Environmental and Resource Economics
Kluwer Academic Publishers. Printed in the Netherlands.
The Role of Water in Manufacturing
DIANE P. DUPONT and STEVEN RENZETTI
Department of Economics, Brock University, 500 Glenridge Avenue, St. Catharines, Ontario,
Canada L2S 3A1. E-mail: firstname.lastname@example.org
Accepted 17 September 2000
Water’s role in manufacturing technologies has received limited attention. A KLEM model
of the sector’s technology is extended to include two facets of water use: intake and recirculation.
Three annual cross-sectional surveys on plant-level water use are pooled and combined with census
data to estimate this extended model for the Canadian manufacturing sector over the period 1981–
1991. While Canada’s water allocation regulations inﬂuence private water withdrawals, statistical
tests support representing water intake as a variable input. Water intake is found to be a substitute
for water recirculation, energy, labour and capital. The relationship between water intake and recir-
culation is stronger when water intake is process-related rather than related to cooling and steam
production. Technological change has been biased in the direction of increased water intake and
decreased water recirculation.
cost function, demand, manufacturing, recirculation, water
Industrial water use refers to water use by manufacturing ﬁrms, mines and thermal
electric generating facilities. During the period 1980–2000, global industrial water
intake has doubled. While industrial water use remained at approximately 23%
of total recorded withdrawals some analysts believe that its share will increase
early in the next century (Biswas 1997). Reasons for growing industrial water
intake include spreading industrialisation, increasing demands for electricity and
government policies that continue to understate the cost of water use (Dinar and
Subramanian 1997). Unfortunately, despite the signiﬁcance of industrial water
use, relatively little is known regarding the role water plays in these applications
(Renzetti, 2000). Given the diversity of technologies across mining, power gener-
ation and manufacturing, this paper restricts its attention to water use in the
This paper is concerned with several questions related to water use in the
manufacturing sector. First, what is the most appropriate way to model water in
manufacturing processes? Should it be seen as a variable or quasi-ﬁxed input?
Second, to what extent is manufacturing water use sensitive to economic factors