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Economics of Saving Water

Even with the anticipated El Nino weather conditions on the west coast, the drought in California will continue. Experts say it will take three or four years of very heavy rainfall to replenish above ground reservoirs, and many more years of above average rainfall to refill underground aquifers. So what has California done to address the economics of saving water?

The Governor implemented a mandatory 25% water cutback, and people responded with an average 31% reduction. Brown is the new green when it comes to lawns (urban use accounts for 21% of water consumption). Unfortunately, farm output has taken a big hit — fields are empty and orchards are filled with dead trees (agriculture accounts for 79% of water consumption).

But it has been difficult for people to conserve when they do not know what water costs. Anyone who drives a car knows how much gas costs per gallon — but very few people know how much water costs per gallon. Last year here in the San Jose area our household water cost $0.004 per gallon (about half a penny). We cut our usage in half, but our water rates still more than doubled to $0.009 per gallon (almost a penny).

Painful as it may be when it comes to something we take for granted, people respond to price signals. As water rates doubled, consumption dropped. The same behavior applies to other commodities that we buy — most noticeably gasoline and electricity. For more about the economics of saving water, please Listen Up to this week’s Energy Show.


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