Unexpected growth of an illegal water market

Urban water supply systems increasingly struggle to serve rapidly growing populations as freshwater resources become scarcer and extreme events more frequent. Intermittent piped supply affects hundreds of millions, leading to the emergence of formal and informal tanker water markets (TWMs) that move water from rural wells to urban users. While TWMs can bridge gaps in public supply, they are criticized for high prices, fostering uncontrolled groundwater pumping, transport-related emissions, and undermining utilities’ cost recovery. Evidence on their competitiveness, net impacts on water security, and scope of illegality remains mixed and case-specific. Jordan—a highly water-scarce country with scheduled supply interruptions—relies heavily on tanker water sourced mainly from rural groundwater, often illegally. This study aims to quantify the size, structure, and legality of Jordan’s TWMs; assess their contributions to water security and economic value; evaluate impacts on aquifers and emissions; and explore future trajectories and policy options under population growth and climate change.

Prior research recognizes TWMs as critical in many cities (e.g., Chennai, Nairobi, Mexico City) but notes underrepresentation in the literature and limited modelling advances compared with other informal markets. Data collection is difficult due to illegality and avoidance of regulation. Theoretical and empirical work indicates informal markets can allocate scarce resources efficiently, but limited data obscure market structure and competitiveness, with mixed findings on entry barriers, pricing, and affordability. Previous simulation studies focused on demand-side drivers of TWM emergence, with integrated supply–demand analyses lacking. Key unknowns include TWMs’ contribution to water security, groundwater impacts, responsiveness to regulation, and future reliability. This study addresses these gaps with a coupled human–natural systems approach and spatial market modelling that integrates supply, demand, transport costs, groundwater dynamics, and agricultural opportunity costs, validated against multiple independent data sources.

The study extends the Jordan Water Model (JWM), a coupled hydro-economic multi-agent system, to simulate legal and illegal tanker water markets (JWM-T). The JWM integrates hydrologic components (a 12-layer MODFLOW-based groundwater model, SWAT runoff inputs, and a water supply network) with institutional modules (central water authority, Water Authority of Jordan, and local utilities) and represents 1,823 urban water user agents (households, refugees, businesses) across 89 subdistricts and 84 agricultural agents. Monthly feedbacks between abstractions and groundwater levels are captured. JWM-T innovations include: - Residual demand modelling: Tanker water demand is defined as residual after piped supply (accounting for intermittency, non-revenue water, tariff structure). Demand functions combine a tiered supply curve with econometric estimates using national household surveys (n=15,858) and a commercial establishment survey (n=341). - Agricultural opportunity costs (MROC): A positive mathematical programming (PMP) crop production model for each agricultural agent estimates the marginal value of water. The reservation price equals pumping cost plus the net revenue of the marginal crop, updated monthly with groundwater levels and pumping lifts from the integrated groundwater model; abstraction caps decline as wells dewater. - Spatial price-equilibrium: A perfectly competitive market with transport costs determines feasible trades between farm and consumer agents to maximize total private surplus, subject to local supply constraints. Road distances (Google Distance Matrix API) and transport costs (from tanker survey data, including fuel, wages, maintenance) endogenize spatial competition, transport costs, and price formation. Optimization is implemented in Pyomo with IPOPT. - Validation: Model outcomes are validated against (1) 2015 potable tanker truck registrations by governorate, (2) observed commercial tanker prices from a 2016 survey (Amman, Irbid, Ajloun), and (3) wastewater influent at the As-Samra treatment plant (2006–2012) with and without tanker consumption. - Energy analysis: Transport energy is computed from delivery distances and a heavy-truck energy factor; compared with piped network energy intensities in the highlands and Jordan Valley. - Future scenarios and policies: An ensemble of ten simulations to 2050 spans all five SSPs under RCP4.5 and two crop price assumptions. Policy experiments include public supply augmentation (e.g., desalination) and distribution improvements, plus TWM policy reforms (e.g., regulating well closures, tanker registration-based controls). Monetary values are in constant 2015 US$.

• Market size and illegality: Total tanker water sales in 2015 are estimated at 59 million m³/yr, within the 41–68 million m³/yr range inferred from truck registrations. Licensed abstractions were 5.5 million m³/yr, implying unregulated sales exceed licenses by 10.7× and an estimated 91% of tanker water is illegally sourced. - Groundwater impacts: Jordan’s total groundwater abstraction is ~619 million m³/yr; overabstraction beyond sustainable yield totals 215 million m³/yr (2015). Tanker sales equal 27% of this overabstraction. In the Amman-Zarqa basin, sales of 27 million m³/yr equal 34% of basin overabstraction. Average groundwater decline is 3.5 m/yr. - Role in supply and revenues: TWMs provide 15% of total urban water use and 53% of commercial (non-heavy industry) water use. They account for about 52% of all urban water spending while delivering only 15% of volumes. Average tanker price is US$3.0/m³ (~4.8× piped tariffs). Total TWM revenue is US$176 million/yr, 8% more than all public suppliers combined. - Cost structure and welfare: 86% of tanker expenditure is costs (69% transport; remainder includes agricultural opportunity and pumping). Net benefits are US$166 million/yr; 85% accrue to consumers, 14% to sellers, <1% to government (taxes). Pumping costs are <1% of tanker costs, indicating current tariffs/charges underprice societal groundwater costs. - Competitiveness: Modelled prices fit observed 2016 commercial prices; the market structure is consistent with high competition and pricing at marginal cost, countering perceptions of market power. - Energy and emissions: Average one-way haul is 13.1 km (2015), adding ~17.6 kWh/m³ transport energy above pumping, higher than typical reverse osmosis energy needs; indicates technical inefficiency and GHG implications. - Projections to 2050: Total tanker sales grow from 59 to 95 million m³/yr; household share of tanker use rises 2.6× from 4.6% to 12.1%. Net benefits increase from ~US$166 to ~US$313 million/yr. Prices rise to US$4.0/m³ nationally and US$5.2/m³ in Amman, driven by local drawdown and longer hauls (average one-way distance increases to ~19.9 km; ~26.8 kWh/m³ transport energy). Population with <40 l.p.d. public supply increases fivefold; share of that vulnerable population using tanker water declines from 92% to 64%. - Policy experiments: A 300 million m³/yr desalination project ( >50% public supply increase) reduces 2050 tanker abstractions only from 95 to 76 million m³/yr (+64% vs +31% relative to 2015–2020 average of ~57.8 million m³/yr). Combining major desalination with equitable and efficient distribution substantially stabilizes tanker abstractions and mitigates vulnerability; either alone is insufficient. Closing illegal tanker wells can stabilize abstractions but substantially harms vulnerable households’ access. Regulating large commercial tanker use via the existing tanker registration system may better control abstractions without curtailing essential household supply.

Findings reveal Jordan’s TWMs are far larger and more illegal than officially acknowledged, substantially contributing to groundwater overabstraction and diverting substantial consumer spending to a costly, energy-intensive delivery mode. Yet TWMs function competitively, pricing at marginal cost, and provide a critical safety net for households under severe intermittency, delivering sizeable consumer surplus. As population grows and climate pressures mount, reliance on TWMs is projected to intensify, with higher prices and longer transport distances due to local drawdowns. Consequently, despite a 2.6× rise in household tanker share, TWMs cannot offset worsening public supply shortfalls; vulnerability (e.g., <40 l.p.d.) increases markedly, and fewer vulnerable households can afford or access tanker water. Policies targeting the root cause—inequitable and inefficient public supply—are more effective than restrictive measures aimed at TWMs themselves. Large-scale desalination alone only moderately reduces tanker demand unless distribution is reformed. A combined strategy of supply augmentation and equitable distribution can stabilize tanker abstractions and improve access and affordability. Regulating commercial tanker use based on the existing registration system offers a pathway to limit groundwater impacts while protecting essential household access.

The study develops and validates a coupled human–natural systems approach to quantify and analyze informal tanker water markets under data scarcity, revealing that in Jordan, illegal sales dominate and significantly burden aquifers while providing essential water access under intermittent public supply. TWMs are competitive and deliver substantial consumer benefits but at high transport energy and cost. Projections indicate continued growth in TWM reliance, prices, and energy use, with insufficient mitigation of rising vulnerability absent substantial public sector reforms. Policy implications are clear: prioritize improving the efficiency and equity of public water distribution, and complement large supply projects (e.g., desalination) with distribution reforms to effectively curb tanker demand and relieve groundwater pressures. Regulatory focus should avoid undermining essential household access; targeted controls on large commercial tanker uses may better balance water security with sustainability. The modelling framework is transferable to other cities with informal water markets, supporting future research on governance, equity, and environmental externalities of informal water supply systems.

• Data scarcity inherent to informal/illegal markets necessitates indirect (shadow-economic) measurement and model-based inference; while validated with multiple datasets (registrations, prices, wastewater), uncertainties remain. - The market is modelled as perfectly competitive with pricing at marginal cost, supported by surveys; deviations from perfect competition in specific locales or times may not be fully captured. - Environmental and resource externalities (e.g., ecosystem impacts, full social cost of groundwater depletion, GHG emissions) are not included in private cost calculations and are assessed separately; comprehensive societal cost quantification is incomplete. - Future projections rely on SSPs under RCP4.5 and assumptions about crop prices; alternative climate or socioeconomic pathways could change outcomes. - Some input datasets (e.g., business and tanker survey microdata) are not publicly available due to confidentiality, limiting external replication of specific estimates.