Incentive-Based Instruments for Water Management

This report provides a synthesis review of a set of incentive-based instruments that have been employed to varying degrees around the world. It is part of an effort by The Rockefeller Foundation to improve understanding of both the potential of these instruments and their limitations. The report is divided into five sections. Section 1 provides an introduction to the synthesis review. Section 2 describes the research methodology. Section 3 provides background on policy instruments and detail on three incentive-based instruments -- water trading, payment for ecosystem services, and water quality trading -- describing the application of each, including their environmental, economic, and social performances, and the conditions needed for their implementation. Section 4 highlights the role of the private sector in implementing these instruments, and Section 5 provides a summary and conclusions