Averting expenditures and valuation of damages: two methods for assessing the benefits of water filtration in Israel

This paper presents an economic benefit analysis of constructing a filtration plant to serve the Israeli National Water Carrier. The main focus of the paper is a comparison of two methods for evaluating the benefits of the filtration plant: direct valuation of damages caused by consumption of unfiltered water, and assessment of consumers' willingness to pay for high quality water by analysis of averting expenditures. We also compare the benefit estimates, as derived by the two methods, with the costs of constructing and operating the filtration plant. The central result is that according to both methods of benefit analysis, the benefits of filtration significantly outweigh costs. Another important result is that total public willingness to pay (WTP) for improved water quality is higher than the total damage costs of consumption of unfiltered water. In the last section of the paper, a proposal for dividing the financial burden of constructing and operating the plant between relevant parties is presented.