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Pricing Sydney water

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  • R. Quentin Grafton
  • Tom Kompas

Abstract

The paper estimates an aggregate daily water demand for Sydney using rainfall, temperature, and price data from 2001 to 2005, and a dummy variable to account for reductions in demand following the introduction of water restrictions in October 2003. Analyses based on the estimated price elasticity, and also values one and two standard errors above and below this estimate, are used to model the effects of different pricing and water supply scenarios. The simulations indicate that without a fundamental change in water policy (pricing and supply) Sydney faces the possibility of critical water shortages in the short- to medium-term should there be a continuation of low rainfall events. Copyright 2007 The Authors Journal compilation 2007 Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Ltd .

Suggested Citation

  • R. Quentin Grafton & Tom Kompas, 2007. "Pricing Sydney water ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(3), pages 227-241, September.
    • Handle: RePEc:bla:ajarec:v:51:y:2007:i:3:p:227-241
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    File URL: http://hdl.handle.net/10.1111/j.1467-8489.2007.00390.x
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    Cited by:

    1. Lin Crase & Suzanne O’Keefe & Brian Dollery, 2008. "Can Urban Water Markets Work? Some Concerns," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 15(3), pages 73-82.
    2. Emma Aisbett & Ralf Steinhauser, 2014. "Maintaining the Common Pool: Voluntary Water Conservation in Response to Varying Scarcity," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 59(2), pages 167-185, October.
    3. R. Quentin Grafton & Michael B. Ward, 2010. "Dynamically Efficient Urban Water Policy," Centre for Water Economics, Environment and Policy Papers 1013, Centre for Water Economics, Environment and Policy, Crawford School of Public Policy, The Australian National University.
    4. Fuente, David, 2019. "The design and evaluation of water tariffs: A systematic review," Utilities Policy, Elsevier, vol. 61(C).
    5. Wheeler, Sarah Ann & Bjornlund, Henning & Shanahan, Martin & Zuo, Alec, 2008. "Price elasticity of water allocations demand in the Goulburn–Murray Irrigation District," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(01), pages 1-19.
    6. Aisbett, Emma & Steinhauser, Ralf, 2011. "Does anybody give a dam? The importance of public awareness for urban water conservation during drought," Research Reports 107850, Australian National University, Environmental Economics Research Hub.
    7. Henrique Monteiro, 2010. "Residential Water Demand in Portugal: checking for efficiency-based justifications for increasing block tariffs," Working Papers Series 1 ercwp0110, ISCTE-IUL, Business Research Unit (BRU-IUL).
    8. Bethany Cooper & Michael Burton & Lin Crase, 2019. "Willingness to Pay to Avoid Water Restrictions in Australia Under a Changing Climate," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(3), pages 823-847, March.
    9. Lin Crase & Bethany Cooper, 2017. "The Political Economy of Drought: Legacy and Lessons from Australia's Millennium Drought," Economic Papers, The Economic Society of Australia, vol. 36(3), pages 289-299, September.
    10. Steven Renzetti, 2009. "Wave of the Future: The Case for Smarter Water," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 281, February.
    11. Daniel A. Brent & Lata Gangadharan & Anca Mihut & Marie Claire Villeval, 2019. "Taxation, redistribution, and observability in social dilemmas," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 21(5), pages 826-846, October.
    12. Wang, Hua & Xie, Jian & Li, Honglin, 2008. "Domestic water pricing with household surveys : a study of acceptability and willingness to pay in Chongqing, China," Policy Research Working Paper Series 4690, The World Bank.
    13. Long Chu & R. Quentin Grafton, 2019. "Policy Note: "Short-term Pain for Long-term Gain: Urban Water Pricing and the Risk-adjusted User Cost"," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 5(02), pages 1-14, April.
    14. Emma Aisbett & Ralf Steinhauser, 2011. "Maintaining the Common Pool: Voluntary Water Conservation in Response to Increasing Scarcity," ANU Working Papers in Economics and Econometrics 2011-554, Australian National University, College of Business and Economics, School of Economics.
    15. Productivity Commission, 2008. "Towards Urban Water Reform: A Discussion Paper," Research Papers 0801, Productivity Commission, Government of Australia.
    16. Hugh Sibly & Richard Tooth, 2008. "Bringing competition to urban water supply ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(3), pages 217-233, September.
    17. R. Quentin Grafton, 2017. "Responding to the ‘Wicked Problem’ of Water Insecurity," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 31(10), pages 3023-3041, August.
    18. World Bank Group, 2016. "High and Dry," World Bank Publications - Reports 23665, The World Bank Group.
    19. Grafton, R. Quentin & Chu, Long & Kompas, Tom, 2015. "Optimal water tariffs and supply augmentation for cost-of-service regulated water utilities," Utilities Policy, Elsevier, vol. 34(C), pages 54-62.
    20. World Bank [WB], 2016. "High and Dry : Climate Change, Water, and the Economy," Working Papers id:10736, eSocialSciences.
    21. Barker, Andrew & Murray, Tim & Salerian, John, 2010. "Developing a Partial Equilibrium Model of an Urban Water System," Staff Working Papers 102, Productivity Commission, Government of Australia.
    22. Freebairn, John W., 2012. "Risk Aversion and Urban Water Decisions," 2012 Conference (56th), February 7-10, 2012, Fremantle, Australia 124206, Australian Agricultural and Resource Economics Society.
    23. Cooper, Bethany & Crase, Lin & Burton, Michael P., 2010. "Urban Water Restrictions: Attitudes and Avoidance," 2010 Conference (54th), February 10-12, 2010, Adelaide, Australia 58892, Australian Agricultural and Resource Economics Society.
    24. Hughes, Neal & Hafi, Ahmed & Goesch, Tim, 2009. "Urban water management: optimal price and investment policy under climate variability," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 53(2), pages 1-18.
    25. R. Quentin Grafton & Michael B. Ward, 2008. "Prices versus Rationing: Marshallian Surplus and Mandatory Water Restrictions," The Economic Record, The Economic Society of Australia, vol. 84(s1), pages 57-65, September.

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