22 Nov 2016

Do lawn rebates work? Yes but badly

This story explains how California water agencies spent $350 million subsidizing lawn removal so that people would should might use less water.

While this program was a success in terms of spending, I'm not sure it was either efficient, sustainable or equitable.

In terms of efficiency, it's clear that higher water prices would encourage people to use less water on all margins, i.e., by watering less but also fixing leaks, etc.

In terms of sustainability, "the jury is still out" as there's no sign that (a) use in those households fell (the rebound effect) or that (b) use by neighbors didn't consume the savings.

In terms of equity, you have to ask "who paid $350 million?" and answer: ratepayers who saw increases in their bills. Assuming that that wealthier ratepayers were the ones with lawns (and the cash to pay the rest of the cost to rip them out), then the implication is that poorer ratepayers subsidized the richer ratepayers. Not exactly the way it's supposed to work.

Bottom Line: If you want people to use less water, then raise the price. If you want to protect the poor from price increases and the utility from revenue fluctuations then read this.


GP said...

This is an important issue that some in the state are starting to address. The case for cost-effectiveness will need to be made if these programs are to continue (and should have been made at the outset, but that is a different story).

If you have any thoughts on this report (http://innovation.luskin.ucla.edu/TurfRebateAnalysis) produced by my center on behalf of LADWP, I'd be interested (I was not involved in the analysis).

David Zetland said...

@GP: Excellent report... for that limited topic. To me, a policy of higher prices is superior:

Increases revenues, not costs, so can last "forever"
Pushes people to save water on ALL margins, not just landscaping removal (e.g., vs leaks)
Transfers money to water misers from water users, not from all customers (via fixed charges) to lawn removers.
Instant response. No need for payback period angst.

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