IWRA Proceedings

The demand for high quality groundwater is growing at unprecedented rates around the world. This unprecedented growth rates create considerable stress on groundwater resources in certain parts of the world, and considerable social controversy over how the resource should be managed. The policy problem is rooted in the fact that established groundwater institutions (policies) cannot handle the new resources realities. In response to emerging economic, environmental and social stress, there is pressure for change in groundwater policy in many developed countries. From an economic perspective, the question is whether groundwater policy can be designed to enhance wise groundwater management. The objective of this research is to examine the potential for developing efficient and equitable groundwater policy as a tool for groundwater management. An economic framework is presented for understanding externalities, market failures and the fundamental economics of institutional change. Several key aspects of corrective policy are explored in depth, including, 1) the economic impetus for policy change, 2) the challenges in quantifying and protecting existing rights, 3) implementing limits on aquifer use and 4) the role of water pricing and transfer flexibility. Case studies from Europe and the United States are examined to induce practical lessons concerning best practices in these areas. This research contributes to the policy debate by evaluating the economic impacts of alternative groundwater management policies and by making policy recommendation that have the potential to improve water management around the world.