As water supplies become strained, some municipalities have turned to reclaimed water as a potential source to meet non-potable needs. Such reclaimed water – wastewater effluent treated to appropriate quality standards – is not suitable for human consumption without additional treatment, but can be used for purposes such as irrigation and cooling. One reclaimed water distribution system of particular interest is at the University of Texas at Austin (UT), USA, which receives treated effluent from City of Austin wastewater treatment plants. Depending on the embedded energy of existing water sources, existing levels of wastewater treatment, and the extent of the relevant distribution network, water reuse can save energy and carbon emissions compared with conventional drinking water distribution systems, at the expense of higher capital costs. Our analysis uses EPANet modeling software and historical datasets to examine the embedded energy and carbon emissions in drinking water and reclaimed water for non-potable applications at UT. We then examine the overall economics of reclaimed water use, including capital and operating costs for a variety of amortization periods, financing costs, and externality costs using a levelized-cost of water methodology. This integrated analysis serves as the basis for developing principles of sustainable water reuse.