Water conservation is a priority for many communities and countries. Within the frame of SmartH2O, a EU-funded research and innovation project, the research team investigated the effect of pricing policies on water saving. We analysed the response of urban water consumers through multiple methods. Both the structure of tariffs and water scarcity are found to drive water saving behaviour. Prices and monetary rewards are estimated to have a greater impact than symbolic prizes.
Saving water through pricing policy
About the project
Principal Investigators: Paola Garrone
Researcher team: Paola Garrone, Luca Grilli, Riccardo Marzano
Funders: EU Seventh Framework Programme under Grant Agreement No. 619172 (SmartH2O: an ICT Platform to leverage on Social Computing for the efficient management of Water Consumption)
KEY RESEARCH QUESTIONS
As severe droughts hit many world regions, and episodes of water shortage occur also in Europe, the debate on water conservation policies has grown in urgency and geographic, sectoral and disciplinary scope. Within the SmartH2O project, the research team investigates the potential of water pricing policies. Our research addresses the following problems: Do residential water consumers reduce water consumption significantly in response to increases in water prices? Is price elasticity more important in the presence of water scarcity events? Do symbolic prizes have a greater impact on water saving conducts than extrinsic incentives, such as prices and monetary rewards? In order to answer these questions, we make use of both meta-analyses, and new survey data collected from Swiss and Spanish urban water consumers, adopting a stated preference approach. Even though average price elasticity is low, increasing block rate tariffs are shown to be associated with higher price elasticity. Secondly, our results reveal that customers are more responsive to water prices in locations where water is scarcer. However, stricter pricing policies are not found to induce water conservation in water scarce communities if inhabitants have strong environmental concerns. Lastly, we study the willingness to save water for a sample of Swiss and Spanish water users under three alternative incentive policies: a water price increase, a monetary reward and a symbolic prize. We show that both price and monetary rewards result to be effective mechanisms in the presence of a water shortage. Conversely, the symbolic mechanism is never found to affect consumers’ habits. Based on these results, recommendations are derived for water conservation policies, and more specifically for the choice and design of demand-management instruments.
OUTPUTS & IMPACTS
- Marzano, R., Rougé, C., Garrone, P., Grilli, L. Harou, J. H., Pulido-Velazquez, M. (2018). Determinants of the price response to residential water tariffs: Meta-analysis and beyond. Environmental Modelling & Software, 101, 236-248.
- Rougé, C., Harou, J. J., Pulido-Velazquez, M., Matrosov, E. S., Garrone, P., Marzano, R., Lopez-Nicolas, A., Castelletti, A., Rizzoli, A. E. (2018). Assessment of Smart-Meter-Enabled Dynamic Pricing at Utility and River Basin Scale. Journal of Water Resources Planning and Management, 144(5), 04018019.
- Garrone, P., Grilli, L., Marzano, R. (2016). Incentives to water conservation: comparing price and reward effects through stated preferences. XXVII Riunione Scientifica Annuale Associazione italiana di Ingegneria Gestionale, Bergamo, 13-14 Ottobre 2016.
- Marzano, R., Garrone, P., Grilli, L. (2016). Price Elasticity of Residential Water Demand and Water Scarcity. WINIR Conference, 2-4 September 2016, Boston, MA, The United States [title: “Water Saving: Do Residential Consumers Respond to Price? The Role of Informal Institutions”], Available at SSRN: https://ssrn.com/abstract=3106190
- Harou, J.J., Garrone, P., Rizzoli, A. E., Maziotis, A., Castelletti, A., Fraternali, P., Novak, J., Wissmann-Alves, R., Ceschi, P.A. (2014). Smart Metering, Water Pricing and Social Media to Stimulate Residential Water Efficiency: Opportunities for the SmartH2O Project, Procedia Engineering 07/2014; 89.
- Awards: the SmartH2O project has obtained the WssTP Water Innovation Award 2018 in the Digital Water category
- SUPSI (Scuola Universitaria Professionale della Svizzera Italiana)
- Politecnico di Milano (DEIB and DIG)
- the University of Manchester
- Universitat Politècnica de València
- Set Mobile
- European Institute for Participatory Media
- Società Elettrica Sopracenerina
- Empresa Mixta Valenciana de Aguas S.A.
- Thames Water Utilities
- MoonSubmarine, WebRatio