Essays in Water Conservation and Water Quality Programs

Abstract

As growing populations continue to drive demand for water, managers of this fundamental resource face the dual challenge of providing both sufficient and clean supplies. In this dissertation, I undertake two analyses exploring a policy aimed at maintaining sufficiency of supply through conservation, and a third analysis evaluating a regulatory approach to promote water quality. Because lawns comprise a large share of residential water demand, water utilities across the western United States offer subsidies to replace lawns with less water intensive landscape. In my first analysis, I estimate the water savings and property value effects of one such subsidy, the Southern Nevada Water Authority's "Cash-for-Grass" rebate program. Using event studies and panel fixed-effects models, I find that the average conversion reduces baseline water consumption by 21 percent and increases property values by about 1 percent, however I find little evidence of property value spillovers to neighboring properties. I also show that the smallest savings coincide with years in which many conversions took place, suggesting a possible trade-off between program participation and maintaining the effectiveness of individual conversions. I also find that participants with high pre-conversion water demand save more water than participants with lower pre-conversion water demand. Conservation subsidies present attractive alternatives to price-based approaches to water conservation. However, I find that a relatively modest 6 percent price increase may have achieved equivalent savings. Finally, combining my water savings and housing price impact results, I show that the program generates net benefits of $2.00 per square foot of desert landscape converted. My results expand our knowledge of water conservation rebates and, more generally, contribute to our understanding of the long-term dynamics of conservation rebate program savings as well as how heterogeneous participant characteristics affect conservation rebate program performance. In my second analysis, which is joint work with Sheila Olmstead, we study the effect that an information disclosure policy has on national water quality violations. Since the 1980's, information disclosure policies have grown in popularity as a means by which to promote policy outcomes where direct regulation is a challenge. In this spirit, the 1996 amendments to the Safe Drinking Water Act require water utilities to disclose drinking water violations to their customers in annual water quality reports. We explore the impact of these reports on health-based drinking water quality violations in a differences-in-differences framework using a nationally comprehensive data set of water quality violations and water systems. Our results suggest that reports published in local newspapers or mailed directly to customers may have reduced violations, but we uncover less evidence that posting reports online had any impact. We also show that reductions in violations remain stable over time, and that the effect of the reports appears to be stronger for those water systems serving higher-income counties. Finally, we provide evidence that implies reports induce reductions in microbial contaminants without increasing disinfection byproducts. Our analysis is among the first to explore the long-term impacts of information disclosure policies, and builds on the small but growing literature exploring heterogeneity in the responsiveness to these policies. I return to the Las Vegas Cash-for-Grass program in my third analysis. Following the empirical framework and analysis of Bollinger and Gillingham (2012), I estimate the presence of peer effects in the Cash-for-Grass program. Like Bollinger and Gillingham, I find positive peer effects that grow with time when defining the peer network by a zip code, but unlike these authors, I show that only the cumulative conversions rather than the area of conversions drive these effects. Overall, however, my results largely validate the method of Bollinger and Gillingham. Going beyond their results, I also estimate peer effects within zip codes interacted with deciles of assessed home values. At the zip code-decile, I find peer effects to be even stronger than at the zip code, suggesting that a possible driver of the peer effect works through a desire to maintain competitiveness with other homes in an individual's housing market. I also show that my estimated peer effects are at least an order of magnitude larger than the impact of several targeted marketing campaigns administered by the Southern Nevada Water Authority. To my knowledge, mine is the first analysis to compare a peer effect with the impact of advertising efforts. Overall, my dissertation contributes to environmental economists' understanding of water conservation and water quality policies and aims to improve the management of one of civilizations' most critical resources.