Using economic instruments for water demand management: the case of Gros Islet, Saint Lucia

The issue of water scarcity in developing countries has come to the forefront as a result of increasing levels of water consumption due to population growth and diminished precipitation brought about by the effects of climate change. Of particular concern is the situation of small island developing states where the impacts of water scarcity will be more pronounced. This case study investigated the effectiveness of the water tariff as an economic instrument for water demand management in the urban municipality of Gros Islet, Saint Lucia. Survey results compared with administrative data from the water utility show that the water tariff was effective, to a smaller extent, at reducing household water consumption with the help of public education and awareness campaigns. External economic pressures brought to bear by the Value Added Tax also contributed. Given the high consumers’ willingness to conserve and pay for water, it is recommended that the water utility carries out a detailed study with the objective of designing a tariff structure that better reflects marginal cost pricing.