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Creating Economic Incentives for Conservation
Author(s) -
Vickers Amy,
Markus Edward J.
Publication year - 1992
Publication title -
journal ‐ american water works association
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.466
H-Index - 74
eISSN - 1551-8833
pISSN - 0003-150X
DOI - 10.1002/j.1551-8833.1992.tb05863.x
Subject(s) - incentive , business , investment (military) , revenue , water conservation , demand management , environmental economics , natural resource economics , supply and demand , economics , water utility , water supply , finance , industrial organization , water resources , microeconomics , engineering , ecology , macroeconomics , environmental engineering , politics , political science , law , biology
US water suppliers are increasingly incorporating conservation into their management strategies as a way to enhance supply capacities and shift consumer demand toward sustainable‐use patterns. Incentives to the utility for following this management strategy, aside from the conserving of water, include reduced investment and operating costs and preservation of environmental assets. Disincentives include revenue shortfalls, more frequent rate adjustments, and difficulty predicting future demand. Recent experience by the electric utility industry indicates innovative program‐financing mechanisms may be required if conservation is to be a worthwhile and economically safe venture, particularly for investor‐owned, regulated water utilities. For example, an important assumption associated with incentive strategies is that increased water efficiency is an equal substitute for water supply capacity and has equivalent value in the marketplace. Utilities need to quantify the economic and environmental assets of a conservation program so those elements may be justly incorporated into the financial considerations of alternative supply‐ and demand‐side planning options.