Should we be Increasing the Price of Water to Promote Less Water Use?

The price of potable water is a contentious issue. From a purely economic point of view using the supply and demand principles, water scarcity should herald higher water prices in order for the cost to reflect the water shortage.

When people have to pay a premium price for a product, they tend to value it more, and use it more sparingly. While water usage would undoubtedly go down were prices to increase, there would also be a clear distinction between the poorer households, who would be unable to afford water for general use, and the wealthier households, who could continue to use water as normal.

price of water

While some economists may believe that an increase in the price of water is necessary, clean drinking water has been recognised by the United Nations as an essential human right, and as such should be available to everyone, with no water access distinctions among citizens.

Having said that, currently 780 million people do not have access to clean water, and 6-8 million people in the world die each year as a result of disasters and water-related diseases.

In developed countries such as Australia, we are lucky enough to all have access to clean water, but when access to clean drinking water is as easy as turning a tap, it becomes an expectation that water will always be available.

And if water scarcity doesn’t affect the public on a personal level, will they really care about the issue?

While it’s quite understandable that prices of water must remain reasonable so that everyone has access to clean water, it may be that other penalties or incentive need to be put into place to discourage high water usage.

Drought conditions in Sydney resulted in mass communication in an effort to change people’s paradigms. The Every Drop Counts program and Go Slow on the H2O campaign were run by Sydney Water in an effort to reduce water use, alongside water restrictions and additional projects such as Waterfix and the rainwater tank rebate, which were also widely promoted and subsidised.

The Australian Bureau of Statistics conducted surveys on water use and conservation in 2007, 2010 and 2013. Analysing the raw data for the rainwater tanks within Sydney Water’s area of operation, they found that the number of residents in Sydney that submitted the reason of “water restrictions” for installing a rainwater tank increased in 2013. This is particularly interesting as water restrictions ended in 2009.

Unsurprisingly, Sydney Water found that water usage decreased when water restrictions were put in place and enforced, however the water usage unexpectedly maintained its lower usage even after water restrictions had ended.

  household water use       business water use

 The continuance of water use patterns that were established during the drought’s water restrictions may have occurred for a number of reasons. It might have been that the lower water usage was maintained due to more rainfall in the following years; however rainfall after the water restrictions is comparable to rainfall prior to water restrictions, when water usage was much higher.

rainfall
Source: Sydney Water

 

It may also be the use of alternate water sources, such as rainwater tanks reducing the amount of mains water supply, and suggests a habit or behaviour change in the community to reduce their mains water usage, which may be due to the water restrictions and public communication strategy.

In a survey conducted several years after the drought, it was found that the majority of Sydney Water customers were still actively saving water, which suggests that water savings are engrained amongst Sydney residents.

There have also been studies that have found supporting information, with evidence that the effects of a media campaign can be sustained well after its cessation.

That the effect of a successful campaign can be sustained several years after it has ended demonstrates that a strategy to shift paradigms can be highly effective with long-term effects. This could have implications for further water efficiency campaigns and even assist in resolving discrepancies between the number of households with rainwater tanks and the number of rainwater tanks being used and maintained without failure.

The importance of finding solutions to water shortage is undisputable, and must be found sooner rather than later. Highly populated areas such as Sao Paulo, and areas of California, are on the verge of a water crisis, and water scarcity is an ongoing issue for many countries, including India, China and Ethiopia.

Decentralised water systems such as rainwater tanks are increasingly coming to the forefront, with adaptations to the traditional rainwater tank such as cistern fences developing, however it is important to recognise and address the ongoing maintenance a rainwater tank requires, which is critical to receiving the ongoing benefits of a tank.

Undeniably the solution to the water crisis will be as complex as the problem. There are many aspects the solution may take, including regulation, community awareness and subsidies, however the biggest step will be communicating and engaging the public alongside the policy makers, to make the issue, as well as how everyone can do their part in the solution, as clear as our drinking water.

4 Comments Add yours

  1. Alex Baumber says:

    Interesting question and nicely unpacked Candice. You highlighted some key reasons why water is not just like any other commodity that follows the laws of supply and demand – especially the human right aspect and the acceptance of restrictions by the community. I guess another difference is that for other commodities a rise in price acts as an incentive to provide more supply – e.g. higher corn prices means that more land will get used for corn. But for drinking water in a place like Sydney, the limits on water availability are apparent for all to see (and to experience through water restrictions). Opportunities to increasing supply are limited and even where it is possible, such as through new dams or desalination plants, there’s widespread community recognition that this will have impacts beyond just the $$ cost of building them. Pricing controls can be a useful policy tool for some environmental goods and services – but in order to work they rely on the community accepting that everything can (and should) be converted into dollar values – with water this is clearly not the case…

  2. Alex Auhl says:

    Hi Candice,

    I read a really interesting article from the New York Times yesterday about the effect of water pricing in the context of the Californian drought.

    Here is the link:
    http://www.nytimes.com/2015/04/27/us/drought-widens-economic-divide-for-californians.html?_r=0

    It illustrates how wealthy neighbourhoods consume significantly more water than poorer neighbourhoods, and how ‘price’ can disadvantage the poor while not affecting the rich.

    Here is an excerpt from the article:

    “The wealthy use more water, electricity and natural gas than anyone else,” said Stephanie Pincetl, the director of the California Center for Sustainable Communities at the University of California, Los Angeles. “They have bigger properties. They are less price sensitive. So if you can afford it, you use it.”

    “Then it becomes a moral question,” she said. “But lots of wealthy people don’t pay their own bills, so they don’t know what the water costs.”

    Cheers,
    Alexandra

  3. husky6actual says:

    Hi Candice, ,,, an interesting exploration of the human mind and economics of water.

    One thing that eludes me is why many people in locations with access to good clean and safe tap water are happy to part with their cash to pay exorbitant amounts for the same stuff in a bottle.

    I was intrigued/alarmed by the following stats about bottled water:
    http://www.coolaustralia.org/bottled-water-secondary/

    cheers
    Nicholas

  4. candicej says:

    Damn Alexandra! That article came out 2 days too late for me to use for my blog! Oh well, good find! 🙂

    Thanks for your comments guys, I always think water supply is always an interesting topic. People have so many concerns with cost, health and safety; its a necessity and just about everyone has an opinion. I always find people ask me whether tap water is safe to drink, and there are some that say they don’t like the taste of tap (which is probably just all in their head!) I guess its also hard for travelers to know which countries have tap water which is safe to drink.

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