Determinants of the price response to residential water tariffs: Meta-analysis and beyond

Marzano, Riccardo; Rougé, Charles; Garrone, Paola; Grilli, Luca; Harou, Julien J.; Pulido-Velázquez, Manuel

doi:10.1016/j.envsoft.2017.12.017

Cited by 58 publications

(57 citation statements)

References 68 publications

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“…Water Resources Research specification, (3) double-log functional form, and (4) panel data. Compared to DBR structure, IBR structure is likely to produce higher estimates of price elasticity, so is the case when the model is specified with the average price rather than marginal price (Dalhuisen et al, 2003;Marzano et al, 2018). Similarly, higher estimates of price elasticity have been observed when panel data are used and also when the model is specified with double-log functional form (Marzano et al, 2018).…”

Section: 1029/2019wr026156mentioning

confidence: 99%

Evaluating the Sensitivity of Residential Water Demand Estimation to Model Specification and Instrument Choices

Puri

Maas

2020

Water Resources Research

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There is a substantial body of work that estimates residential water demand as a function of price, household characteristics, and weather. While most results suggest demand is inelastic, researchers have found qualitatively different estimates of price elasticity-both elastic (>1) and inelastic (<1). Inconsistency in the choice of the price signal, its instruments, and appropriate weather variables across studies makes it difficult to determine if the differences in elasticity estimates are real-due to location characteristics-or an artifice of model specification. Predicting accurate demand responses to price changes enables water utilities to stabilize and anticipate future revenue while meeting conservation goals. However, specifying residential water demand with the appropriate model (under block rate structure) is challenging for three reasons: (1) uncertainty around the appropriate price signal, (2) a lack of theoretical motivation for determining which (and how) weather variables affect demand, and (3) simultaneity issues in estimation require the use of instruments, which vary across studies. Therefore, to elucidate the effects of model choices on elasticity, we use a single location and systematically vary the specification of price, instruments, and weather variables across a suite of models. We reaffirm past results that households respond to the average price. We find reasonably stable and robust estimates of price elasticity across different weather and price instrument specification-with some notable exceptions-implying that low-cost information like average temperature is sufficient to accurately reflect the data-generating process, reducing costs and allowing for a parsimonious model.

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Section: 1029/2019wr026156mentioning

confidence: 99%

Evaluating the Sensitivity of Residential Water Demand Estimation to Model Specification and Instrument Choices

Puri

Maas

2020

Water Resources Research

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“…It is important to note that the new sanitation fee structure introduced in 2013 was applied equally both for residential and hotel water consumption. While in the case of residential use there is some previous evidence that concludes that the introduction of an increasing block rates system leads to lower levels of water consumption [22,[29][30][31], no such evidence is found in the case of the hotel sector consumption. This study will therefore try to provide new evidence about the effectiveness of a change in water tariff to promote a more conservative use of the resource in the hotel sector.…”

Section: The Water Price Reformmentioning

confidence: 95%

Hotel Water Demand: The Impact of Changing from Linear to Increasing Block Rates

Deyà-Tortella

García

Nilsson

et al. 2019

Water

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Water is a key aspect for any tourist destination. The pressure of tourism on water resources, and specifically by the hotel sector on islands and coastal areas, threatens the sustainability of the resource and, ultimately, of the destination. Several international organizations propose price policy as an instrument to promote efficiency and penalize excessive water consumption. This study analyzes the short-term effectiveness of a water tariff reform, implemented by the regional government of the Balearic Islands in 2013, on hotel water consumption. The change consists in moving from a linear to an increasing block rate system. The study applies quantile regression with within-artificial blocks transformation on panel data for the period 2011–2015. The results conclude that the reform was not effective as a means to reduce the levels of water consumption. The disproportionate fixed component of the water tariff and the oversized initial block of the sanitation fee can explain the ineffectiveness of the reform.

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“…with conflicting interests [5]. In this context, the importance of employing economic instruments-specifically tariffs-was incorporated, which aimed to signal the scarcity of water resources by allocating a price so as to induce rational use [20,21]. Thus, the water tariff took several different forms [22].…”

Section: Scarcity-based Tariffmentioning

confidence: 99%

Building a System Dynamics Model to Support Water Management: A Case Study of the Semiarid Region in the Brazilian Northeast

Araujo

Oliveira-Esquerre

Sahin

2019

Water

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In recent centuries, water consumption rates have more than doubled and the population growth rate is rising constantly. As a result, water scarcity is now one of the main problems to be faced, mainly in semiarid regions. In light of such a dilemma, this study aims to develop a system dynamics model in order to evaluate the water system in the semiarid region of the state of Paraíba—located in the Brazilian Northeast—and it focus on the following two issues: (1) measures that could have been taken with respect to the recent water crisis (2012–2017); (2) simulating water availability up to 2025. It was observed that, despite the options of in-demand management tools being efficient solutions for water scarcity in the short term (e.g., the influence of scarcity-based tariffs in reducing water use), such tools would not suffice in a context of severe drought within a water-providing system that depends heavily on rainfall. However, certain policies involving water-supply management (e.g., wastewater reuse and inter-basin water transfer) are very effective in maintaining water supply and avoiding a water collapse in the region. Furthermore, employing the Monte Carlo approach in simulating the system dynamic proved that the water supply is sensitive to scarcity-based tariffs, wastewater reuse, and inter-basin water transfer. An important advancement in this study was the simulation of a methodology for pricing that encourages rational use of water-based on its scarcity, which in turn increases revenue and investment in other water-management strategies.

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Determinants of the price response to residential water tariffs: Meta-analysis and beyond

Cited by 58 publications

References 68 publications

Evaluating the Sensitivity of Residential Water Demand Estimation to Model Specification and Instrument Choices

Evaluating the Sensitivity of Residential Water Demand Estimation to Model Specification and Instrument Choices

Hotel Water Demand: The Impact of Changing from Linear to Increasing Block Rates

Building a System Dynamics Model to Support Water Management: A Case Study of the Semiarid Region in the Brazilian Northeast

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