Evidence for the effectiveness of progressive urban water demand management

Abstract

Based on panel data from the City of Davis, California, comprising more than 15,000 urban water consumption units and 81 billing periods over 13 years, this study investigates residential water demand and the effectiveness of three structural water conservation measures. The city switched from a uniform to an increasing block pricing scheme, introduced a second tariff block for single-family residential households, and changed the calculation logic for the household sewer rate. An instrumental fixed effects regression analysis results in a price elasticity of -0.19 for residential consumers. The data also suggests that all structural tariff adjustments were effective, even under consideration of the general economic situation. This is the first study which demonstrates the effectiveness of coupling the sewer rate with a proxy for indoor water consumption on a household level.