[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/fem/femwpa/2008.66.html
   My bibliography  Save this paper

Comparing Price and Non-price Approaches to Urban Water Conservation

Author

Listed:
  • Sheila M. Olmstead

    (Yale School of Forestry and Environmental Studies)

  • Robert N. Stavins

    (Harvard University)

Abstract
Urban water conservation is typically achieved through prescriptive regulations, including the rationing of water for particular uses and requirements for the installation of particular technologies. A significant shift has occurred in pollution control regulations toward market-based policies in recent decades. We offer an analysis of the relative merits of market-based and prescriptive approaches to water conservation, where prices have rarely been used to allocate scarce supplies. The analysis emphasizes the emerging theoretical and empirical evidence that using prices to manage water demand is more cost-effective than implementing non-price conservation programs, similar to results for pollution control in earlier decades. Price-based approaches also have advantages in terms of monitoring and enforcement. In terms of predictability and equity, neither policy instrument has an inherent advantage over the other. As in any policy context, political considerations are important.

Suggested Citation

  • Sheila M. Olmstead & Robert N. Stavins, 2008. "Comparing Price and Non-price Approaches to Urban Water Conservation," Working Papers 2008.66, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2008.66
    as

    Download full text from publisher

    File URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2008-066.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jasper M. Dalhuisen & Raymond J. G. M. Florax & JHenri L. F. de Groot & Peter Nijkamp, 2003. "Price and Income Elasticities of Residential Water Demand: A Meta-Analysis," Land Economics, University of Wisconsin Press, vol. 79(2), pages 292-308.
    2. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
    3. Christopher Timmins, 2003. "Demand-Side Technology Standards Under Inefficient Pricing Regimes," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 26(1), pages 107-124, September.
    4. Freeman, Jody & Kolstad, Charles D., 2006. "Moving to Markets in Environmental Regulation: Lessons from Twenty Years of Experience," OUP Catalogue, Oxford University Press, number 9780195189650.
    5. S. Gaudin, 2006. "Effect of price information on residential water demand," Applied Economics, Taylor & Francis Journals, vol. 38(4), pages 383-393.
    6. Donna Brennan & Sorada Tapsuwan & Gordon Ingram, 2007. "The welfare costs of urban outdoor water restrictions," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(3), pages 243-261, September.
    7. Mary E. Renwick & Sandra O. Archibald, 1998. "Demand Side Management Policies for Residential Water Use: Who Bears the Conservation Burden?," Land Economics, University of Wisconsin Press, vol. 74(3), pages 343-359.
    8. Newell, Richard G & Stavins, Robert N, 2003. "Cost Heterogeneity and the Potential Savings from Market-Based Policies," Journal of Regulatory Economics, Springer, vol. 23(1), pages 43-59, January.
    9. Krause, Kate & Chermak, Janie M & Brookshire, David S, 2003. "The Demand for Water: Consumer Response to Scarcity," Journal of Regulatory Economics, Springer, vol. 23(2), pages 167-191, March.
    10. Parry, Ian W. H. & Bento, Antonio, 2002. "Estimating the Welfare Effect of Congestion Taxes: The Critical Importance of Other Distortions within the Transport System," Journal of Urban Economics, Elsevier, vol. 51(2), pages 339-365, March.
    11. Stavins, Robert N., 2003. "Experience with market-based environmental policy instruments," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 9, pages 355-435, Elsevier.
    12. Pels, Eric & Verhoef, Erik T., 2004. "The economics of airport congestion pricing," Journal of Urban Economics, Elsevier, vol. 55(2), pages 257-277, March.
    13. Renzetti, Steven, 1992. "Evaluating the welfare effects of reforming municipal water prices," Journal of Environmental Economics and Management, Elsevier, vol. 22(2), pages 147-163, March.
    14. Olmstead, Sheila M. & Michael Hanemann, W. & Stavins, Robert N., 2007. "Water demand under alternative price structures," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 181-198, September.
    15. Stavins, Robert N., 1998. "Market-Based Environmental Policies," Discussion Papers 10506, Resources for the Future.
    16. Martin L. Weitzman, 1974. "Prices vs. Quantities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(4), pages 477-491.
    17. Brennan, Donna C. & Tapsuwan, Sorada & Ingram, Gordon, 2007. "The welfare costs of urban outdoor water restrictions," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(3), pages 1-19.
    18. Mansur, Erin T. & Olmstead, Sheila M., 2012. "The value of scarce water: Measuring the inefficiency of municipal regulations," Journal of Urban Economics, Elsevier, vol. 71(3), pages 332-346.
    19. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249.
    20. Hugh Sibly, 2006. "Urban Water Pricing," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 13(1), pages 17-30.
    21. repec:bla:ausecr:v:39:y:2006:i:2:p:227-237 is not listed on IDEAS
    22. Robert A. Collinge, 1994. "Transferable Rate Entitlements: the Overlooked Opportunity in Municipal Water Pricing," Public Finance Review, , vol. 22(1), pages 46-64, January.
    23. Renwick, Mary E. & Green, Richard D., 2000. "Do Residential Water Demand Side Management Policies Measure Up? An Analysis of Eight California Water Agencies," Journal of Environmental Economics and Management, Elsevier, vol. 40(1), pages 37-55, July.
    24. Revesz, Richard L. & Stavins, Robert N., 2007. "Environmental Law," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 1, chapter 8, pages 499-589, Elsevier.
    25. Lucas W. Davis, 2008. "Durable goods and residential demand for energy and water: evidence from a field trial," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 530-546, June.
    26. Donald E. Agthe & R. Bruce Billings, 1987. "Equity, Price Elasticity, and Household Income Under Increasing Block Rates for Water," American Journal of Economics and Sociology, Wiley Blackwell, vol. 46(3), pages 273-286, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alexandros Polycarpou & Theodoros Zachariadis, 2013. "An Econometric Analysis of Residential Water Demand in Cyprus," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 27(1), pages 309-317, January.
    2. Nathan DeMaagd & Michael J. Roberts, 2020. "Estimating Water Demand Using Price Differences of Wastewater Services," Working Papers 202019, University of Hawaii at Manoa, Department of Economics.
    3. Daniel A. Brent & Lata Gangadharan & Anca Mihut & Marie Claire Villeval, 2019. "Taxation, redistribution, and observability in social dilemmas," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 21(5), pages 826-846, October.
    4. Jeffrey A. EDWARDS & Alfredo A. ROMERO & R. Gary PUMPHREY, 2014. "Supporting the Development of Municipal Water Policy: A study of the United States with Implications for Other Nations," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 14(2).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mansur, Erin T. & Olmstead, Sheila M., 2012. "The value of scarce water: Measuring the inefficiency of municipal regulations," Journal of Urban Economics, Elsevier, vol. 71(3), pages 332-346.
    2. Sheila M. Olmstead, 2010. "The Economics of Managing Scarce Water Resources," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 4(2), pages 179-198, Summer.
    3. Henrique Monteiro, 2010. "Residential Water Demand in Portugal: checking for efficiency-based justifications for increasing block tariffs," Working Papers Series 1 ercwp0110, ISCTE-IUL, Business Research Unit (BRU-IUL).
    4. Stavins, Robert, 2004. "Environmental Economics," RFF Working Paper Series dp-04-54, Resources for the Future.
    5. Robert N. Stavins, 2011. "The Problem of the Commons: Still Unsettled after 100 Years," American Economic Review, American Economic Association, vol. 101(1), pages 81-108, February.
    6. Castledine, A. & Moeltner, K. & Price, M.K. & Stoddard, S., 2014. "Free to choose: Promoting conservation by relaxing outdoor watering restrictions," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 324-343.
    7. Mónica Maldonado-Devis & Vicent Almenar-Llongo, 2021. "A Panel Data Estimation of Domestic Water Demand with IRT Tariff Structure: The Case of the City of Valencia (Spain)," Sustainability, MDPI, vol. 13(3), pages 1-26, January.
    8. R. Quentin Grafton & Tom Kompas & Hang To & Michael Ward, 2009. "Residential Water Consumption: A Cross Country Analysis," Environmental Economics Research Hub Research Reports 0923, Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University, revised Aug 2009.
    9. Olmstead, Sheila M., 2014. "Climate change adaptation and water resource management: A review of the literature," Energy Economics, Elsevier, vol. 46(C), pages 500-509.
    10. El-Khattabi, Ahmed Rachid & Eskaf, Shadi & Isnard, Julien P. & Lin, Laurence & McManus, Brian & Yates, Andrew J., 2021. "Heterogeneous responses to price: Evidence from residential water consumers," Journal of Environmental Economics and Management, Elsevier, vol. 107(C).
    11. Stavins, Robert, 2001. "Lessons From the American Experiment With Market-Based Environmental Policies," RFF Working Paper Series dp-01-53, Resources for the Future.
    12. Nataraj, Shanthi & Hanemann, W. Michael, 2011. "Does marginal price matter? A regression discontinuity approach to estimating water demand," Journal of Environmental Economics and Management, Elsevier, vol. 61(2), pages 198-212, March.
    13. Stavins, Robert, 2003. "Market-Based Environmental Policies: What Can We Learn from U.S. Experience and Related Research?," Working Paper Series rwp03-031, Harvard University, John F. Kennedy School of Government.
    14. Wichman, Casey J. & Taylor, Laura O. & von Haefen, Roger H., 2016. "Conservation policies: Who responds to price and who responds to prescription?," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 114-134.
    15. Shyama Ratnasiri & Clevo Wilson & Wasantha Athukorala & Maria A. Garcia-Valiñas & Benno Torgler & Robert Gifford, 2018. "Effectiveness of two pricing structures on urban water use and conservation: a quasi-experimental investigation," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 20(3), pages 547-560, July.
    16. Janine Stone & Christopher Goemans & Marco Costanigro, 2019. "Variation in Water Demand Responsiveness to Utility Policies and Weather: A Latent-Class Model," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 6(01), pages 1-33, September.
    17. Steven Renzetti, 2009. "Wave of the Future: The Case for Smarter Water," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 281, February.
    18. Oliver R. Browne & Ludovica Gazze & Michael Greenstone, 2021. "Do Conservation Policies Work? Evidence from Residential Water Use," Environmental and Energy Policy and the Economy, University of Chicago Press, vol. 2(1), pages 190-225.
    19. R. Quentin Grafton & Michael B. Ward, 2008. "Prices versus Rationing: Marshallian Surplus and Mandatory Water Restrictions," The Economic Record, The Economic Society of Australia, vol. 84(s1), pages 57-65, September.
    20. Liang Lu & David Deller & Morten Hviid, 2018. "Price and Behavioural Signals to Encourage Household Water Conservation in Temperate Climates," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2018-01, Centre for Competition Policy, University of East Anglia, Norwich, UK..

    More about this item

    Keywords

    Cost-effectiveness; Water Conservation; Market-based Approaches; Policy Instrument Choice; Water Price;
    All these keywords.

    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fem:femwpa:2008.66. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alberto Prina Cerai (email available below). General contact details of provider: https://edirc.repec.org/data/feemmit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.