Estimating the Effect of Land Cover on Water Treatment Costs: Evidence from the Czech Republic

Land cover is often assumed to influence drinking water quality and treatment costs, yet empirical evidence remains limited in Central Europe. This study analyzes the determinants of drinking water production costs in the Czech Republic, using data from surface water-based utilities in 2018. A total cost function is estimated with a log–log regression model that accounts for hydroclimatic and geographic factors. Three main findings emerge. First, economies of scale are evident: total costs rise less than proportionally with output, leading to declining unit costs as production expands. Second, watershed area has a consistent positive effect on costs, reflecting the greater geographic complexity of larger basins — a factor rarely quantified in previous studies. Third, no robust evidence was found that forest cover reduces treatment costs at the watershed scale, suggesting that land-cover effects are context-dependent or mitigated by regulatory and operational practices. These results underscore the importance of production scale, basin size, and spatial context in shaping the economics of drinking water provision, and they provide the first empirical evidence on these relationships from a Central European setting.