Pricing and individual choice in urban water conservation. Key takeaways from the UCT-UCR seminar
By Senani Mamba | WPE
In August's seminar, we were joined by Gary Libecap, Distinguished Professor Emeritus at the Bren School of Environmental Science & Management and Economics Department at the University of California, Santa Barbara (UCSB), emeritus, as well as the National Bureau of Economic Research (NBER) in the United States. Prof. Libecap presented his research on 'Pricing and Individual Choice in Urban Water Conservation', offering valuable insights into urban water pricing and rural-to-urban water transfers.
The discussion began by illustrating how water consumption has shifted from agricultural use to urban use globally, citing a 58% share in 2026 (up from 47% in 2000), driven by rising urban populations, especially in Asia and Africa. Examples from the Colorado Big Thompson rural/urban water pricing signals rising more moderately by design were shown, where an increase in price from 2010 to 2025 was 8–10 times, double in the Denver residential and almost 1.6 in the Colorado Springs retail water.
Key takeaways:
- Prof. Libecap emphasised that demand moderation using pricing and supply enhancement in urban water conservation resulted in 20% of water diversions as well as a reduction of consumption by 20–40%.
- He compared urban water pricing with supply enhancement, where pricing mechanisms are used in 33–50% of US urban areas and 60–80% of US urban areas using supply enhancement; noting that cities rely more on supply expansion than on pricing due to pressure from the political economy. He also illustrated the effect of variation in tiered pricing across different cities, with the highest-tier pricing strategy having the greatest conservation effect on water. Whilst adding uniform capital costs blunts the effect of block pricing.
- He showed how water movement could also be a solution to water scarcity. By making an illustration of how the movement of water from the West slope of Colorado (agricultural demand) to the East slope (urban demand) was implemented.
To conclude the discussion, he presented on community lessons from other water transfers, citing the IID/MWD Conservation Program (Imperial Irrigation District/Metropolitan Water District) San Diego in California, a community investment fund estimated at 20 million USD from San Diego and ~30 million USD from MWD. He showed that these strategies also move money and for sending communities these funds support local businesses and receiving communities prevents costly capital establishments of grey water usage, low-flush toilets etc. Moreover, global lessons from the experience from his research were that there would be a rising demand for water calling for the movement of water and effective pricing strategies and a demand for establishment of water markets that estimate the marginal value of water for compensation.
This presentation is part of the UCT-UCR Seminar Series: Water Economics and Politics, a joint initiative between the University of Cape Town (UCT) and the University of California, Riverside (UCR). About this presentation: Pricing and individual choice in urban water conservation.