Water Rewards is a new concept that will encourage and support sustainable use of water by Australian households, urban industries and businesses. Its primary objectives are to use market-based mechanisms and incentives to encourage consumers, who are members of Water Rewards, to use less water by financing and rewarding efficient water use and reuse. It is, in practice, a community-owned and initiated urban water trading scheme.
When successfully implemented, Water Rewards will remove the need for governments to impose water restrictions, or for monopoly water retailers to impose statutory price increases in an attempt to control demand. It builds on experiences in the rural water industry, urban electricity retail market and the NSW carbon credits trading scheme (GGAS). It also draws on the latest Australian innovations in on-line transactions, security and privacy management.
Water Rewards regulates itself through pricing, ongoing consumer education and investment in water conservation measures. It does this by using pricing to discourage excessive use of water, providing rewards to encourage water conservation and by controlling funds from the sale of water so that they are invested on water conservation measures as well as water supply. At its heart, Water Rewards rewards the individual for changing his or her approach to water use.
The scheme does not mandate how water conservation is to be carried out. It allows members to invest their rewards in any of a wide range of accredited water savings projects and technologies. Consequently, it uses economic incentives in an equitable and politically acceptable manner. It requires no change to existing infrastructure systems and can be applied immediately to any community which has metering of water consumption.
Water Rewards will buy water in bulk from a water supply authority and sell water to its members. It does so in much the same way as an electricity retail company, a mobile phone services or ISP company. Water Rewards members are volunteer consumers from any jurisdiction that has a metered water supply and where the water authority agrees to bulk sell water. The scheme is commercially sustainable if it sells the same amount of water to more members at the same price. Its economic objectives are to reduce the per head consumption of water while still retaining members. It will achieve these objectives by:
- Placing no water restrictions on consumption;
- Charging a higher unit price to Water Rewards members who use more water than the ‘sustainable’ level on a per capita basis;
- Rewarding consumers who use less water per head. The rewards are transferable but can only be spent on ways to reduce water consumption or redeemed on this basis. This will help develop the market for water saving and reuse systems and provide funds for community or regional projects;
- Harnessing the goodwill generated through the knowledge that Water Rewards is a not for profit, organisation with a positive environmental mission.
Water Rewards has the potential to remove the need for government-imposed water restrictions; ensures that monopoly power is not abused by those in control of water funds; is fair, equitable, transparent and easily understood by the public and business community. People will join because of rewards, because they believe in sustainability and, most importantly, because they will not be subjected to water restrictions. In other words the Water Rewards scheme will succeed whether consumers join out of concerns for water sustainability or purely for reasons of self-interest.
While this proposal outlines a particular approach to allocation of rewards the approach is flexible and the reasons for giving rewards can be changed. Rewards are granted for actions that encourage sustainability but they can only be collected by a further action that encourages sustainability.
The system of rewards is similar to that used by commercial organisations to encourage repeat business. In retail commerce this approach works by consumers earning a reward when they purchase some goods or services but not being able to claim the reward until they purchase more goods. Common examples are the 4 cents a litre for petrol reward, or buy six cups of coffee and get 50% off the sixth. With Water Rewards members are rewarded when they do something that encourages sustainability but they cannot redeem the reward until they do something to further sustainability. This is a positive feedback loop.
There is theoretical and practical evidence that incentives (rewards) based schemes are more effective in encouraging changes in consumer behaviour than disincentive (penalty) based approaches. This is as true in the area of sustainability as it is in normal retail commerce. For several case study examples see ‘Carrots not Sticks – the possibilities of sustainable consumption reward card for the UK’ a report produced by the UK National Consumer Council (Holdsworth and Boyle 2004; www.ncc.org.uk/responsibleconsumption/carrots.pdf).
Water rewards uses will range from household devices (eg. water tanks, garden irrigation systems and low-flow shower heads) to community or regional programs (eg. storm water recycling ponds and micro-irrigation schemes for local playing fields) and sustainability technologies and projects further reduce consumption which further supports sustainable consumption.
A recent major study by the City Futures Research Centre at the University of NSW reports that it is going to be difficult to reduce Sydney consumption without changing people’s attitudes and assumptions surrounding the use of water inside their own homes. It is also stated that increasing prices without education was unlikely to be an effective method of managing water demand.
Professor John Quiggin of the University of Queensland in an article ‘Why water restrictions break down’ argues
“Restrictions on urban water use are an essential tool for managing droughts and other temporary disruptions to water supply. But they should be reserved for that purpose. In the long run, prices should be allowed to work.”
Peter Newman of Murdoch University in a report ‘Why is local scale best for sustainability’ argues that community based water sustainability measures built around local areas with direct involvement of the community is more likely to bring long term water sustainability. Water Rewards will explore mechanisms whereby local communities can both organise and fund their own water sustainability measures.
Verheyen ‘Can we save the environment: Research into the feasibility of using Bonus Cards to stimulate environment friendly consumption’ shows positive results from five European pilot projects involving a relatively complicated bonus rewards system associated with reducing landfill packaging. The chief lessons from the projects are that it must be simple and involve the consumer in few decisions. These are attributes of Water Rewards where a consumer signs up once and is then assisted in learning ways to save water.
Praveen, Kopalle and Neslin (2003) is one of many articles showing that delayed rewards programs are very effective in changing consumer behaviour. If implemented properly Water Rewards should have the same effect.