1 Water conservation

Water conservation can be encouraged with price or non-price instruments. Water prices are more often directed at cost recovery than water conservation. They vary with location and use. A farmer pays one price to receive water from an irrigation ditch, a family pays a different price to receive drinking water at its tap, an organization might pay a variety of prices to buy water that is then left to flow in-steam for environmental purposes. Prices may be found in an auction, determined by the average cost of utility service, or set through an administrative procedure. An increase in price often results in a reduction in demand, but the elasticity of this response varies with the price level, use of water, availability of substitutes, and incidence of water prices. This last factor is driven by political or regulatory decisions that explain the existence of block prices, social tariffs, sectorial cross-subsidies, regulatory exemptions, and other “adjustments ” that distort consumption decisions and conservation investments. For the sake of this article, assume that it costs one dollar to receive one cubic meter of drinking water (265 gallons), a number that’s close to three dollars per ccf (hundred cubic feet of water, or 748 gallons); see Zetland and Gasson (2012) for a global survey of water prices. Wholesale water buyers usually pay far less for water (e.g., $100 for one million liters, or 0.81 acre foot) because the water is neither suitable for drinking nor typically pressurized for 24/7 delivery through a distribution system