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Water Use Efficiency and Composition of Production in Canada

Congress: 2008
Author(s): Joel Bruneau
Joel Bruneau: Assistant Professor, Department of Economics, University of Saskatchewan

Keyword(s): water use efficiency; scale; composition; water use techniques; water consumption; Divisia index
AbstractDemand for water in the Canadian business sector has risen 24 percent between 1981 and 1996. Improved efficiency of water use has been proposed as one way to limit this demand (Alberta Environment, 2003). However, water withdrawal per dollar of production (water intensity) has declined by only 4 percent over the same period. Since water use intensity can change with technologies but also with changing industrial structure within a country, we decompose the decrease in water withdrawal intensity into separate technique and composition effects. This allows us to assess the extent to which Canadian firms have improved efficiencies in water use. We show that, with respect to water intake, changes in the composition of business activity have lead to an expansion of water intensive industries relative to other industries. However, improvements in the techniques of production more than offset the changes in composition. Overall, Canadian businesses improved water intake efficiencies by 7 percent. If we exclude Electric Power Systems, the largest sector by intake volumes, then the improvement in techniques attributed to the other sectors was even more dramatic at 11 percent. Further, the change in composition of these non-electric power industries was also towards less water intensive production. These improvements in the techniques associated with water intake are even stronger when we consider total gross water use (which includes recirculated water). Technological improvements reduced water demand by 18 percent. At the same time, actions taken by firms have had the effect of increasing consumption of water so that, on average, manufacturing firms consumed 17 percent more water per dollar of output in 1996 than they did in 1981.
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