Economic incentives for urban water conservation in the Colorado river basin

Hannah Hansen1, Bonnie Colby1
1Department of Agricultural and Resource Economics, University of Arizona

We examine the use of incentive based policy tools to encourage urban water conservation in the Colorado River Basin. These tools influence behavior indirectly though economic signals and allows greater flexibility to water users. The main focus of this study is Municipal Rate Structures and their influence on water usage. Throughout the Colorado River Basin, cities employ a variety of rate structures that include incentives to curtail consumption such as seasonal pricing provisions, and tiered usage rates. The rate structures promote conservation by penalizing higher usage with more expensive water. Investment projects for the replacement of water meters with Advanced Metering Infrastructure are occurring across the Basin and allow for more accurate and frequent reads of water usage and data storage. Policymakers can use this new technology to design more efficient and effective water conservation policies. In addition to water rates and infrastructure improvements, municipalities may offer rebate programs to customers for low flow appliances, smart irrigation systems, gray water systems, and turf replacement with Xeriscape. Programs such as these can motivate outdoor water conservation. The subsidization of effluent (treated wastewater) is another widely used incentive based policy tool. Cities supply effluent at rates lower than typical water service to encourage its usage in irrigation on large turf areas such as parks and golf courses. Together, this array of policy tools can encourage adoption of water saving practices in the pursuit urban water conservation.

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