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Modelling Household Water Demand in Europe - Insights from a Cross-Country Econometric Analysis of EU-28 countries

Abstract: 
Understanding how household water consumption will react to long-term changes requires an intensive use of modeling tools. Economists have developed a great variety of models to predict water demand for domestic users. Although estimations of a domestic water demand function have been undertaken for a substantial number of countries all over the world, the level of knowledge in Europe is still limited. In Europe, household water demand functions are available for some countries but a recent report from the European Environmental Agency, points out that most available reference studies date back ten or twenty years ago. By reviewing the existing literature, we have not been able to find any household water demand function estimate for 10 of the EU-28 countries (Austria, Bulgaria, Croatia, Estonia, Finland, Hungary, Ireland, Latvia, Lithuania and Slovenia). For the 18 remaining countries, it should be pointed out that the estimates of the household water demand functions rely on data posterior to 2010 only for 6 of them (Cyprus, Czech republic, Germany, Luxembourg, Romania and United Kingdom). For Denmark and Sweden, the more recent studies date back to year 1990 and 1992, respectively. This report provides then an update on the knowledge on household water use in Europe. Our primary focus is on estimating a household water demand function for all EU-28 countries using consistent data and econometric methods. Primary data on household water consumption, on households water prices and on households characteristics supposed to have an impact on water consumption have been collected, assembled and checked for each one of the EU-28 countries. The typical source of data include national statistical offices, regulators of water and wastewater services, national associations of water and wastewater services, national associations of municipalities. Then, a household water demand function has been estimated for each country using the most possible disaggregated data (typically municipality-, water service- or nuts3- levels) and the most recent data (typically 2005-2012). The econometric estimates allow us to identify the determinants of the household water demand for each country. We also provide a new set of price and income elasticities for EU-28 countries. This collective work is a part of the Euro Freshwaters project developed by the JRC and leaded by Ad de Roo and Alberto Pistocchi. Lead author is Arnaud Reynaud. Contributing authors are Denis Lanzanova and Vassileos Markantonis.
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