A Comprehensive Environmental Cost–Benefit Analysis of Using Reclaimed Water for Irrigation in Southern Spain

Abstract

Water scarcity and pollution are critical challenges affecting agriculture and aquatic ecosystems. This study evaluates the environmental benefits of using reclaimed water (RW) for irrigation in southern Spain by applying a comprehensive cost–benefit analysis (CBA) to a water reuse project. This method allows us to assess financial feasibility and environmental externalities of RW use for irrigation, with particular focus on the reduction in eutrophication and greenhouse gas emissions. Furthermore, the proposed CBA highlights the potential of RW to provide essential nutrients for crops, reduce reliance on synthetic fertilizers, and mitigate the ecological impact of fertilizer manufacturing and transportation. Results indicate that, while the direct financial returns of RW are limited, the integration of environmental benefits significantly improves the overall economic viability of water reuse projects. Furthermore, sensitivity analyses suggest that policy measures, such as adjusted water pricing and financial incentives, could enhance the adoption of RW in agriculture. This study supports the role of RW as a sustainable alternative for irrigation, contributing to water conservation, pollution reduction, and climate resilience. Future research should focus on long-term agronomic impacts, optimized pricing models, and policy frameworks that promote water reuse as a key strategy in sustainable water management.

1. Introduction

The world is facing increasing challenges related to water scarcity both in terms of availability and quality. At the same time, water demand is increasing due to various factors, such as the need to produce more food for a growing population. The growth of the world population implies greater competition for resources, especially for agriculture, which is the most water-consuming sector in the world. According to the Food and Agriculture Organization (FAO), agriculture accounts for approximately 70% of global water withdrawals, primarily for irrigation purposes. In comparison, industry and domestic uses represent about 20 and 10% of water withdrawals, respectively. These values underscore the significant role of agriculture in global water consumption [1].

In Mediterranean regions, such as southern Spain, prolonged droughts and aquifer overexploitation have further strained water availability [2]. These pressures are compounded by water pollution from agriculture, particularly due to excessive nitrogen and phosphorus inputs from chemical fertilizers, which degrade aquatic ecosystems and contribute to eutrophication and biodiversity loss.

In fact, eutrophication has become a serious threat to water conservation due to nutrient excess, causing algae and plant overgrowth, thereby depleting oxygen and disrupting ecosystems. Different studies have emphasized the importance of accurately quantifying nutrient inputs, their retention in soils, and their bioavailability, as critical factors influencing the extent of nutrient runoff and the risk of eutrophication [3].

Recent global and European policy frameworks, such as the Kunming–Montreal Global Biodiversity Framework (GBF) and the European Commission Nitrates Directive, emphasize the urgent need to reduce nutrient pollution and promote sustainable agricultural practices [4,5]. The GBF aims to halt biodiversity loss and protect ecosystems. This initiative highlights the need to reduce fertilizers’ environmental impact by promoting a more efficient nutrient usage. Specifically, target 7 focuses on halving the excess of agricultural nutrients entering ecosystems by 2030. Its main objective is to mitigate eutrophication and improve ecosystems’ health, which in turn helps to protect biodiversity [4]. Furthermore, the European Nitrates Directive seeks to reduce nitrate pollution by monitoring water quality and designating vulnerable zones [5].

These objectives call for innovative approaches to water and nutrient management, including the treatment and reclamation of wastewater. Reclaimed water (RW) use for agricultural irrigation has gained relevance both in academic and policy spheres [6], culminating in the European Commission’s 2023 regulation on minimum requirements for water reuse in agriculture, which entered into force on 26 June 2023, to stimulate and facilitate water reuse in the European Union (EU) [7].

RW offers a dual opportunity as it supplements water supplies and delivers crops nutrients—primarily nitrogen (N), phosphorus (P), and potassium (K)—which can reduce reliance on synthetic chemical fertilizers. Despite these advantages, the uptake of RW in agriculture remains limited, partly due to incomplete assessments of its economic and environmental values. While previous studies have applied cost–benefit analysis (CBA) methods to evaluate the viability of water reuse projects [8,9,10], several critical research gaps remain unaddressed. One of these gaps refers to the limited valuation of environmental externalities as most applied CBAs usually focus on direct costs and benefits for farmers, often omitting broader environmental benefits (or positive externalities) such as avoided eutrophication, improved water quality, or greenhouse gas (GHG) emission reductions [2]. In addition, the economic value of nutrients recovered through RW is rarely quantified, despite studies showing significant potential to offset fertilizer costs and reduce pollution [11,12]. Lastly, there is a lack of location-specific case studies. Although some regional studies exist (e.g., Guadalquivir Basin, in Spain, Puglia, in Italy, and Murcia, in Spain), there is a clear need for comprehensive CBAs that incorporate local agronomic, economic, and environmental data [2].

This paper contributes to addressing these gaps by developing a comprehensive CBA method that includes environmental benefits of using RW to irrigate avocado trees in the region of La Axarquía (Málaga, Spain). As previously noted, the fertigation potential of RW should become an incentive for profiting from those nutrients (i.e., N, P, K) by spreading them directly on the fields along with the irrigation water, thus, decreasing the use of synthetic fertilizers. The main research objective of this study is to highlight the environmental benefits associated with the use of RW for irrigation and fertilization purposes. Addressing these positive environmental externalities allows us to carry out a comprehensive valuation of RW benefits. Specifically, our study focuses on the outcomes of the European Commission-funded RichWater project [13]. This project allowed us to develop and verify wastewater treatment and reclamation technology based on a membrane bioreactor (MBR). Specifically, this MBR was designed to deliver safe, nutrient-rich RW for its use in agriculture, thus providing crop nutrients, allowing upstream water-savings, and reducing pollution downstream by minimizing the application of chemical fertilizers. The project RichWater is located in the La Axarquia region (southern Spain) and is characterized by a critical combination of increasing water scarcity and the presence of water-use intensive crops (e.g., subtropical fruits, such as avocados and mangos). Specifically, our comprehensive CBA focuses on the use of RW to irrigate avocado trees.

A CBA usually compares a decision’s projected costs and benefits to determine its economic feasibility [14]. Although several studies have used CBA methods to evaluate the use of RW by the agricultural sector [2,8,9,10,11], the presented CBA contributes to the existing literature by integrating the economic valuation of the positive environmental externalities derived from avoided eutrophication and GHG emissions reduction due to nutrient recovery by using RW.

To address the outlined objectives, this study is structured as follows. Section 2 presents the contextual background of the study, including the regional challenges of water scarcity and nutrient pollution, as well as a description of the RichWater project and the used data sources. Subsequently, the methodological framework applied to carry out a comprehensive CBA is described, with a specific focus on calculating the Net Present Value (NPV) for the use of RW in our case study. Our CBA framework includes the economic valuation of internal financial components and external environmental benefits—such as avoided eutrophication and greenhouse gas emissions—thus, offering a replicable and robust approach for similar assessments in other regions. Section 3 presents the results of the analysis, followed by a discussion in light of the existing literature and policy contexts in Section 4. Finally, Section 5 offers some conclusions and recommendations.

2. Materials and Methods

2.1. Description of the Context

The RichWater project is located in the town of Algarrobo, in the region of La Axarquía (Malaga, Spain). The project is located close to the municipal wastewater treatment plant (WWTP), as shown in Figure 1. As can be observed, the RichWater reclamation facility and the irrigation test sites are located in the same area, which facilitates the monitoring and control of the irrigation process and the crop responses.

As previously commented, the La Axarquía region faces water scarcity problems due to the depletion of conventional surface and groundwater sources, the limited availability of alternative freshwater supplies, and the increasing frequency of prolonged droughts. In this context, the use of RW plays a crucial role in its adaptation to current water scarcity, alleviating pressure on existing resources and mitigating the risk of future water shortages. Implementing water reuse schemes is particularly vital in such water-stressed areas, where insufficient irrigation water constrains agricultural productivity, economic development, job creation, and key sectors like tourism. These interconnected challenges have been directly addressed by the RichWater project in this region, whose economy relies heavily on agriculture and tourism. Consequently, the project aims to tackle both environmental and socio-economic pressures, while supporting local authorities in meeting regulatory requirements and regional stakeholder expectations [15].

As previously noted, the RichWater project demonstrated and verified a technology that combines water treatment and reclamation using membranes with an adapted irrigation system. The overall process is completely automated, with minimal operation and maintenance requirements. The final objective was to supply a constant source of nutrient-rich water free from pathogens, complying with current legal requirements for RW use for irrigation purposes. Moreover, the project’s ambition was to create a multisectoral win–win solution for both economic (e.g., agriculture) and environmental (e.g., water conservation) sectors. With this aim, RichWater followed an open innovation, participatory, and bottom-up approach, to guarantee the effective engagement of water operators, farmers and irrigators, public administration, and local action groups and agents in the project activities.

2.1.1. Technical Description

The RichWater system was designed to treat and reclaim municipal wastewater and produce pathogen-free and nutrient-rich irrigation water by preserving the nutrients (N, P, and K, among others). It comprises an energy-efficient MBR system, a mixing module, a fertigation unit, and a monitoring/control unit with soil sensors to guarantee demand-driven and case-sensitive fertigation. The MBR combines ultrafiltration (pore of 0.04 µm and the pressure applied is between 0.10 and 0.25 bar) and biological decomposition treatment. The water that enters the MBR is municipal wastewater where the coarse particles have already been taken away by screening and grit removal to avoid any MBR clogging. Concerning the technical characteristics of the membrane, it consists of a flat sheet ultrafiltration cassette composed of 26 active filter plates and two protective plates, all made of polypropylene, and a laser-welded membrane made of polyether-sulfone. A flow diagram of the RichWater process is presented in Figure 2.

The particularity of the RichWater system relies on a biological decomposition treatment that includes a nitrification process (not followed by denitrification). Contrary to activated sludge treatments, RichWater is designed to keep the N, P, and K nutrients in the treated water, so as not to be degraded during treatment. After the sludge removal, the water is disinfected using a mercury vapour low-pressure UV-lamp (MINI-65W/4P) for microbiological contamination removal. The installation’s lifetime is estimated to be around 15 years, the time reference used in our CBA.

2.1.2. Content of the Effluent

The study of Muñoz-Sánchez et al. [16] compared the composition of the effluent treated by the RichWater system with fresh local water to evaluate its suitability for irrigation of different crops, such as tomato, mango, and avocado. Specifically, they monitored effluent electrical conductivity (EC), pH, sodium absorption ratio (SAR), and mineral content weekly from September 2017 until June 2018. The N, P, and K average concentrations were 36.4, 7.74, and 64.51 mg L_, respectively [16]. Those results are used later in our analysis to estimate the nutrients concentration in the RW.

Concerning the quality of the effluent, it is worth noting that the system delivers RW that fulfils the requirements stated by Spanish legislation (RD 1620/2007), EU Directive (91/271/EEC) and FAO and WHO guidelines for the secure use of water. RichWater performance parameters were verified with the effluent quality before and after the treatment and the reclamation processes, achieving the EU Environmental Technology Verification (ETV). This ETV programme was launched by the European Commission, and reports are issued by the Institute for Ecology of Industrial Areas in Katowice (Poland) (as an external certification body) [17]. Furthermore, testing was supervised by the certified IRTENE S.L. (testing body) with the participation of a subcontracted laboratory, LABAQA, to ensure proper monitoring.

2.2. Materials

Investment and operational costs have been provided by BIOAZUL SL (technology developer and RichWater project coordinator). As previously mentioned, our analysis includes an assessment of externalities to economically quantify the environmental benefits derived from the use of RW for irrigation. In this case, the data used has been gathered from local farmers of avocado crops, irrigation communities, and internal data gathered from the monitoring of the project prototype and the existing literature. At this point, it is worth noting that all the data have been referred to the RichWater system with a treatment capacity of 500 m³ day.

2.3. CBA Methodology

CBA methods assess the profitability of implementing a solution or technology to support the decision-making process by assigning and comparing monetary values to the related costs and benefits [18]. As a part of the CBA, the NPV has been calculated to estimate the economic value of using RichWater technology. The NPV is defined as the difference between the annual total costs and discount benefits. Indeed, the NPV considers that today’s and future values are not the same by applying a discount rate, as shown by Equation (1) below. A negative NPV implies that a project cannot provide a positive return, while a positive NPV shows the project’s financial viability.

$$NPV={{\displaystyle \sum }}_{t=0}^n{\displaystyle \frac{B_t-C_t-OC }{{\left(1+d\right)}^t}}$$

(1)

The discount rate (parameter “d” in Equation (1)) is an interest rate applied to the costs and benefits to convert the expected future values into a present value. The discount rate value generally varies between 3 and 5%, though 4% is the most used value as recommended by the EC for “long-term” projects [19]. In Equation (1), “n” represents the reference period used in our CBA. Though it depends on the project and its components and equipment, it usually ranges from 10 to 30 years [19]. In our specific case, 15 years is the expected system lifespan. The term “OC” represents the opportunity cost, corresponding to the potential benefit missed when selecting one alternative over another. Usually, for CBA water reuse projects, the OC refers to the land on which WWTP is placed [20].

Conducting a CBA for interventions on water resources with environmental impacts is challenging due to their status as public goods (thus, lacking a market-determined price). Another potential limitation is the reliance on various estimates and projections to develop the CBA, as these assumptions may be inaccurate [21].

Indeed, related impacts can be classified into internal and external categories. Internal impacts are those directly associated with the costs involved in the project, and external impacts are those with no economic value. In Equations (2) and (3), these are represented by B_t (benefits) and C_t (costs), and expressed as

$$B_t=B_{int,t}+B_{ext,t}$$

(2)

$$C_t=C_{int,t}+C_{ext,t}$$

(3)

2.3.1. The Internalities

Most CBA applications rely on internal values, which are the ones that directly impact the market. In our case, the internal cost is the result of adding the investment costs (CAPEX) and the operating and maintenance costs (OMC) [19]. CAPEX includes the RichWater system, civil work, hydraulic and electrical connections, and equipment costs. The OMC includes energy consumption, consumables and materials, and personnel-related costs. Moreover, the internal benefit represents the internal income from selling RW to irrigators.

2.3.2. The Externalities

Environmental effects are the primary external impacts considered in our analysis. Indeed, any infrastructure/system or service has positive and negative impacts on the local and global environment, which can be classified as direct or indirect [19]. When analyzing water reuse projects, the estimation of external impacts is not often considered. Hence, decisions concerning the use of RW are usually based only on the financial costs and benefits (internal impacts), without considering non-monetary external impacts, such as environmental protection [20]. In order to quantify those externalities and to be able to integrate them into our CBA, they must be converted into monetary values. To do so, the concept of shadow values is used to illustrate both the avoided equivalent environmental damage and the value of the economic environmental benefit [21]. CBA studies usually use shadow prices to value non-market benefits economically, such as pollution reduction [9]. Therefore, shadow prices are a good tool to include environmental impacts by assigning them a financial value and better understanding their economic relevance [22]. As highlighted by Vries et al. [23], these prices can reflect the prevented emissions, expressed in euros per kilogram (in the case of pollutants), as a measure of external costs. In particular, this study uses the shadow prices to value the benefits from eutrophication and CO₂ emissions abatement.

The external costs in the case of water reuse projects usually represent the associated biological and chemical risks [20], while the external benefits mainly refer to environmentally positive impacts (e.g., pollution reduction). In the specific case of irrigation, using RW ensures the supply reliability of large quantities of water throughout the year without being affected by climatic conditions. Additionally, it provides high nutrient content that supports reducing chemical fertilizer usage and its potential damage to freshwater ecosystems associated with eutrophication and algal blooms [24]. Our CBA incorporates the reduction in damage to aquatic ecosystems associated with eutrophication and algal blooms [24], and the reduction of CO₂ emissions linked to the reduction in the use of industrial fertilizers. In our study, external costs are assumed to be negligible, as no chemical or biological contamination was linked to the irrigation effluent.

The following subsections are organized based on the methodological path indicated by the EU guide to the CBA of investment projects [19].

2.4. Economic Analysis

Our CBA aims to conduct a comprehensive economic analysis that goes beyond a simple financial assessment based solely on actual monetary flows. In contrast, an economic analysis considers broader societal impacts, taking into account not only monetary costs and benefits but also environmental externalities.

This analysis compares two scenarios involving avocado crops in the same geographical area: one with and one without the use of RW, as shown in Figure 3. Consequently, the resulting costs and benefits can be attributed to the RichWater system.

Scenario 1 considers using fresh local water for irrigation, combined with the application of 100% of chemical nutrients according to the fertilization plan provided by local farmers from La Axarquia. Scenario 2, by contrast, considers using RichWater RW, and the nutrient concentration is adjusted upstream by adding chemical fertilizer if needed. All the data correspond to a flow rate of 500 m³ day_. of treated effluent. By comparing these two alternative scenarios, the added value generated by the project can be economically assessed, allowing for an evaluation of the costs and benefits attributable to the RichWater system [25].

2.4.1. Expenditure on Nutrients

To account for the costs associated with the purchase of chemical fertilizers in both scenarios, it is necessary to consider both the nutrient concentration in the RW and nutrients demand for selected crops (

Table 1. RW nutrient concentration and nutrients demand (annual, 3-year-old avocado trees).

Nutrients	Concentration [mg L]	Demand [kg ha]
N	36.40	120.00
P	7.74	0.00
K	64.51	130.00
Ca	65.42	24.00

). Our calculation refers to one hectare of avocado crop cultivated in La Axarquia. The amount of NPK nutrients present in the effluent was obtained from the study by Muñoz-Sánchez et al. [16]. As for calcium concentration, the average value of the tests performed by the certified laboratory NEOINTEGRA on site from July 2017 to July 2018 has been used. Based on local farmers’ expertise, an average water consumption of 5500 m³ ha per year has been considered (corresponding to a year with standard rainfall levels).

In the case of P, the requirements vary depending on the soil type, among other factors. In La Axarquia, the P is naturally provided by the soil. Therefore, it is not included in the fertilization plan [16].

Based on an average water consumption of 5500 m³ ha per year, the total nutrient input from RW contributes significantly to the fertilization needs of the crop. The estimated annual nutrient supply includes 220.2, 42.47, 354.81, and 359.8 kg ha of N, P, and Ca, respectively. These contributions from irrigation water help reduce the reliance on synthetic fertilizers, enhancing the sustainability of the practice while maintaining stable and productive avocado cultivation.

The fertilization plans provided by local farmers have validated these nutrient requirements. To estimate the economic savings, commercial market prices for fertilizers are used, presenting different concentrations in selected nutrients (N, K, and Ca). As shown in

Table 2. Composition and cost of various commercial fertilizers.

Fertilizer	Price (EUR/ kg)	N	K2O	CaO
NH4NO3	0.818	35%	0%	0%
KNO3	1.147	13%	46%	0%
Ca(NO3)2	0.727	16%	0%	26%

Source: Own elaboration based on commercial prices.

below, the concentrations had to be converted because fertilizing elements (N, K, Ca) are conventionally expressed as compounds such as NH₄NO₃, KNO₃, and Ca (NO₃)₂. Therefore, the conversion factor used (based on their molecular weight) is NH₄NO₃ to N = 1, KNO₃ to K = 0.83, and Ca (NO₃)₂ to Ca = 0.71.

Based on these data, the amount of chemical fertilizers required under Scenario 1 is estimated at 687 kg ha per year, with an associated cost of 657.72 EUR ha per year_. In contrast, when using RW, there is no need to apply additional chemical fertilizers, as the nutrient requirements of the crop are fully met by the RW nutrient content.

2.4.2. Cost Estimations

The technology developer provided the CAPEX cost data based on the system purchase costs within the RichWater project, extrapolated for a flow rate of 500 m³ day of effluent, including a selling margin. Additionally, OMC data have been estimated based on the experience gained during the RichWater demonstration phase, assuming that the system operates 350 days per year.

Table 3. CAPEX and OMC of the RichWater system.

Type of Cost	Amount (EUR)
CAPEX	266,500.00
Personnel	11,250.00
Maintenance	4552.50
Cleaning (sludge removal)	750.00
Electricity	11,440.49
OMC per year	27,992.99

Source: BIOAZUL SL.

summarizes these costs.

2.4.3. Revenue from the Sale of the Reclaimed Water

Revenues from the sale of RW to irrigators represent the only internal monetary benefit. Equation (4) represents the revenue flow (R_rw). The most commonly applied pricing model in water reuse schemes for agriculture, industry, and municipal use is the volumetric charge (in EUR m³), as it provides a straightforward method for quantifying financial returns from RW sales [26]. By applying this model, water reuse projects can enhance financial sustainability while encouraging more efficient water use.

$$R_{rw}=V_{rw}\ast P_{rw}$$

(4)

where V_rw is the annual volume of reclaimed wastewater (m³) and P_rw is the selling price of the reclaimed water (EUR m³).

In order to determine plausible RW prices, different information sources have been consulted, including recent literature. Jodar-Abellan et al. [27] examined the current status and prospects of wastewater reuse in Spain, highlighting the difficulty of establishing a market price for recycled water. Their study concludes that the promotion of RW reuse requires pricing policies that adequately distribute the costs among stakeholders [27]. The work of De Paoli Mattheiss [26] also argues that pricing strategies for RW should be based on its intended use. Currently, it remains unclear how additional costs of water reuse should be shared among the relevant stakeholders such as water operators, irrigation communities, and public administrations.

A wide variety of estimates can be found when looking at the literature on RW costs. The study of Pistocchi et al. [28] conducted a comprehensive analysis across Europe on the costs associated with reclaiming and transporting treated wastewater for agricultural irrigation. Their study revealed significant cost variability influenced by treatment requirements, infrastructure needs, and energy consumption. Treatment costs vary from 0.08 EUR m³ of essential treatment to 0.23 EUR m³ when more stringent treatment is applied [28].

A recently published study estimates RW costs in southern Spain, including depreciation costs [29]. This study provides a cost range between 0.16 EUR m³ and 0.19 EUR m³ (for a 1 Mm³ production capacity plant). These costs would be significantly lower if investment depreciation costs were excluded [20]. La Axarquia irrigation community has provided, as a reference, a price of 0.19 EUR m³ (EIP-Agri Operational Group-Axarquia Sostenible), which includes distribution costs (i.e., pumping and analytical costs) in addition to direct reclamation costs.

In our case, a value of 0.15 EUR m³ has been used for the calculation of RW revenues. This choice will be discussed further in the sensitivity analysis, where alternative prices are considered. As a result of applying Equation (4), the evaluated income per year (350 operation days) is estimated in

Table 4. Income per year from the selling of the reclaimed water.

Selling Price	0.15 EUR m3
Volume of water per day	500 m3 day
Volume of water per year	175,000 m3 year
Income in 1 year	26,250 EUR

Source: Own calculations.

. It is worth noting that, on average, each avocado hectare consumes 5.500 m³ ha per year. Therefore, the produced RW is sufficient to fertigate ca. 32 hectares.

2.5. Externalities

2.5.1. Chemical and Biological Risks

Water reuse projects face potential negative externalities, primarily concerning biological and chemical risks, as RW comes from urban sewage sources [24]. To mitigate these risks to human health and the environment, stringent quality parameters for RW were set by the Royal Decree 1620/2007, which also established thresholds to be respected according to the intended use of the water. This Royal Decree has been recently updated by the Royal Decree 1085/2024, of October 22, approving the Water Reuse Regulations and amending various royal decrees regulating water management, including the Royal Decree 1620/2007. This new regulation aims to ensure a more efficient and sustainable management of water resources in Spain. As previously noted, the RW delivered by RichWater complies with the current quality requirements set by RD 1620/2007 [16] and the European Directive for water reuse (EU 91/271/EEC).

2.5.2. Eutrophication

Treated municipal wastewater contains, among other compounds, N and P, which are primary contributors to eutrophication [30]. To reduce the risk of water eutrophication and associated algal blooms, it is essential to remove N, P, and other compounds before discharging treated wastewater into the natural environment. According to the EU Directive 91/271/EEC concerning urban wastewater treatment (UWWT), the requirements for urban wastewater discharges into sensitive areas subject to eutrophication are as follows: 2 and 15 mg L for total P and N, respectively. The recent revision of the Urban Wastewater Treatment Directive (UWWTD), adopted on 27 November 2024, revises the requirements for discharges from urban WWTPs to sensitive areas subject to eutrophication to 0.5 mg L⁻¹ for the total phosphorus and 6 mg L for the total nitrogen.

In this section, we quantify the environmental benefits associated with using RW for avocado irrigation. As previously noted, our CBA considers the prevention of eutrophication resulting from avoiding the discharge of treated wastewater into water bodies. Even when wastewater undergoes conventional treatment in compliance with EU legislation, the large volumes of discharged water can still significantly impact the receiving environment. Therefore, this section focuses on the benefits of reusing treated wastewater rather than releasing it into the environment, highlighting its potential to mitigate nutrient-related environmental problems. Specifically, our discharge effluent contains 2 and 15 mg L of P and N, respectively.

Shadow prices for eutrophication abatement have been monetized by CE Delft in a recently published report, which offers a comprehensive set of environmental prices for over 2500 pollutants [23]. Since 1997, CE Delft has been publishing and updating “shadow prices” that express the value of the environment and calculate it in terms of the marginal costs of achieving established environmental policy targets.

Table 5. Environmental prices for emissions to water of eutrophication pollutants (in 2021).

Pollutant	Environmental Price (EUR kg)
	Lower	Central	Upper
Nitrogen (N)	7.60	14.30	27.60
Phosphorus (P)	2.56	3.74	10.13

Source: [23].

presents the lower, average, and upper estimated values, as provided by CE Delft [23]. These prices reflect the loss of economic welfare when one additional kilogram of N or P finds its way into the environment.

In order to determine the external cost of nutrient discharge into water bodies, the following simplified Equation (5) must be applied.

Table 6. Summary of data used for the calculation.

N [kg m3]	0.015
P [kg m3]	0.002
Water volume [m3 day]	500
Shadow price N [EUR kg]	14.30
Shadow price P [EUR kg]	3.74

Source: Own calculations.

summarizes the data used in the calculation. By considering that our RW effluent meets the water quality requirements, the mass of N and P not discharged to the environment can be obtained. Results are shown in

Table 7. Amount of P and N not discharged to the environment and the corresponding shadow prices (in euros).

	1 Day	1 Year	15 Years
Mass N [kg]	7.50	2737.50	41,062.50
Mass P [kg]	1.00	365.00	5475.00
Price N [EUR]	107.25	39,146.25	587,193.75
Price P [EUR]	3.74	1365.10	20,476.50
Total price [EUR]	110.99	40,511.35	607,670.25

Source: Own calculations.

.

$$Cost eutrophication=P_N\ast M_N+P_P\ast M_P$$

(5)

where

• P_N is the shadow price of nitrogen (EUR kg) (central value);
• P_P is the shadow price of phosphorus (EUR kg) (central value);
• M_N is the weight of nitrogen (kg);
• M_P is the weight of phosphorus (kg).

Results presented in Table 7 show that using RW can prevent the daily discharge of several kilograms of nutrients into the environment. On an annual basis, monetizing this avoided eutrophication quickly represents over 40K EUR. It is worth noting that this estimation does not account for eutrophication resulting from the sludge disposal. The nutrients accumulated in the sludge may also end up in landfills, which can cause soil eutrophication [31]. Additionally, it is important to mention that the monetized shadow cost savings derived from this analysis do not necessarily reflect society’s willingness to pay for this avoided impact.

2.5.3. Carbon Dioxide Equivalent

The production and transportation of chemical fertilizers contribute significantly to greenhouse gas (GHG) emissions. The carbon footprint of fertilizers encompasses the total GHG emissions generated throughout their entire life cycle, from production to application. Using nutrient-rich RW can reduce the need for chemical fertilizers, thereby decreasing the GHG emissions associated with their manufacturing and transportation.

Our analysis aims to estimate a monetary value of CO₂ reduction achieved by using RW for fertigation. The effluent concentrations used are the average concentrations in NPK, as stated in the project’s ETV report [17]. Our estimation is based on the Life Cycle Assessment (LCA) method by using the Climate Impact Forecast tool. This tool relies on the data base IdeMat [32]. The calculation is shown in

Table 8. Calculation of the footprint of the fertilizers.

Fertilizer	kg CO2eq kg Fert	kg Fert Day	kg CO2eq Day
N	4.31	13	−55.99
P	1.14	2.2	−2.51
K	0.71	7.2	−5.11
Total reduction per day: −63.61 kg CO2eq
Total reduction per year: −22.26 t CO2eq (350 days)

Source: [17] (p. 27) and [31] for 500 m³ treatment capacity.

.

Once the net avoided GHG emissions (in tons of carbon dioxide equivalent) have been quantified, its monetary value can be obtained by using a shadow price (Equation (6)).

$${Costs}_{{CO}_2}=P_{{CO}_2}\ast M_{{CO}_2}$$

(6)

where

• P_CO2 is the unit shadow price of CO₂ actualized (EUR t);
• M_CO2 is the avoided CO₂ emission (t).

The guide to the CBA of investment projects [19] recommends using shadow costs of carbon values established by the European Investment Bank as the best available evidence on the cost of meeting the temperature goal agreed by the Paris agreement (i.e., the 1.5 °C target) [33]. By using the recommended shadow prices, the obtained calculation and results are presented in

Table 9. Shadow prices of the CO₂eq emissions.

CO2 Year (t)	Year of Life Spam	Year	EUR t CO2 eq	Value (EUR)
22.26336	1	2024	148.00	3294.98
22.26336	2	2025	165.00	3673.45
22.26336	3	2026	182.00	4051.93
22.26336	4	2027	199.00	4430.41
22.26336	5	2028	216.00	4808.89
22.26336	6	2029	233.00	5187.36
22.26336	7	2030	250.00	5565.84
22.26336	8	2031	278.00	6189.21
22.26336	9	2032	306.00	6812.59
22.26336	10	2033	334.00	7435.96
22.26336	11	2034	362.00	8059.34
22.26336	12	2035	390.00	8682.71
22.26336	13	2036	417.00	9283.82
22.26336	14	2037	444.00	9884.93
22.26336	15	2038	471.00	10,486.04
			Total	97,847.47

Source: [33] p. 23.

.

3. Results

This section presents the estimated NPV of our CBA assessment and includes a sensitivity analysis to examine how variations in key parameters influence the NPV outcome. Given the multiple assumptions made, this analysis provides a broader perspective on the methodology used, particularly in integrating externalities. The total estimated NPV is summarized in

Table 10. Estimated NPV.

NPV	Amount (EUR)
NPV (Internalities)	−248,712.90
NPV (Externalities)	518,753.65
Total	270,040.75

Source: Own calculation.

. A comprehensive breakdown of the economic analysis is provided in

Table A1. Breakdown of the economic analysis.

	Internalities (4% Discount)		Externalities (4% Discount)
Year	Costs (EUR)	Income (Water Selling) (EUR)	Eutrophication (EUR)	CO2_eq Footprint (EUR)
1	256,250.00	25,240.38	38,953.22	3168.25
2	25,881.09	24,269.60	37,455.02	3396.32
3	24,885.67	23,336.15	36,014.44	3602.15
4	23,928.53	22,438.61	34,629.27	3787.13
5	23,008.20	21,575.59	33,297.38	3952.55
6	22,123.27	20,745.76	32,016.71	4099.65
7	21,272.37	19,947.84	30,785.30	4229.58
8	20,454.20	19,180.62	29,601.25	4522.40
9	19,667.50	18,442.90	28,462.74	4786.43
10	18,911.06	17,733.56	27,368.02	5023.47
11	18,183.71	17,051.50	26,315.40	5235.19
12	17,484.34	16,395.67	25,303.27	5423.20
13	16,811.86	15,765.07	24,330.07	5575.62
14	16,165.25	15,158.72	23,394.30	5708.30
15	15,543.51	14,575.69	22,494.51	5822.53
Total NPV	−540,570.57	291,857.67	450,420.88	68,332.77
EUR m3	−0.21	0.11	0.17	0.03
		Total internalities	−248,712.90 EUR
		Total externalities	518,753.65 EUR
		Total	270,040.75 EUR

of Appendix A, detailing the contribution of each variable to the NPV calculation.

As shown in Table 10, the NPV calculation, when only the internalities are considered, is negative. To reverse this net loss, potential strategies include increasing expected revenues (i.e., by raising the water price), reducing the OMC, extending the project lifetime (if feasible), and/or incorporating potential subsidies or grants to reduce initial investments. If externalities are considered, the NPV becomes positive. The monetization of these externalities highlights their potential to impact the overall assessment and decision-making process significantly.

To further assess the robustness of the results, a sensitivity analysis was conducted examining variations in internalities and externalities. Internal benefits are mainly linked to the RW selling price, which remains uncertain due to the absence of a well-established pricing system for water reuse. A conservative selling price of 0.15 EUR m³ has been considered, as the average value within the range between 0.08 EUR m³ (essential treatment) and 0.23 EUR m³ (more stringent treatment) [28]. Other estimations suggest higher selling prices, such as 0.19 EUR m³ (local irrigation community of Axarquia), including treatment, pumping, and analytical costs. This price increases to 0.26 EUR m³ if the water has to be served to farmers at higher altitudes as a result of the increase in pumping costs. Moreover, the price range between 0.16 EUR m³ up to 0.19 EUR m³ for a WWTP with a production capacity of 1 Mm³ as provided by [29], includes investment depreciation costs, though transportation costs have been excluded from the calculation.

Our sensitivity analysis compares revenue changes by using alternative selling prices of 0.15 EUR m³, 0.19 EUR m³, and 0.30 EUR m³ (which includes the estimated value of the fertilizer content of RW, +0.15 EUR m³). Variations in annual income for different assumed selling prices range from the current 26,250 EUR to 33,250 EUR (if price 0.19 EUR m³ is considered) and to 52,500 EUR (if price 0.30 EUR m³ is considered). As expected, income is directly proportional to the RW selling price, highlighting the importance of selecting an appropriate price for the profitability of water reuse projects.

Regarding the external benefits, the amount of P and N not discharged to the environment and the corresponding shadow price related to eutrophication (Table 7) refer to situations where the discharged treated wastewater contains 2 mg L for the total P and 15 mg L for the total N, limits set by the EU Directive 91/271/EEC on UWWTD. In our sensitivity analysis, the new limits set by the recent revision from 27 November 2024, have been considered, reducing the limits to 0.5 mg L for the total P and 6 mg L for the total N. In this case, the shadow prices over a 15-year plant lifespan are significantly reduced: from 607,670.25 EUR to 239,996.63 EUR. This affects the total NPV, which turns slightly negative (−2488.44 EUR).

These results demonstrate that CBA assessments are sensitive to important parameters, such as the RW selling price and legislation limitations on the nutrient content of RW discharge. Consequently, certainty in these parameters significantly conditions the viability of RW projects.

4. Discussion

CBA estimations usually underscore the multifaceted benefits of RW usage for irrigation, particularly in water-scarce regions. Our CBA has demonstrated that while the direct financial feasibility of the RW project would be economically unviable under current economic conditions (i.e., taking into account only the internal economic costs and benefits from RW sales), the inclusion of environmental externalities substantially contributes to the overall profitability and viability of the project.

Previous studies have consistently highlighted the potential of water reuse for irrigation as a sustainable strategy to address water scarcity and nutrient management [18,20]. Our study aligns with these findings by showing that RW provides a reliable water source, a critical aspect in the current climate change context. Additionally, it reduces dependence on synthetic fertilizers, thus supporting the idea that integrating wastewater reuse into agricultural systems can yield significant environmental and economic benefits in terms of pollution reduction. Furthermore, existing research also emphasizes that water reuse can mitigate eutrophication and its associated ecological risks [24], an aspect reinforced by our results.

Our economic analysis revealed that the internal costs of water reuse projects usually exceed direct RW revenues, primarily due to the high initial capital investment and operational costs. Our sensitivity analysis confirmed that even small changes in RW pricing structures could significantly improve the financial viability of water reuse projects, thus supporting prior research advocating for policy interventions to increase RW competitiveness against conventional water sources. In addition, the nutrient content of RW should be considered in price settings, thus facilitating the financial viability of these projects.

Furthermore, the ability to supply nutrient-rich irrigation water while preventing excess nutrient discharge into aquatic ecosystems represents a strategic synergy between wastewater management and sustainable agriculture, which should also be accounted for in RW valuations. These findings contribute to ongoing discussions in water resource management and align with global sustainability initiatives, such as the Kunming–Montreal Global Biodiversity Framework (GBF), contributing to broader climate adaptation and circular economy strategies.

From a policy perspective, integrating externalities into economic assessments provides a more holistic view of the benefits of water reuse. The shadow pricing approach applied in this study highlights the economic value of reduced eutrophication and avoided CO₂ emissions. However, policy frameworks, such as the revised European Directive on UWWT, significantly influence these economic assessments. As an example, the updated nutrient limits introduced by this directive significantly impact the external benefits of RW use in irrigation, thus demonstrating the dynamic nature of regulatory impacts on sustainability assessments.

In future scenarios, other environmental and social aspects, such as supply reliability for farmers, job creation, and contribution to a circular economy, could also be monetized to further support water reuse projects. Additionally, soil eutrophication due to nutrient retention in the soil (not consumed by the avocado crops) could be incorporated into future assessments. In our opinion, further research is still needed to address the following issues: (1) Optimized Pricing Models: Future research should explore adaptive pricing mechanisms capable of reflecting both market value and environmental externalities and creating financial incentives for water reuse. The price of RW should reflect not only the water value but also the fertilization value of its nutrients’ content; (2) Long-Term Agronomic Effects: Further studies should assess the impact of RW use on soil health, crop yields (production efficiency of crops fertigated with RW), crop quality (in terms of organoleptic properties) and potential risks associated with long-term nutrient accumulation and how this impacts ecosystems and biodiversity; (3) Stakeholder Perspectives and Market Development: Understanding farmers’ perceptions and willingness to pay for RW can help develop targeted policy incentives and business models; (4) Climate Change Resilience: Evaluating the role of RW in enhancing agricultural resilience to drought and extreme weather events would provide valuable insights for climate adaptation strategies; (5) Balance between the value of the production losses (in terms of yield reduction) due to water shortages, and the cost of implementing water reuse schemes for irrigation.

5. Conclusions

Although wastewater reuse projects have many environmental benefits, these often go unnoticed in common CBAs. This paper proposes a methodology to integrate and economically quantify the environmental impacts associated with the use of RW for irrigation purposes. By studying the case of the RichWater system to produce RW for the irrigation of avocado crops, this work has shown the importance of considering environmental benefits in CBA assessments. Firstly, findings have shown that the use of RW reduces eutrophication of water bodies as a result of reduced wastewater discharges. Secondly, significant GHG emissions can be avoided due to a decrease in the use of synthetic fertilizers. By incorporating the economic value of these two environmental benefits in our CBA, the viability of RW projects is significantly improved. However, findings have shown that economic feasibility still remains a challenge due to the insufficient revenues of water reclamation. Adequate consideration of these aspects may allow RW to become a cornerstone of sustainable water management strategies, particularly in regions facing increasing water scarcity and environmental degradation from intensive-irrigated crops.

Finally, we would like to address some limitations of our study. Since the estimated shadow prices and costs are temporary in nature, our CBA results are subject to variations. It is worth noting that our estimated positive NPV of the use of RW for irrigation significantly relies on the considered environmental benefits (i.e., eutrophication and CO₂ abatement). Additionally, other environmental externalities, such as those related to soil conservation, could also be addressed in the CBA method. Further research should address these limitations with the aim to provide a more comprehensive analysis.