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Economic policy instruments and sustainable water use

The aim of this paper is to review the insights on the desirability and possibilities for using economic policy instruments to reach sustainable use of water. Special attention will be paid to the scope for price instruments and privatisation and liberalisation of the sector as these feature prominently in the current policy debate. For this aim, we will provide a stylized description of the water for market devoting attention to both the relevant characteristics of demand and supply, including market failures that require government intervention to regulate the market.Next, attention is shifted to the possibilities of influencing supply and demand such that the market for water satisfies basic sustainability criteria.