UC Riverside

The mismanagement of water resources at global level calls for a reconsideration of the current water policies. The three approaches to water policy instruments are water pricing, water markets, and institutional instruments based on cooperation. The approach in Spain is institutional cooperation, whereas the European Union promotes water pricing to balance water supply and demand, and in Australia water markets have been implemented to confront water scarcity and droughts. This study compares these three types of policy instruments to address drought in the Jucar Basin. The analysis indicates that the institutional instrument based on cooperation and the water market instrument both achieve similar results, demonstrating that the current institutional approach is not inferior to water markets. Another important result is that the water pricing instrument entails very substantial losses to farmers, which implies that this alternative is politically unfeasible. This result questions seriously the reliance of the Water Framework Directive on the water pricing instrument in irrigation.