Regulation Impact Statement
Proposed National system of mandatory Water Efficiency Labelling for selected products
George Wilkenfeld and Associates Pty. Ltd.
Department of the Environment and Heritage, May 2004
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Executive summary
The growing demand for water in urban areas is a major policy challenge for all Australian jurisdictions. Technologies to increase the efficiency of water use in urban areas are readily available, but they are not being adopted as rapidly as is necessary to limit growth in water use. The issue is particularly pressing for household water use.
Households account for about 16% of the consumption of mains-supplied water in Australia, the second largest share of mains water use after agriculture. A further 4% is used in the commercial and other sectors, much of it for similar purposes as in households and employing similar end use devices.
There is evidence of several types of failure in the market for water-using appliances, with the consequence that cost-effective options to increase water-efficiency are being passed up, especially in the residential sector:
- Imperfect cost-reflectiveness in water pricing (although price signals are becoming more cost-reflective, at least for water supply if not for wastewater disposal);
- Low public awareness of water and wastewater prices;
- The widespread practice of central metering in multiple-dwelling households, which weakens the incentive for individual users to manage their water consumption;
- Poor information on the relative significance of end uses and on the water efficiency of different models; and
- The split incentives problem. For developers of commercial and residential property there is an incentive to minimise capital costs rather than lifetime operating costs, because water (and energy) charges will be borne by the buyer or tenant of the property.
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