Determinants of Water Conservation: Evidence from the Recent California Drought
AbstractManaging demand for residential water use is increasingly important in light of increased climate
variability, growing population, depleted groundwater, and the high costs of developing new supply.
During the recent 2012-2016 drought in California, many utilities achieved state-mandated goals to
reduce their residential water use by over 25%, representing a huge public policy success. However, it is
unclear which particular policies drove this conservation. This paper seeks to disentangle the impacts
different state and municipal policies had on residential water use. We use hourly micro-data from over
86,000 single family households between 2013 and 2016 in a large Californian city.
First, we find that a 10% increase in marginal rates is associated with a decrease in use of 20
gallons/day. Over our sample period, rate changes are responsible for saving 25 gallons/day. Second,
reducing the number of days households are allowed to use water outdoors results in households
substituting water use from banned to non-banned days. However, water use persistently decreases by
6% (30 gal/day) after this policy change, specifically during hours when outdoor use was never
permitted, suggesting households may be reacting to the announcement of the change. Consistently,
water use declines by 74 and 44 gallons/day after the announcement of “State of Emergency” and
“Mandatory 25% Water Use Reductions,” respectively. Indeed, these major state-level announcements
appear to induce interest in the drought, as measured by Google searches. A mediation analysis shows
that our measure of drought awareness is highly correlated with water use, but, after controlling for city
and state policies, this correlation disappears. Finally, while we see large savings (55 gallons/day) from
toilet and lawn rebates, total impacts are negligible due to low-take up rates.