Economic Policy Instruments and Evaluation Methods in Dutch Water Management: An analysis of their contribution to an integrated approach

In international water policy, a trend can be observed towards more attention for economic approaches in water management. In 1992, at the International Conference on Water and the Environment (ICWE) in Dublin, the Convention on the Protection and Use of Transboundary Water Courses and International Lakes was adopted. Guiding Principle 4 of this convention states that ‘water has an economic value in all its competing uses and should be recognised as an economic good’. The argumentation for this principle states that ‘…past failure to recognise the economic value of water has led to wasteful and environmentally damaging uses of the resource. Managing water as an economic good is an important way of achieving efficient and equitable use, and of encouraging conservation and protection of water resources’. In 1993, the World Bank wrote a policy paper in which it advocated a demand management approach to water management, including the use of economic policy instruments. In 2000, the European water framework directive (WFD) was issued, strongly emphasising sound economic management of water in its Member States. Policy principles, instruments and methods included in the WFD to achieve this are (amongst others) the full cost recovery principle (including environmental and resource costs), the polluter and user pays principles, and economic analyses of human activities with an impact on water systems at the level of river basins and sub-basins. Theoretical benefits of economic approaches1 towards water management include efficiency in public management, an efficient allocation and use of natural resources, and the possibility of (further) deregulation of water management (leaving a larger part of water management to the market), with an associated flexibility for economic actors in the realisation of public goals