Water Pollution Economic Effects, Causes, and Solutions

Dirty water costs all of us money

two people standing on a beach picking up trash and putting it into the plastic bag

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Water covers almost 70% of the world's surface. Of that, only 2.5% is fresh, and just 1% of that is available for use. Water is used for agriculture, drinking water (potable), recreation, and fishing.

Water quality of streams, lakes, and rivers depends on the sources that feed them. Unfortunately, water pollution is created when fertilizer, animal and human waste, plastics, and toxic industrial chemicals enter these sources. It costs the economy by impacting public health, fishing, tourism, and the environment. Governments try to control the damage by setting water-quality standards to regulate usage. 

Causes of Water Pollution

Many of our waterways are in poor biological condition. According to the Environmental Protection Agency (EPA), 46% of U.S. streams, 21% of lakes, 18% of coastal waters, and 32% of the nation’s wetlands are contaminated by water pollution. The most common contaminants are bacteria and heavy metals such as mercury, phosphorus, and nitrogen. The leading causes are farm runoff and pollution absorbed from the air.

Regulating pollution offenders is a challenge for government agencies. That’s because most of this is “nonpoint” pollution, or runoff from septic tanks, farms, and roadways. About 80% of pollution in the ocean comes from land sources that flow directly into water supplies, according to the National Oceanic and Atmospheric Administration.

Untreated Sewage

Untreated sewage kills 2.2 million people each year worldwide from diarrheal diseases. In the developing world, 10% of the population are severely infected with intestinal worms. In the U.S. 4.32 million people suffer from acute gastrointestinal illness from contaminated public drinking water systems. These diseases stem from untreated sewage, which allows pathogens to grow and reduces the amount of oxygen in the water.

Farming Practices

Farming practices add pollutants from fertilizer, animal-waste runoff, and livestock nitrogen waste. Farm animals also destroy the grasslands, allowing the top soil to wash into waterways as silt. Feed crops and range land contribute to deforestation, resulting in runoff and siltation of waters. The runoff creates a rich source of nutrients that plants, such as algae, feed on. As a result, algae blooms have worsened and threaten recreational and potable water supplies. For example, the Mississippi River dumps tons of nitrogen from fertilizer into the Gulf of Mexico each summer. This creates a “dead zone,” devoid of oxygen, about the size of Massachusetts.

Global Warming

Over the past 30 years, 25% of the world's coral reefs have died. High water temperatures from global warming toxify the algae living in coral. Coral polyps then expel the algae so that only the white framework remains. Coral can actually tolerate intermittent bleaching, but recurrent events will kill it. In the early 1980s, bleaching only occurred every 25 to 30 years. By 2016, bleaching occurred once every 5.9 years. That’s an almost five-fold increase in coral bleaching in the past 40 years. More than half of 100 reefs studied lost more than 30% of their corals in 2015 or 2016.

Ocean Acidification

Shellfish and coral reefs suffer serious damage from ocean acidification, also caused by global warming. Scientists estimate 25% of all carbon emitted goes into the oceans. The increase in carbon dioxide changes the chemical makeup of the water. This, in turn, causes the pH levels to fall, making the water more acidic. Since the 1800s, the pH level has fallen by 0.1 pH units. It doesn't sound like much, but the pH scale is logarithmic, like the Richter scale that measures earthquakes. As a result, it represents a 30% increase in acidity. This is an alarming trend that creates a toxic environment for ocean wildlife.

Effects on the Economy

The most devastating economic fallout from water pollution, according to the U.S. Environmental Protection Agency, occurs in four main areas: 

  • Cost of treating drinking water
  • Losses to tourism (swimming, snorkeling, boating)
  • Damage to commercial fishing and shellfish harvests
  • Lower real estate values

Let’s examine these in more detail.

Increased Water Treatment Costs

Pollution increases water treatment prices. This is due to the additional energy costs and chemicals to filter and clean the water. For example, the Great Lakes in Minnesota suffer from enormous algae blooms. This has increased water treatment costs by almost $4.00 per 1,000 gallons, according to the EPA.

Tourism Industry Costs

Almost $1 billion in revenue is lost in tourism each year to water pollution, according to the EPA. This comes from nutrient pollution and associated algae blooms. In August 2018, a red-algae bloom off the southwest coast of Florida created an emergency health crisis. Hospital admissions increased by 54% because of toxic vapors emitted from decaying algae. Red-tide clean-up efforts cost the state between $11,114 and $250,000 per event between 2004 and 2007.

Fisheries Costs

The shellfish industry on America's West Coast is threatened by pollution and ocean acidification. Highly-acid water corrodes the carbon-based shells of shellfish. In Washington state alone it threatens the $270 million mollusk, oyster, and clam industry. If nothing is done, the total cost to the entire industry could reach $100 billion.. 

Elsewhere in the world, pollution and acidification threaten a key underpinning of the world’s sea life. Coral reefs support the life cycle of over 25% of all marine species. The reefs provide shelter, food, and breeding grounds. More than half a billion people around the world depend on them for food or fishing income. The National Marine Fisheries Service estimates the commercial value of U.S. fisheries from coral reefs is more than $100 million. The loss in coral is a concern because coral infuses billions into local economies from tourism. It also protects shorelines from unchecked erosion.

Real Estate Costs 

Water pollution also negatively impacts real estate values. The EPA found that waterfront property values drop as much as 25% if the water is polluted compared to properties with clean water.

A study of waterfront properties in New York showed significant differences between those on clean versus polluted lakes. Prices for properties on highly-polluted Lake Erie rose 188% over a 13-year period. That sounds great, but not compared to the values on clean Lake Chautauqua. Those values rose 406%. 


Despite these discouraging facts, there are viable and proven means to combat our nation’s water pollution. The government must make clean water a higher priority, especially in more populated areas.

Regulation and Taxes 

First, the government should update the 1972 Clean Water Act and other local and state laws to reflect current conditions. The Act had two significant benefits:

  • It substantially decreased U.S. water pollution, particularly industrial wastes and municipal discharges. 
  • The grants increased real estate values within a 25-mile radius of cleaned-up water.

The government could also impose Pigouvian taxes on those who pollute. These taxes levy a fine on polluters that is commensurate with the damage they’ve created and the harm they’ve caused others. The taxes are proven to curtail pollution and also fund cleanup efforts.

The government could increase funding for studies of water pollution solutions. For example, bioremediation has shown great promise at low cost. It employs microorganisms or microbial plants and their enzymes to naturally degrade contaminants in the environment.


We can all contribute to solving the water pollution problem. To stop algae blooms, Greenpeace suggests we stop (or dramatically reduce) our consumption of meat and dairy.

Another solution is for farmers to repurpose manure into biofuels. Modern industrial farming techniques use concentrated animal feeding operations that generate more than 300 million tons of waste annually. Most of it ends up in the rivers and oceans, although some of it is absorbed into the ground as fertilizer. Repurposing would eliminate some of this pollution.

The Bottom Line

Water pollution costs the economy dearly in four areas: water treatment, tourism, commercial fishing, and real estate.

The largest contributors to U.S. water pollution are modern agricultural practices, industrial-waste discharges, and uncontrolled runoff. Global warming further worsens pollution by increasing acidification and algae blooms, and is a threat to our food and water sources.

The government should update the 1972 Clean Water Act to cover more of the nation’s waters. It should impose Pigouvian taxes and fund studies to uncover solutions such as bioremediation. Businesses should limit the chemicals, fuels, and construction sediment that goes into the water system. Everyone can do their part by reducing the use of fertilizers and other household chemicals, and by eating fewer animal-based foods.

Frequently Asked Questions (FAQs)

How can we prevent water pollution in our home?

Anyone can take steps to reduce water pollution in their local area. For example, you can keep cooking oils, fats, chemicals, pills, and cleaning supplies out of your drain—these products can pollute waterways after they're flushed away down the toilet or sink. You can also reduce water pollution by reducing water use with an efficient toilet (or by putting a brick in a standard toilet tank).

How does industrial pollution result in water pollution?

Many industrial and commercial entities generate wastewater. If wastewater contains too high of a concentration of pollutants when it is discharged, it can pollute natural waterways. Shale gas extraction generates particularly large amounts of wastewater. Other major industrial polluters include oil and mining entities.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. USGS. "Where Is Earth's Water?"

  2. EPA. "National Water Quality Inventory Report to Congress," Page 2.

  3. National Ocean Service. “What Is the Biggest Source of Pollution in the Ocean?"

  4. World Health Organization. "Water Quality: Guidelines, Standards and Health," Page 90.

  5. Centers for Disease Control and Prevention. "Magnitude and Burden of Waterborne Disease in the U.S."

  6. Microbial Life Educational Resources. "The Gulf of Mexico Dead Zone."

  7. National Oceanic and Atmospheric Administration. "NOAA Forecasts a Very Large Dead Zone for Gulf of Mexico."

  8. NOAA. "Coral Reefs."

  9. Science Magazine. “Frequency of Coral Bleaching Has Increased Nearly Fivefold Since the 1980s.”

  10. NOAA. "Ocean-Atmosphere CO2 Exchange."

  11. PMEL Carbon Program. “A Primer on pH.”

  12. Environmental Protection Agency. “Nutrient Pollution. The Effects: Economy.”

  13. Florida Fish and Wildlife Conservation Commission. “Red Tide Report (August 10, 2018).”

  14. Florida Division of Emergency Management. "Gov. Scott Directs Additional $4 Million for Counties Impacted by Red Tide."

  15. Research Gate. “Public Costs of Florida Red Tides: A Survey of Coastal Managers."

  16. University of Colorado Boulder. "The Influence of Ocean Acidification on the Economic Vitality of Shellfish Hatcheries in the Pacific Northwest," Pages 10, 15.

  17. National Ocean Service. “How Do Coral Reefs Benefit the Economy?

  18. MDPI. "A Comprehensive Review of the Evidence of the Impact of Surface Water Quality on Property Values," Page 3.

  19. CEPR Policy Portal. "How the Clean Water Act Has Served the Environment and the Economy."

  20. Science Direct. “Bioremediation.”

  21. State of the Planet. Earth Institute. “How Hamburgers Pollute Our Water.”

  22. Town of Simsbury, Connecticut. "10 Things You Can Do To Reduce Water Pollution."

  23. Environmental Protection Agency. "Industrial Wastewater."

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