Water Conservation - Economic Instruments

What are economic instruments?

Economic instruments provide financial incentives or disincentives to guide behaviour towards meeting environmental goals. The following are several examples of economic instruments that can be used to promote conservation, efficiency and productivity (CEP) of water:

  • Water withdrawal fees: The cost associated with water withdrawal provides financial incentive for water users to minimize waste and be more productive and/or efficient with water.
  • Water pricing: This instrument is used to generate revenues to recover partial or full costs of operating and maintaining water supply and treatment facilities (e.g. municipal water and waste water treatment plant). By passing on the cost of water treatment to users, pricing provides financial incentive for users to minimize waste. Pricing structures can be designed so that high water users (or water wasters) pay more than users that conserve water.
  • Pollution charges: This instrument provides financial incentive to minimize pollution by indicating the cost associated with polluting water sources.
  • Tradable permit: This instrument ‘caps’ the amount of water available for use, which provides a financial incentive by allowing users to trade the water that can be made available from conservation and efficiency efforts.
  • Subsidies: This instrument provides financial incentives to encourage water conservation and best management practices (e.g. installation of low flush toilets, leak detection system).

The Alberta government has undertaken a review and completed an evaluation of a number of management tools, including economic instruments to meet water conservation and productivity objectives. The following table provides a summary of the review.


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Updated: Dec 16, 2015