water Article Water Value Flows Upstream Hubert H. G. Savenije 1 and Pieter van der Zaag 1,2,* 1 Water Management Department, Delft University of Technology, 2628 CN Delft, The Netherlands; [email protected] 2 Land and Water Management Department, IHE Delft, 2611 AX Delft, The Netherlands * Correspondence: [email protected] Received: 4 August 2020; Accepted: 2 September 2020; Published: 22 September 2020 Abstract: Arjen Hoekstra postulated in 2001 that the value of water accumulates in an upstream direction: water value flows upstream. The ultimate source of this value is the rain. This original idea he used to develop the water value-flow concept. This article shows that the water value-flow concept has much to offer in terms of contemporary challenges. It is fully consistent with the "Five Bellagio Principles on Valuing Water" that the High Level Panel of Water published in 2017, and can make significant contributions to the first four principles. This article also shows that the concept can make many more contributions, including incorporating precipitationsheds, and thus include the source areas of rainfall in valuing water. Yet, until now, this innovative and potentially ground breaking concept has been largely ignored by researchers and practitioners in the fields of water resources management and economics. We conclude that the value-flow concept is a unique and promising framework for the integrated assessment of the value of water within a water resources system or river basin. We suggest that the concept can be enriched by incorporating instream benefits, water quality, as well as social, cultural, and spiritual values. We also suggest to test whether the concept can be usefully applied, and add value, to the emerging fields of socio-hydrology and water accounting. Keywords: valuation; integrated assessment; water economics; water resources management 1. Introduction Here, consistent with the work of Arjen Hoekstra, it is postulated that the value of water accumulates in an upstream direction: water value flows upstream. The ultimate source of this value is the rain. However, how can value be attributed to rainfall? The value of water has during the last few years received increasing attention, mainly through the work of the High Level Panel of Water, which published in 2017 the "Five Bellagio Principles on Valuing Water" (see https://sustainabledevelopment.un.org/content/documents/15591Bellagio_principles_on_valuing_ water_final_version_in_word.pdf; last visited 31 May 2020). These principles suggest that if policy-makers and society at large are aware of the multiple values of water, including the non-economic values such as spiritual, ecological, and social values, better decisions will be made. As the concept of “value” has multiple meanings [1,2], first we clarify that in this paper we refer to the economic value, including those environmental values that can be quantified. These are thus “assigned values”, values that individuals attach to specific physical goods, activities, or services [1,2]. Because virtually all human and ecosystem activities rely on the availability of water and because no economic activity is possible without it, it was internationally agreed during the International Conference on Water and Sustainable Development (held in Dublin in 1992) that water should be considered as an economic good. Since then, “Water as an Economic Good” became one of the most cited Dublin Principles. However, ever since the concept was launched, there has been confusion about what "water as an economic good" actually meant. Some interpreted it purely in financial and Water 2020, 12, 2642; doi:10.3390/w12092642 www.mdpi.com/journal/water Water 2020, 12, 2642 2 of 11 monetary terms, while others insisted that it essentially implies that decisions should be made on the basis of comprehensive weighing of societal costs and benefits [3,4]. The latter interpretation implies that economic decisions should be made on the basis of integrated valuation of water. However, valuing water is not straightforward [5], not only due to water’s physical, political, and economic characteristics [6], but also because of the difficulty or even impossibility to commensurate these different value dimensions into one metric [7,8]. However, there are other complicating aspects. One is that water is vital, finite, fugitive, and irreplaceable at the same time, but also because water use is part of a complex water resources system [9]. Moreover, water is both an economic and a public good as well as a common pool resource [4]. We do not know of any other good with this unique combination of features. A further complicating aspect is that the hydrology of water creates upstream–downstream interdependencies between users, leading to what has been called water asymmetry: downstream water users often depend on what upstream users do, whereas most of the time upstream users are not or little impacted by what downstream users do, at least within the water realm [10]. This makes it necessary to take the water cycle into account when valuing it. It has been argued that knowing the precise value—or values—of water may not be such a critical issue; but, rather that the process of valuing water should offer a structured and transparent mechanism to engage different stakeholders, who may value water differently [11]. Others insist that innovation in valuing water is, however, necessary [6]. Garrick and collaborators point at typical existing economic techniques that need to be improved, as well as the need to combine economic with cultural valuation techniques [6]. With Hoekstra, we would argue that what is certainly needed is to conceptualize the value of water in direct connection to the water cycle and the water resources system. Arjen Hoekstra was a pioneer in efforts to achieve this. Twenty years ago he introduced the value-flow concept [12–15], in the early days of integrated water resources management (IWRM) research. However, current water economics scholarship has ignored this concept, and not even criticized it. This paper aims to revive the value-flow concept, by briefly reviewing it (Section2), expanding it to include precipitationsheds (Section3), considering its potential contribution to the new fields of socio-hydrology and water accounting (Section4), exploring possible applications to contemporary water challenges (Section5), and finally, as a way of conclusion, formulating some directions for future research (Section6). 2. The Water Value-Flow Concept: Water Values Flow Upstream In 2000, Arjen Hoekstra and his students became interested in the question how the value of water, as it is used in a particular place, is connected to the catchment that generated the water. Until then, the value of water was always considered merely in relation to the direct use of the water, but not to the system that produced it. As a hydrologist, one is used to considering a water system as an undividable unit where all components of the system are interconnected, consisting of several sources, stocks, and flows. Before the concept of IWRM became common practice, considering such sources in isolation had led to serious mistakes, where for instance a river dried up as a result of groundwater extractions or afforestation in its drainage basin. Not considering the hydrological connection between different water uses in relation to the water available in the entire system is a serious flaw in water resources management. The river basin is the natural system boundary for water systems, since all the water in a basin stems from the rain (or more correctly the precipitation) falling within its boundaries. Hence, the precipitation is the source of all the benefits accrued from the water. These benefits represent a value of the water. Ultimately the accumulation of all these values should be attributed to the rain. This, however, leads to a paradox, because most people would say that the rain is for free, and something that is for free has no value; however, all benefits obtained from using water within a catchment are derived from that same rainfall. Does the most valuable resource, the rain, have no value? 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