Every day, policy-makers, corporations and individuals make decisions affecting water resources without knowing if their actions are impacting our long-term prosperity. The costs of water pollution or overuse are rarely factored into these decisions, costs economists politely term “externalities.” So we need to improve our understanding of the nexus between fresh water and our economy in three key areas.

First, we need to detail the contribution of water to Canada’s economy and assess the economic benefits of protecting and conserving our rivers and lakes. The Brookings Institute, a US think tank, showed that investing $26 billion in restoring Great Lakes ecosystems would create economic benefits in excess of $50 billion. Following an assessment of ecological goods and services of the upstream watershed, New York City realized it could spend $507 million working with upstream stakeholders to improve watershed protection and save the $8 billion that would have been needed for a new treatment plant to provide the same water quality.

There are few equivalent studies in Canada, although a new federal framework to evaluate the economic value of nature will hopefully begin to change that.

Second, we need to better understand the risks associated with mismanaging this precious resource. The costs of drought in 2001-2002 amounted to $3 billion, making it one of Canada’s largest natural disasters. In a changing climate, prolonged droughts and intense floods will increase in frequency. Climate projections show that with an increase of 2 degrees Celsius due to global warming, a reduction in water levels on the St. Lawrence River could cost $350 million in lost hydro-electrical production.

A major knowledge-gap that poses significant economic and environmental risks unless immediately addressed is the state of our groundwater, which for too long has been “out-of-sight, out-of-mind.” Understanding the value of groundwater and accelerating the pace of groundwater mapping should be a national priority.

Knowing these risks could raise some difficult but important questions, such as: Will we need to restructure agriculture to respond to permanent drought in the Prairies? Should we limit urban growth to areas with sustainable water supply? Is it wise to export so much energy if it threatens river health, aquifers and dependent communities?

Finally, we need to spur Canadian innovation to capitalize on the rapidly growing global demand for solutions to the world water crisis. The recent introduction of Ontario’s Water Opportunities and Water Conservation Act is a positive sign that the nexus between water and economy is gaining some traction in at least one province. This act, designed to develop a new water industry and promote a culture of water conservation in Ontario, will hopefully stimulate other provinces, the federal government, and Canadian entrepreneurs to move Canada to the forefront of this emerging economic opportunity while enhancing our own domestic water policy frameworks.

In these times of austerity, our governments are rightfully seeking to bolster and strengthen the foundations of the Canadian economy. A critical pillar in the economic well-being of this country is the protection of healthy rivers, lakes and aquifers. Making investments in this water-economy nexus will pay dividends today and far into the future.

Thomas S. Axworthy is President and CEO of the Walter and Duncan Gordon Foundation.