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Consultancy study for the Environment Agency on how best to incentivise water efficiency

waterClient request

How best to incentivise the efficient use of resources is a key issue across the UK, as in many countries. Of particular concern to the water sector, is the selection of the best tools available to encourage companies to manage water efficiently; as well as the assurance that such management covers both the demand and supply side of delivery. In this context, LSE Consulting were contracted by the Environment Agency to provide a detailed study reviewing the challenges of stimulating water efficiency through the use of benchmarks and targets. The project, carried out by a team comprising LSE senior faculty with research input from independent specialist water industry consultants, was intended to develop regulatory tools that would enable the success of demand management interventions to be measured, to assess the feasibility of prescribing water efficiency based targets, and to appraise the regulatory impact of its recommended approaches.

Approach and methodology

The study team proposed to produce an analysis dealing with the different benchmarking systems employed in a number of countries, and the different strategies for implementing them within different sectors, schemes of regulation, and at different stages of the water delivery process. To do so they developed a specific framework of analysis, conducted expansive literature reviews of the water, energy and waste sectors internationally and refined existing assessment criteria for measuring and assessing the transferability of such schemes to the UK. Consulting closely with the project's steering group at every stage, they developed a set of recommended options based on detailed feasibility studies, which were included in the fully referenced report submitted to the client.

Solution and benefits

Extending the scope of the Agency's proposed study, and refining its proposed outcomes, the study team developed a research proposal that went beyond a theoretical cost benefit analysis, to seek specifically to identify those approaches that had the greatest potential within the UK water sector to stimulate maximum efficiency, and to present a realistic appraisal of any challenges which might be faced in implementing them. In turn the study's audience was extended – informing not only Environment Agency staff, but also feeding in to the work of Ofwat, DEFRA, and the Water Savings Group. Combining senior LSE academics and professional water consultants, LSE Consulting were able to provide a highly diverse group of independent, creative, innovating thinkers with an extensive knowledge of the sector and its regulation and vast experience in advising and reporting on government regulatory strategies, to deliver a thorough practical and theoretical approach to these issues and their objectives.

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