Water Pricing Strategy

In the society, the scarce resources are allocated through the collective decision of millions of households and firms. People in the society cannot get all they wish or want and therefore have to make decisions. How much money to spend, how much savings to invest and how much time to work are some of the key decisions people have to make (Perman, & Perman, 2011). A scarce resource in my local area is water. Due to severe drought in my area in the recent past, water agencies have come up with an environmental policy with a sole aim of encouraging the consumers to reduce their consumption of water as well as promoting the conservation of water. Managing the demand for water is the policy initiated by the water agencies in my area. This policy

Adjusting the price of water has proven more successful as compared to the non-price-based strategies. A perfect example of a price-based instrument that helps in the management of water is the water budgets. The adoption of a water budget by the local water agencies have also helped in dealing with scarcity. Water budgets entail an indoor allocation which primarily relies on a house population as well as an outdoor allocation which primarily relies on the weather conditions in the local area, irrigable land and special needs (Willis, Ozdemiroglu, & Campbell, 2012). When the indoor and outdoor allocations are added together, the sum is the household’s water budget. Efficient water use, in this case, is when a household stays within the budget while inefficient water use is when the water use exceeds the household's budget. The water agencies have set a regulation that once a household budget is exceeded, the water bill is priced at a high rate. This will automatically encourage water conservation because people in my local area will prefer to save the extra coin that they might incur for other

The population of the residential areas is usually big and a reduction in the demand for water will help to conserve more water. When there is a reduction in the demand of water, industries will change energy sources to renewable energy which will not only help in the reduction of water consumption but also in the reduction of carbon emissions (Pashardes, Swanson, & Xepapadeas, 2002). When the prices of commodities go up, the demand for the commodity decreases. This strategy has been employed by the water agencies and supported by the local authorities. Since my local area is a water-scarce state, the implementation of such a policy will be key in dealing with the water scarcity in all seasons and reduce vulnerability to drought. This approach of dealing with the scarcity of water is considered a better option when compared to the others of erecting more storage and conveyance systems due to the costs likely to be incurred.

I believe that this policy allows for more sustainability because it encourages the local population to utilize water in an efficient manner because they are likely to incur extra costs if they use the water inefficiently. This policy also encourages people and industries to take up the initiative of conserving the environment so as to reduce the scarcity of water and reduce vulnerability