29 Dec 2009

Lower demand with restrictions, prices or both?

(via LF) In this 2000 article [pdf], Renwick and Green use statistics to look for the joint and several effects of eight California water agencies' programs to reduce consumption between 1989 and 1996. Besides the Aurora article, this is one of the only papers I've read that tries to separate these effects -- using sophisticated statistical techniques. (The article on Santa Barbara's conservation in the early 1990s does not separate the effects)

The agencies are big and important (San Francisco, Los Angeles, East Bay MUD, City of San Diego), and the authors find stuff that we'd expect:
  • Mandatory restrictions reduce use more than voluntary ones.
  • Higher prices reduce demand.
  • The demand response is stronger in summer months.
There are some interesting nuances, however. Price elasticity -- in the presence of other programs -- is -0.16, which is very low. (A 10 percent increase in price lowers demand by 1.6 percent.)

Income elasticity is 0.25, which implies that a 10 percent increase in income increases water demand by 2.5 percent. That's an increase in demand for what I call "lifestyle" water.

Lot size elasticity is 0.27, meaning that a 10 percent increase in lot size translates into a 2.7 percent increase in demand.

Interestingly, the authors did not find any effect of rebates (e.g., for low flow toilets) on demand. Since 7 of 8 agencies use rebates, this result is "interesting." It may reflect bad data, zero actual effect, or a rebound effect ("I'm saving water on flushing, so I'll take a longer shower.") that offsets toilet water consumption. OTOH, it seems that rebates have been helpful in lowering per capita demand, but that's just theory. (It may have fallen due to less outdoor irrigation...)

My final observation is on Table II, which shows agencies' prices and price structures over time. Three agencies (San Francisco, Contra Costa, and San Bernadino) has uniform block rates throughout the study; two agencies (Los Angeles and EBMUD) went from uniform block to increasing block back to uniform rates; three (Santa Barbara, Marin MWD and San Diego) had or went to increasing rates and stayed there. I know that water manager prefer the simplicity of uniform rates, and it seems like they return to them as soon as the "crisis" is over. That's a bad sign as far as long-term conservation signals.

Oh, and they ask for a better understanding of residential demographics. I wonder if ANY of these agencies has -- since then -- got an idea of how many people live at each meter?

Bottom Line: There are many ways to promote (or ignore) conservation, but some are more effective than others.


  1. Given such low elasticities I wonder if these are short term elasticities (inelasticities) and if the long term elasticities are higher. It may also indicate that the perceived cost/value ratio is so low that it is rational to not even consider the cost of water.

    Is anyone else surprised that public agencies spent money on things (rebates) that had no measurable effect?

    Bottom Line: It is hard to change habits in the short term, but in the long term we can modify life style and purchase technology that changes our water demand.

  2. @Jay -- I'd bet they were short term.


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