Responsiveness of Household Water Demands to Price and Non-Price Conservation Tools

Abstract

Canada has apparently abundant water resources: approximately 7% of the world’s renewable fresh water with less than one percent of its population. Pressure on the resource is growing with annual water withdrawals increasing by almost 90% in the last twenty years leading Canadians to be second highest per capita users of water in the world. Water utility managers want to put into place conservation strategies that will ensure a more sustainable use of available water supplies, particularly, in the face of increasing variability of precipitation arising from climate change. They are increasingly turning to price tools (raising water rates) instead of traditional non-price tools (summer water restrictions) to encourage conservation. However, there is little information on the responsiveness of consumer demands to price changes. Establishing the efficacy of such a tool for curbing water use is one policy problem addressed by this research. A second problem is how to incorporate price responsiveness into the ability to predict future water demands and revenue streams that will support future infrastructure maintenance and improvements.