Water‐Use Fee (WUF) and Water Productivity (WP) in the Manufacturing Industry: An Environmental Economic Approach in Colombia

ABSTRACT Water is a vital resource and an essential input for the manufacturing industry, a key sector for biodiversity financing. Environmental fees are policy economic instruments designed to finance natural resource management while changing society's unsustainable habits. An econometric model was used to analyze the relation between WUF and WP in the Colombian manufacturing industry from 2010 to 2022. An average WUF of US $50.87 million was obtained, representing an increase of +1060% since 2017. The mean WP was 1.68 US $/m 3 , with decreases recorded from 2015 to 2018 and from 2019 to 2021. While WUF did not affect WP, it showed moderate to high correlations with other environmental variables in the model, including investments, operating costs, and staff for environmental protection expenses. The potential of WUF to internalize the value of water in the economy has been recognized, and the commitment of the Colombian manufacturing industry to scale up to sustainable water use practices is remarkable. However, the present study evidences its irrelevance in econometric terms. Although changes to the WUF regulatory framework have been introduced to strengthen its environmental purpose, low water pricing remains the main barrier to policy effectiveness, not only in Colombia, but globally.