In its first part, the paper focuses on the relationships between the quality of the water resource, industrial sewage, and waste water treatment in two successive steps: intra-industrial waste abatement followed by centralized end-of-pipe purification in (public) purification plants. Purification plants are viewed as firms producing water quality with both conventional inputs and with the water resource's assimilative capacity. In a two-commodity two-factor general equilibrium model various second-best policy regimes are studied which implement politically predetermined water quality standards. Water quality management turns out to become inefficient by requiring to finance purification through the revenue from industrial sewage charges. Next a two-region model is studied where a "sewage charge" on industrial pollution is levied along with an effiuent charge on the residual waste content of the water released by the purification plant into a recipient water resource. Purification plants are required to balance their budgets and/or the revenues from effiuent charges are earmarked for subsidizing wastewater treatment processes. Various institutional arrangements are scrutinized with respect to their (in)efficiency implications. In the last part of the paper a general equilibrium model is developed in which drinking water is produced from raw water with the help of labor whose productivity increases with raw water quality. Raw water quality is assumed to depend on both the size of the water protection area and on that amount of assimilative services of the raw water resource which is not used for waste assimilation. The central question is whether efficiency requires the price of drinking water to equal its marginal production costs in the water works or whether high quality raw water from water protection areas is a scarce resource in the sense that it carries an economic rent. Raw water turns out to be always scarce if industrial pollution does not spill over at all into the water protection area. Otherwise, if in the initial situation raw water is abundant, then it becomes less abundant - and possibly eventually scarce - with increasing demand for drinking water, with increasing labor endowment and with decreasing land endowment.
