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Solved Problems, Bigger Problems

Christchurch Council this morning tweeted a helpful water-saving tip.


Longer showers use more water. Who’d have suspected? Now I know why the hot water cylinder runs out sometimes.

If Council really wants to conserve water, there’s a simple simple solution. Water pricing. There’s one vehement popular objection, which is already totally solved. And a more difficult one that isn’t.

First, the solved problem: “But water is essential and it’s mean to charge people for it.

First, let’s leave aside the obvious retorts that people starve without food and that we don’t have Councils provide all-you-can-eat buffet pipes to each house. Take it as a constraint on the solution because politics. But it’s a simple constraint. Here’s how you solve it.

  1. Check which household used the most water last year, other than through line faults.
  2. Give each household an allocation equal to that amount of water. For free, they get that much water.
  3. Rebate each household a per-litre charge for every litre of that allocation that they don’t use; charge any household the same per-litre charge if they go over the free allocation.
  4. Don’t charge people for line blowouts, unless they repeatedly fail to fix them on notification.
  5. Increase property taxes trivially to cover the water rebate cheques.

Net effect? High water using households pay more; houses using less water pay less; and, any net shortfall is primarily funded by rates falling on more expensive properties (ie a wealth tax).

This is a totally solved problem. It beggars belief that people don’t get this.

There are other ancillary little problems, like that people think that water charging is a precursor to privatisation. That just seems silly as a Council wanting to privatise would just sell it off without pricing while allowing the new owner to price.

The bigger problem, and the potentially unsolved one, is that the cost of reading the meters might outweigh the efficiency gains from having households use less water. But if the efficiency gains of using less water are tiny, it’s odd that Council’s reminding people that longer showers use more water.

And if it turned out that residential users were willing to pay a much higher per-unit fee for water than were agricultural or other users, perhaps it might be easier to set up a system in which water could be bid away from less valuable uses and into more valuable uses. Just maybe. Like how we don’t use titanium to build paperclips. Noticed how we don’t use titanium to build paperclips? Prices. They work.

But the biggest problem is stupid politics. The mechanics are a solved problem. But in plenty of places where water is scarce, it’s still hard to work the politics of charging for residential water, even though it is totally totally simple to do it in a way that absolutely cannot harm low-income households that use a lot of water, as I’ve shown above. And if you go to a “well, poor households will feel coerced to use less water because of the rebate cheques”, consider whether you might be happier moving to places that don’t use the price system at all.

About Eric Crampton (88 Articles)
I'm Head of Research with the New Zealand Initiative.

2 Comments on Solved Problems, Bigger Problems

  1. Katharine Moody // December 14, 2016 at 10:31 pm // Reply

    I’m not sure but if I understand the legislation correctly, (I think) charging for water can only be done on a cost-recovery basis – therefore, one cannot implement a ‘scarcity’ charge as a means to incentivise conservation (and/or build up capital reserves). Hence a TLA with a scarcity problem (one which will require significant future capital investment, say for a dam) only has Development Contributions (I believe) as a means to fund such future/growth requirements. So pricing doesn’t necessarily lead to [enough] conservation. But I could be wrong on that. I only started thinking on it the other day when at an event where a Mayor lamented not being able to implement a ‘green’ type tax/charge on water use. I assume that is what he meant as it is a TLA that has a shortage problem, one that persists even though water is charged on a volumetric basis.


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