Assessing the Economics of Natural Ressource Use in a Changing Environment

Industrial firms, water suppliers and regulators in Germany face the challenges of climate change and its impacts on the availability and quality of water supplies. In an environment with potentially declining water supply reliability, information on industrial water demand patterns becomes more relevant. This work departs from an economic approach by inter-preting the demand for water as a derived demand within the overall use of inputs for industrial production. The analysis primarily uses firm-level data obtained through a survey in the German part of the Elbe River Basin. For the first time, own- and cross-price elasticities of industrial water demand as well as elasticities of substitution are derived for Germany in a microeconometric cost function framework.