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Effectiveness of Rebate Programs in Reducing Household and Commercial Water Use

Project ID: 1591
Principal Investigator: Steven Piper
Research Topic: Water Marketing
Priority Area Assignments: 2012 (Climate Adaptation), 2013 (Climate Adaptation)
Funded Fiscal Years: 2012
Keywords: water conservation, rebate program, marginal cost of water, marginal rebate cost

Research Question

Municipal and industrial water shortages can be addressed through demand side management or supply expansion. The high cost and limited possibilities of supply expansion make demand side management a potentially viable alternative to equate water supply and demand in the future, particularly during times of financial stress and uncertainty. This research will evaluate the effectiveness of water rebate programs for a variety of water saving devices in reducing household and commercial water use. Evaluating the effectiveness of a rebate program requires an evaluation of how the rebate actually changes purchasing behavior, both in terms of the type of purchase made and when it is made, and the level of market saturation that currently exists for water-saving devices. This research will evaluate existing water rebate participation and socioeconomic data to evaluate the effect of rebate size and type on consumer buying behavior and ultimately the water savings realized from rebates.

Need and Benefit

The purpose of this research is to evaluate the effectiveness of water rebate programs in reducing water use, for both households and commercial establishments, relative to water use without the programs. There are two factors to consider when evaluating rebate effectiveness. First, does the existence of a rebate program change purchasing behavior? If the consumer would buy a water- saving device with or without a rebate, then the value of the rebate toward saving water is zero. However, if the consumer would not buy the water-saving device without a rebate, then the rebate has a positive value in terms of water savings. Second, what rebate value is necessary in order to change consumer behavior and receive water-saving benefits? This research will provide empirical estimates of the rate of adoption of water-saving devices with and without a rebate and the effect of rebate levels on that rate.

This information can help water suppliers evaluate the potential for rebate programs to meet their current and future water supply needs in a cost- effective manner. If the research indicates that very high rebate amounts are needed to encourage the adoption of water-saving devices, then other more cost-effective demand or supply side measures may be required to meet needs. If the research indicates that moderate rebate levels can lead to significant water use reductions, then rebate programs may be used as an important part of conservation plans and overall water resource planning to meet future water needs and solving water supply problems due to drought, climate change, or other issues.

Contributing Partners

None

Research Products

Bureau of Reclamation Review

The following documents were reviewed by experts in fields relating to this project's study and findings. The results were determined to be achieved using valid means.

The Influence of Rebates on the Purchase of and Willingness to Pay for Water Conservation Devices (final, PDF, 299KB)
By Steven Piper
Report completed on May 30, 2014

This analysis focuses on the effect of rebates on the likelihood of purchasing a water conservation device and the willingness to pay for a device. An ordered logit model was estimated to evaluate factors that influence the decision to purchase a smart timer and an ordinary least squares model was estimated to evaluate willingness to pay. Results indicate a rebate has a positive influence on the likelihood of purchasing a smart timer but does not have a significant effect on willingness to pay.
Keywords: water conservation, smart timer, willingness to pay

This information was last updated on October 25, 2014
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