Estimating the Structure of Industrial Water Demands: The Case of Canadian Manufacturing

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Abstract
This study considers water use by Canadian manufacturing firms. The estimation of water demands is based on a detailed cross-sectional survey of establishment-level observations on water prices, quantities, and expenditures. Industrial water use is modeled as having four components: intake, treatment prior to use, recirculation, and discharge. Average values for the estimated own-price elasticity for water intake range from -0.1534 to -0.5885. Water recirculation is found to be a substitute for both water intake and water discharge. This confirms that expanding the use of economic incentives (e.g., effluent fees) may be effective in encouraging firms to reduce their water use while increasing in-plant recirculation.