Tuesday, July 8, 2008

The wisdom of water restrictions in Cape Town

Cape Town faced several droughts over the last few years, resulting mainly in water restrictions and development of alternative supply options.  These responses succeeded in stabilising water use, but an important, but often overlooked question is at what cost it was achieved.  

Some response options are just more costly then others. 

Using prices to manage water demand is more cost-effective than implementing non-price conservation programs.  The gains from using prices as an incentive for conservation come from allowing households to respond to increased water prices in the manner of their choice, rather than by installing a particular technology or reducing particular uses, as prescribed by non-price approaches. Price-based approaches also have important advantages in terms of monitoring and enforcement.
Raising water prices (like the elimination of any subsidy) is politically difficult, but there may be political capital to be earned by elected officials who can demonstrate the cost-effectiveness advantages of the price-based approach.  At a minimum, communities choosing politically popular low water prices over cost-effectiveness should quantify this tradeoff and make it explicit.  Where water rate-setting officials are constrained by law from raising water prices, during droughts or in general, a discussion of the real costs of these constraints would be useful. 
(photo: Ballardian, Sandy Scheltema; courtesy Age newspaper)

1 comment:

Gerhard Buttner said...

Excellent topic that Capetonians and South Africans are probably not taking seriously enough. As Capetonian now living in Oaxaca, Mexico – a country of a similar development level than SA, I find it interesting how much more aware Mexicans are of water as limited resource – and partly due to a lack of regular supply to the houses.

While part of this is probably more mismanagement than effective supply control, South Africans are always amazed when I tell them that we like most other households – of all socio-economic levels - receive water from the public water system only a few times per week for a few hours (and in the dry season a week or more can pass without receiving a drop). Obviously individuals then need to store whatever comes their way in large tanks (which every house has on the roof). When water runs out, people order a water truck at an enormous cost compared to the nearly nothing that is paid for the highly subsidized public water. So obviously people save water, trying to avoid this (a combination of supply side and demand side control?). Water quality? – different topic, but even the poor households buy their 20 liter canisters regularly, nobody drinks public water without treatment or boiling.