Authors: Carmine Ornaghi (University of Southampton) & Mirco Tonin (Free University of Bozen-Bolzano)
Paper number 1801
Abstract
There is general consensus that water meters are necessary for promoting an efficient use of water through some form of pricing mechanism based on effective consumption. However, available evidence on benefits and costs of metering is scant and often based on a small sample of households. This paper uses data of the first large-scale universal metering programme in England to produce a comprehensive analysis of the impact of metering on consumption, social efficiency and distributional outcomes. We find that, on average, due to metering households decrease consumption between 18% and 22%, a higher value than assumed as a policy target. The percentage reduction in water consumption is very similar across different income groups but, whereas high-income households gain financially upon switching to metering, less affluent households are, on average, around £10 worse-off. Finally, our analysis shows that there is a large proportion of households for which the social cost of metering outweighs the benefits, thus calling into question whether universal metering should be extended to other areas of the country in its current format, as opposed to a selective metering programme where only “large” households receive a meter, which would be more efficient from the society’s point of view.
Keywords: Water meters, social efficiency, equity.
JEL classification: Q25, D12, H42.