efficiency through self-evaluation, which might have led to overestimation and biased policy recommendations. To address these issues, this study applies a cross-evaluation strategy, combining self-evaluation and peer-evaluation, to assess the eco-efficiency of WWTPs. The empirical application focuses on a sample of Spanish WWTPs, yielding the following key findings. Average eco-efficiency scores were 0.353 and 0.230, for self-evaluation and global peer-evaluation approaches, respectively, confirming the overestimation of eco-efficiency scores based on self-evaluation. If WWTPs were eco-efficient, they could potentially reduce greenhouse gas (GHG) emissions by up to 0.39 kg CO 2eq /year. The application of reliable methods, such as peer-evaluation, for eco-efficiency assessment of WWTPs provides water regulators with a comprehensive understanding of the environmental and economic performance of WWTPs. This knowledge guides decision-making, policy development, and resource allocation, facilitating sustainable and efficient wastewater management practices., Competing Interests: Declaration of competing interest The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper., (Copyright © 2023 The Authors. Published by Elsevier B.V. All rights reserved.)

The transition to a neutral carbon and sustainable urban water cycle requires improving eco-efficiency in wastewater treatment processes. To support decision-making based on eco-efficiency evaluations, reliable estimations are fundamental. In this study, the eco-efficiency of a sample of 109 WWTPs was evaluated using efficiency analysis tree method. It combines machine learning and linear programming techniques and therefore, overcomes overfitting limitations of non-parametric methods used by past research on this topic. Results from the case study revealed that optimal costs and greenhouse gas emissions depend on the quantity of organic matter and suspended solids removed from wastewater. The estimated average eco-efficiency is 0.373 which involves that the assessed WWTPs could save 0.32 €/m 3 and 0.11 kg of CO 2 equivalent/m 3 . Moreover, only 4 out of 109 WWTPs are identified as eco-efficient which implies that the majority of the evaluated facilities can achieve substantial savings in operational costs and greenhouse gas emissions., Competing Interests: Declaration of Competing Interest The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper., (Copyright © 2023 The Author(s). Published by Elsevier Ltd.. All rights reserved.)

The intensification of livestock activities lead to an increase in waste generation with high content of nutrients, as is the case of piggery wastewater. However, this type of residue can be used as culture media for algae cultivation in thin-layer cascade photobioreactors to reduce its environment impact and produce a valorizable algal biomass. Biostimulants were produced by enzymatic hydrolysis and ultrasonication of microalgal biomass, using membranes (Scenario 1) or centrifugation (Scenario 2) as harvesting methods. The co-production of biopesticides by solvent extraction was also evaluated using membranes (Scenario 3) or centrifugation (Scenario 4). The four scenarios were analyzed by a technoeconomic assessment estimating the total annualized equivalent cost and the production cost, i.e., the minimum selling price. Centrifugation provided biostimulants approximately 4 times more concentrated than membranes, but with higher expense due to the cost of the centrifuge (contribution of 62.2 % in scenario 2) and the electricity requirements. The biopesticide production resulted the highest contribution to investment cost in scenarios 3 and 4 (34 % and 43 % respectively). The use of membranes was also more advantageous to produce biopesticides, although it was 5 times more diluted than using centrifuge. The biostimulant production cost was 65.5 €/m 3 with membranes and 342.6 €/m 3 by centrifugation and the biopesticide production cost was 353.7 €/m 3 in scenario 3 and 2,122.1 €/m 3 in scenario 4. Comparing the treatment of 1 ha of land, the cost of the biostimulant produced in the four scenarios was lower than the commercial one (48.1 %, 22.1 %, 45.1 % and 24.2 % respectively). Finally, using membranes for biomass harvesting allowed economically viable plants with lower capacity and longer distance for biostimulant distribution (up to 300 km) than centrifuge (188 km). The algal biomass valorization for agricultural products production is an environmentally and economically feasible process with the adequate capacity of the plant and distribution distance., Competing Interests: Declaration of competing interest The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper., (Copyright © 2023 The Authors. Published by Elsevier B.V. All rights reserved.)

Wastewater treatment plants (WWTPs) are energy intensive facilities. Controlling energy use in WWTPs could bring substantial benefits to people and environment. Understanding how energy efficient the wastewater treatment process is and what drives efficiency would allow treating wastewater in a more sustainable way. In this study, we employed the efficiency analysis trees approach, that combines machine learning and linear programming techniques, to estimate energy efficiency of wastewater treatment process. The findings indicated that considerable energy inefficiency among WWTPs in Chile existed. The mean energy efficiency was 0.287 suggesting that energy use should cut reduce by 71.3 % to treat the same volume of wastewater. This was equivalent to a reduction in energy use by 0.40 kWh/m 3 on average. Moreover, only 4 out of 203 assessed WWTPs (1.97 %) were identified as energy efficient. It was also found that the age of treatment plant and type of secondary technology played an important role in explaining energy efficiency variations among WWTPs., Competing Interests: Declaration of competing interest The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper., (Copyright © 2023 The Authors. Published by Elsevier B.V. All rights reserved.)

Achieving sustainability and resilience depends on the conciliation of environmental, social, and economic issues integrated into a long-term perspective to ensure communities flourish. Many nations are transitioning toward both objectives, while at the same time addressing structural concerns that have not allowed them to look after the environment in the past. Chile is one of these nations dealing with such challenges within a particular administrative context, an increasing environmental awareness, and a set of unique and complex geophysical boundaries that impose a plethora of hazards for cities, ecosystems, and human health. This paper presents recent accomplishments and gaps, mostly from an environmental perspective, on issues related to air pollution, the urban water cycle, and soil contamination, in the path being followed by Chile toward urban sustainability and resilience. The focus is on the bonds between cities and their geophysical context, as well as the relationships between environmental issues, the built environment, and public health. The description and diagnosis are illustrated using two cities as case studies, Temuco and Copiapó, whose socioeconomic, geographical, and environmental attributes differ considerably. Particulate matter pollution produced by the residential sector, drinking water availability, wastewater treatment, stormwater management, and soil contamination from the mining industry are discussed for these cities. Overall, the case studies highlight how tackling these issues requires coordinated actions in multiple areas, including regulatory, information, and financial incentive measures. Finally, the policy analysis discusses frameworks and opportunities for Chilean cities, which may be of interest when conceiving transitional paths toward sustainability and resilience for other cities elsewhere., Competing Interests: The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper., (© 2023 The Authors.)

Eco-efficiency assessment of municipal solid waste (MSW) suppliers is a useful tool in the transition to a circular economy. Furthermore, it provides evidence of the economic and environmental performance of municipalities that can be used for decision-making and/or elaboration of regulatory policies. In this study, eco-efficiency scores were computed for a sample of 140 Chilean municipalities in the provision of MSW services. In doing so, the stochastic semi-parametric envelopment of data method was applied. It is a novel technique which overcomes the limitations of parametric (stochastic frontier analysis) and non-parametric (data envelopment analysis) methods previously employed to evaluate the eco-efficiency of MSW services. The average eco-efficiency of the 140 assessed municipalities was 0.332 which indicates that they could save 66.8% of their operational costs and recycling the same amount of waste. Moreover, 61.4% of the evaluated municipalities presented an eco-efficiency score which was lower than 0.4, whereas the other municipalities (38.6% of the sample) exhibited an eco-efficiency which raged between 0.4 and 0.80. Hence, none of the municipalities assessed was identified as eco-efficient which, implies that there is room for all municipalities to reduce operational costs in the management of MSW. Population density, tourism and location of the municipality were identified as factors influencing the eco-efficiency of the municipalities in MSW management.

Drinking water treatment systems (DWTSs) are energy intensive facilities, and are an example of the water-energy nexus. Benchmarking energy efficiency is a valuable tool for improving the economic and environmental performance of such facilities. Data envelopment analysis (DEA) is typically used to assess efficiency, allocating flexible weights (FSW) to variables that maximise energy efficiency scores for each DWTS (DEA-FSW). It means that different conditions are applied to each DWTS. Moreover, the DEA-FSW approach has finite discriminatory power which limits cross-unit comparison of energy efficiency hindering the benchmarking of DWTSs. To overcome these limitations, our study explored the effect of estimating the energy efficiency scores of DWTSs by allocating common sets of weights (CSW) within DEA (DEA-CSW). This approach was applied empirically on a sample of 146 DWTSs. Evaluated DWTSs had poor energetic performance based on both DEA-FSW and DEA-CSW estimates (low energy efficiency scores: 0.329 and 0.163, respectively). Even in the optimistic scenario, the average energy efficiency score was low (0.220), with potential electricity savings of 78 % by DWTPs when energy efficient. Unlike DEA-FSW, DEA-CSW allowed energy efficient DWTSs to be distinguished from the 146 facilities. Significant differences in the weights allocated to electricity and pollutants removed from raw water were reported for both approaches, and contributed to diverging energy efficiency scores. In conclusion, this study demonstrated the relevance of using suitable methods to generate comparable results for water companies, allowing the energy performance of DWTSs to be objectively evaluated for benchmarking purposes., Competing Interests: Declaration of competing interest The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper., (Copyright © 2022 Elsevier B.V. All rights reserved.)

Relevant challenges associated with the urban water cycle must be overcome to meet the United Nations Sustainable Development Goals (SDGs) and improve resilience. Unlike previous studies that focused only on the provision of drinking water, we propose a framework that extends the use of the theory of nudges to all stages of the overall urban water cycle (drinking water and wastewater services), and to agents of influence (citizens, organizations, and governments) at different levels of decision making. The framework integrates four main drivers (the fourth water revolution, digitalization, decentralization, and climate change), which influence how customers, water utilities and regulators approach the challenges posed by the urban water cycle. The proposed framework, based on the theory of nudges first advanced by the Nobel Prize in behavioral economics Richard H. Thaler and Cass R. Sunstein (Thaler and Sunstein, 2009), serves as a reference for policymakers to define medium- and long-term strategies and policies for improving the sustainability and resilience of the urban water cycle. Finally, we provide new insights for further research on resilience approaches to the management of the urban water cycle as an element to support the more efficient formulation of policies., Competing Interests: Declaration of competing interest The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper., (Copyright © 2023 The Authors. Published by Elsevier Ltd.. All rights reserved.)

Improving eco-efficiency in the provision of municipal solid waste plays an important role for a sustainable economy. Eco-efficiency of municipal solid waste service providers (MSWSPs) has been generally assessed using the conventional data envelopment analysis (DEA) method. However, this approach is sensitive to data noise and has no statistical properties. To overcome these limitations, in this paper, we adopt the double-bootstrap DEA model to derive robust eco-efficiency scores. This nonparametric method allows conducting statistical inference to explore environmental factors affecting the eco-efficiency of MSWSPs. The empirical approach focused on a sample of 298 MSWSPs in Chile, a middle-income country whose policies for promoting waste recycling are incipient. The results indicated that based on the bias-corrected eco-efficiency scores, the potential saving in costs and unsorted waste could be up to 37.8% on average to generate the same level of output (recycled waste). The findings showed that dealing with data noise and uncertainly is of great importance when conducting benchmarking analysis. The region where the municipality is located, tourism, population density and waste per capita are environmental variables that significantly influenced eco-efficiency of Chilean MSWSPs. Several policy implications are discussed based on the findings of this study.

Improving the management of municipal solid waste (MSW) is fundamental to promote circular economy and sustainability. Unsorted waste involves negative environmental impacts which often are ignored in economic feasibility studies due to its difficult valuation. In this study the shadow price of unsorted waste using the directional distance function was estimated. This methodological approach also allowed us to compute eco-efficiency scores of a set of municipalities in the provision of MSW services. The empirical application focused on a sample of 119 Chilean municipalities. The results showed that the average shadow price of unsorted waste was 297.66 €/ton which means that the environmental cost of left waste as unsorted was 297.66 € per ton. A regression tree model illustrated that population density, tourism intensity and the generation of waste per capita significantly influenced the shadow price of unsorted waste. Moreover, it was illustrated that Chilean municipalities were very inefficient in the management of MSW since the average eco-efficiency score was 0.272. The findings from this study reveal that additional and alternative policies should be adopted to improve the management of MSW and increase its recycling rate., Competing Interests: Declaration of competing interest The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper., (Copyright © 2022 The Authors. Published by Elsevier Ltd.. All rights reserved.)

Getting a good understanding regarding the economic and environmental performance of water utilities is of great importance to achieve the goal of an efficient and sustainable industry. In this study, we apply the range adjusted measure (RAM) data envelopment analysis (DEA) model to evaluate the integrated (production and environmental) efficiency of several water utilities located in Chile. Integrated efficiency is evaluated using the concepts of natural and managerial disposability. This approach further allows us to quantify the contribution of each input and undesirable product on efficiency scores. The results highlighted that the Chilean water industry showed high levels of production and environmental efficiency over time. Under natural disposability, water utilities could control production costs to reduce water leakage and unplanned water supply interruptions by 3.3% on average. Under managerial disposability, water utilities could further cut down undesirable outputs by 1.4% on average by adopting best managerial practices. On average, potential savings in operating costs, employment, water leakage, and unplanned water supply interruptions were higher for concessionary utilities as they showed slightly lower efficiency scores than full private utilities., (© 2022. The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.)

Understanding water-energy nexus in the provision of drinking water services is a challenge which has outstanding relevance in the current climatic emergency. Environmental efficiency and eco-efficiency assessment of water companies are two useful tools to address this challenge. In this study, we estimated hyperbolic and enhanced hyperbolic distance functions to compute the potential reduction in greenhouse gas (GHG) emissions and energy costs in the provision of drinking water. The empirical application focused on the English and Welsh water companies over 2011-2019. Average environmental efficiency and eco-efficiency scores were 0.920 and 0.962, respectively which indicates that water companies performed well but there is room for improvement. Moreover, due to the economies of scale, the cost of reducing GHG emissions was higher for water and sewerage companies than for water only companies. The results and conclusions of this study allow better understanding of the relationship between the provision of drinking water, energy costs and GHG emissions., Competing Interests: Declaration of Competing Interest The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper., (Copyright © 2022 The Author(s). Published by Elsevier Ltd.. All rights reserved.)

Improper municipal solid waste (MSW) management leads to contamination of water, soil and air with negative impacts on human health. Moreover, not dealing with residual waste has huge implications for meeting circular economy targets. Understanding how much it costs could lead to a better quality of service and boost environmental sustainability. This study estimates an input distance function using econometric techniques to measure the technical efficiency of the MSW sector in Chile. This approach further allows us to estimate the shadow price of residual waste in terms of total costs. The results indicated that the average technical efficiency of the waste sector was 0.592. This means that the potential savings in costs and residual waste among municipalities could be at the level of 40.8%. Large divergences among municipalities were found since efficiency scores ranged between 0.029 and 0.863. It is found that for 53% of the municipalities evaluated, efficiency scores varied between 0.61 and 0.80. On average, the cost of reducing residual waste was 81.10 US $ per kilogram. This means that on average the cost of preventing one more kilogram of residual waste not being collected and recycled was 81.10 US $. It was also found that on average as population density increased, the shadow price of residual waste increased as well. Implications: The study provides a methodology that allows the policy makers to estimate the efficiency of the solid waste sector where limited available statistical data usually exists in developing and medium-income countries. They have the opportunity to understand what drives costs and identify the best and worst performers. This information is essential to develop local initiatives to enhance waste recycling and therefore, achieving the targets established at national level. Managers can also see if there are other operating factors that could influence performance such as population density. The proposed methodology allows integrating other exogenous variables that might be interesting to policy makers. For instance, a tourism index could be included in the assessment to evaluate whether tourism impacts on the efficiency of municipalities in the provision of municipal solid waste services and therefore, to analyze the implementation of an eco-tax for tourists.

The physicochemistry and production rate of drinking water treatment residuals (DWTRs) depends on the raw water composition and the plant operational parameters. DWTRs usually contain Fe and/or Al oxyhydroxides, sand, clay, organic matter, and other compounds such as metal(oids), which are relevant in mining countries. This work proposes a simple approach to identify DWTRs reuse opportunities and threats, relevant for public policies in countries with diverse geochemical conditions. Raw water pollution indexes and compositions of DWTRs were estimated for Chile as a model case. About 23% of the raw drinking water sources had moderate or seriously contamination from high turbidity and metal(loid) pollution If the untapped reactivity of clean DWRTs was used to treat resources water in the same water company, the 73 and 64% of these companies would be able to treat water sources with As and Cu above the drinking water regulations, respectively. Integrating plant operational data and the hydrochemical characteristics of raw waters allows the prediction of DWTRs production, chemical composition, and reactivity, which is necessary to identify challenges and opportunities for DWTRs management., (© 2022. The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.)

Evaluating and benchmarking the energy efficiency of drinking water treatment plants (DWTPs) is essential to improve the environmental and economic performance of these facilities. However, robust and reliable methods should be used to compute energy efficiency scores to avoid biased conclusions. In this study, the stochastic non-parametric envelopment of data (StoNED) method was employed to assess the energy efficiency of a sample of 146 DWTPs. This methodological approach also allowed us to explore the influence of several environmental variables on the energy performance of DWTPs. The average energy efficiency score of the facilities evaluated was 0.461. It means that they could save 54% of the current energy consumption. 42% of the DWTPs evaluated presented an average energy efficiency score varied between 0.41 and 0.61. None of the 146 water treatment facilities was identified as fully energy efficient which evidences that all DWTPs could save energy. The source of raw water, the age of the DWTP and the main technology used to treat raw water were factors that statistically affected the energy efficiency of DWTPs. It was also estimated that a 1% increase in the removal of total dissolved solids and sulfates result in an increase in energy consumption by 0.340 and 0.409%, respectively, ceteris paribus. The information and conclusions of this study are of great interest for water managers and regulators to improve the operation of DWTPs and plan the design of new facilities., Competing Interests: Declaration of competing interest The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper., (Copyright © 2022 Elsevier B.V. All rights reserved.)

Water systems need to become more locally robust and sustainable in view of increased population demands and supply uncertainties. Decentralized treatment is often assumed to have the potential to improve the technical, environmental, and economic performance of current technologies. The techno-economic feasibility of implementing independent building-scale decentralized systems combining rainwater harvesting, potable water production, and wastewater treatment and recycling was assessed for six main types of buildings ranging from single-family dwellings to high-rise buildings. Five different treatment layouts were evaluated under five different climatic conditions for each type of building. The layouts considered varying levels of source separation (i.e., black, grey, yellow, brown, and combined wastewater) using the corresponding toilet types (vacuum, urine-diverting, and conventional) and the appropriate pipes and pumping requirements. Our results indicate that the proposed layouts could satisfy 100% of the water demand for the three smallest buildings in all but the aridest climate conditions. For the three larger buildings, rainwater would offset annual water needs by approximately 74 to 100%. A comprehensive economic analysis considering CapEx and OpEx indicated that the cost of installing on-site water harvesting and recycling systems would increase the overall construction cost of multi-family buildings by around 6% and single-family dwellings by about 12%, with relatively low space requirements. For buildings or combined water systems with more than 300 people, the estimated total price of on-site water provision (including harvesting, treatment, recycling, and monitoring) ranged from $1.5/m 3 to $2.7/m, 3 which is considerably less than the typical tariffs collected by utilities in the United States and Western Europe. Where buildings can avoid the need to connect to centralized supplies for potable water and sewage disposal, water costs could be even lower. Urine-diversion has the potential to yield the least expensive solution but is the least well developed and had higher uncertainty in the cost analysis. More mature layouts (e.g., membrane bioreactors) exhibited less cost uncertainty and were economically competitive. Our analysis indicates that existing technologies can be used to create economically viable systems that greatly reduce demands on centralized utilities and, under some conditions, eliminate the need for centralized water supply or sewage collection., (Copyright © 2022. Published by Elsevier Ltd.)

Several methodological approaches have been applied to evaluate the performance of water companies for regulatory purposes. Performance assessment involving a long-time period is relevant to consider the heterogeneity of the water companies as many changes might have occurred across years. In this study, we applied three different parametric models to estimate cost efficiency scores for a sample of English and Welsh water companies over the years 1991-2018. Two out of three models employed allowed us to decompose overall cost efficiency (OCE) into persistent and transient cost efficiency, i.e. allow identifying the drivers of OCE. The assessment covered six price reviews, and therefore, OCE estimations were linked with water industry regulation. Results revealed that OCE scores are sensitive to model specification as the average values for models 1, 2 and 3 were 0.959, 0.514 and 0.669, respectively. Nevertheless, the three models converge in identifying the source of raw water as an environmental variable affecting OCE. Cost efficiency estimations evidenced that price reviews conducted in 1999 and 2004 were challenging for water companies as OCE scores decreased. The opposite effect was identified for the subsequent price reviews. Beyond the estimated OCE score for the empirical application carried out, this study highlights the importance of selecting robust and adequate methods to evaluate the performance of water companies considering the main objective of such evaluation., (© 2021. The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.)

Moving to a more sustainable and low-carbon footprint urban water cycle is essential in the light of climate change. In this paper, we estimate the implicit cost of reducing greenhouse gas (GHG) emissions for several English and Welsh water companies from 2013 to 2019. Using econometric techniques, we compute the shadow prices of direct and indirect CO 2 emissions associated with the provision of drinking water. This methodological approach also allows us to investigate the impact of a set of environmental variables on the costs of water companies and therefore on the costs of reducing GHG emissions. We then compute the returns to scale, technical change, and technical efficiency of the water companies. The empirical results show the following: (1) the average shadow price of CO 2 across years was 0.114 £/kgCO 2 , which means that the English and Welsh water industry needs to spend an extra £0.114 in operating expenditure to prevent the emission of one kilogramme of CO 2 ; (2) the cost of reducing GHG emissions is very variable among water companies and across years; (3) water taken from boreholes and average pumping head increases cost requirements and therefore the inefficiency of water companies; and (4) the water industry may lower its production costs and thus the costs of reducing GHG emissions by improving its daily operations and adopting new technologies. From a policy perspective, this study evidences that in the English and Welsh water industry, a market-based approach may be more suitable to reduce GHG emissions than a carbon tax policy., (© 2021. The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.)