Productivity implications of the water-energy-emissions nexus: An empirical analysis of the drinking water and wastewater sector

Water, energy and greenhouse emissions issues are intertwined and are difficult to resolve in isolation. One of the challenges in addressing the water-energy-emissions nexus is the lack of studies that integrate both the environmental and economic aspects. The provision of drinking water and wastewater services is a complex operation that involves a significant energy input resulting greenhouse emissions. Using an environmentally sensitive productivity growth index, this paper analyses the productivity growth trends in the Australian drinking water sector from 2005 to 06 to 2014-15. Specifically, the paper estimates the global Malmquist-Luenberger productivity index and its drivers for the sector whilst incorporating an undesirable output - greenhouse emissions. Findings suggest that the overall environmentally sensitive productivity growth remained stagnant up until 2012-13 and experienced a decline of 7.2% and 4.6% during 2013-14 and 2014-15, respectively. In cumulative terms, the productivity growth of the sector has declined by about 28% from the 2005-06 level when accounted for greenhouse emissions. The productivity growth decline can be mainly attributed to the efficiency change rather than technical change over the study period. The findings call for a greater understanding of energy and emission intensity of various water supply options and wastewater operations.