Towards the design of an Environmentally and Socially Conscious Water Metering Tariff

summary:

The motivation for the research was an acceptance that there is a strong environmental case for universal water metering, particularly in southern and eastern England, regions that are already making unsustainable use of their water resources and where the situation is expected to get worse because of population shifts and climate change. In these regions at least, water is now a scarce resource, which implies that it needs to be managed. A scarce resource cannot be managed unless it is measured, yet water companies presently have little knowledge about how much water different household consumers use. Since the use of water needs to be managed, that implies that its use needs to be measured by metering. A further argument involves recognition that water has a value and that people should be encouraged to use it wisely. It is not easy for that message to get across when water is a free good at the point of use, and there is no incentive to avoid even the most gratuitous waste.

There are also arguments against water metering: that it is an expensive means of encouraging water conservation, that it can lead to people cutting back on use that is essential for hygiene or medical reasons, and that its implementation can lead to disproportionate costs for low-income households (i.e. is regressive). The focus of this research is an examination of ways to design water-metering tariffs to reduce negative impacts on poor households.

Universal metering could be implemented in the UK through a variety of different tariffs, each with different distributional implications. At one end of the spectrum would be an equal charge (at least from a given water company—water charges currently vary widely by region) for all households per unit volume of water used. This would increase the regressivity of water charging, and most low-income households would be made worse off. At the other end of the spectrum universal metering could be made very progressive, and most low-income households could be made better off, by having a lower tariff for those on benefits, by giving a ‘free’ allowance of water to some households, or by varying the tariff by an amount related to Council Tax. These are some of the options explored by the research in this paper. All the progressive options involve on average a redistribution of income from better off to less well of households.

Research Discussion Paper 21

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