Examples of Water Resources Management Options: Protective Structures and Demand Management

Nachtnebel, Hans Peter; Nandalal, K. D. W.

doi:10.1007/978-3-030-60147-8_18

Cited by 1 publication

(1 citation statement)

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“…Moreover, price elasticities contribute to evaluating consumer welfare changes (Hajispyrou et al., 2002) due to variations in rates and rate structures (Smith & Al‐Maskati, 2007; Thrikawala et al., 2008), and they are relevant to assessing the achievement of multiple tariff objectives (Clarke et al., 2017; Favre & Montginoul, 2018; Zetland & Gasson, 2013). Recently, the adverse effects of climate change on water availability and the constant population growth have motivated a strong resurgence of interest in water demand estimation to contribute to the efficient and sustainable use of water (Nachtnebel & Nandalal, 2021).…”

Section: Introductionmentioning

confidence: 99%

Estimating Residential Water Demand Under Systematic Shifts Between Uniform Price (UP) and Increasing Block Tariffs (IBT)

Chovar Vera,

Vásquez‐Lavín,

Ponce Oliva

2024

Water Resources Research

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We evaluate whether changing from a uniform price (UP) to an increasing block tariff (IBT) changes people's behavior. We exploit a unique setting in which the price scheme moves back and forth yearly from UP to IBT. We discuss the effectiveness of IBT in reducing summer consumption. This issue is relevant to many countries and policymakers interested in designing tariff structures. There is no evidence of how the same consumer may react to systematically switching from one tariff structure to another yearly. We estimate the residential water demand and its price elasticity using a generalized least squared random effect model for the UP and the discrete/continuous choice model for the IBT. In addition, we split the sample between low and high‐consumption groups. For the low consumption group unaffected by the tariff change, the elasticity in the nonsummer months is higher (more elastic) than in the summer. Consumers in this group reduce their elasticity from nonsummer to summer months (−0.299 vs. −0.071, respectively) and increase their consumption by 13%. The high consumption group increased its summer consumption, but only by 8.7%, and contrary to the first group, its elasticity increased significantly (from −0.299 to −0.568). The high‐consumption group is indeed affected by the change in tariff. From a policy perspective, this implies that the IBT structure is relevant. However, if the policy seeks to promote conservation, it needs to be adjusted to a lower decile of the water consumption distribution to affect a more significant portion of the population.

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