Economic Instruments for Water Management

Economic Instruments for Water Management

The Cases of France, Mexico and Brazil

Ronaldo Seroa da Motta, Alban Thomas, Lillian Saade Hazin, Jose Gustavo Feres, Céline Nauges and Antonio Saade Hazin

This book argues that the economic appeal of using water charges to promote efficiency in usage and pollution control can be constrained by institutional and operational problems. Analysing the cases of France, Mexico and Brazil, the authors – respective local experts – illustrate that barriers are similar despite the existing differences among these economies.

Chapter 2: Conceptual Framework and Review of Experiences

Ronaldo Seroa da Motta

Subjects: business and management, management and sustainability, economics and finance, environmental economics, environment, environmental economics, environmental management, management natural resources, water


1 Ronaldo Seroa da Motta 2.1 INTRODUCTION The use of economic instruments (EI) has been analysed in a vast literature. Theoretical analysis started with the pioneer proposal of externality taxation of Pigou and led to the detailed and comprehensive theoretical work of Baumol and Oates (1988). Add to this numerous books and articles dealing with specific particularities in distinct contexts. The same abundance is found within the literature of EI experiences. It is specially worth noting the diverse OECD (for example, 1994, 1995) publications that describe and analyse every single and specific case of EI in developed countries. A detailed survey for selected developing countries can be found in RietbergenMcCracken and Abaza (2000). A recent survey of Stavins (2002) covers all regions in the world, pointing out reasons for failures and successes. For Latin America and the Caribbean the World Bank research in Seroa da Motta et al. (1999) presents the first comprehensive analysis of EI uses, later complemented by a Cepal study in Acquatella (2001). A useful earlier citation is Panayotou (1993). This chapter will not attempt to propose new theoretical or analytical insights relevant to EI use in the Latin American region. Instead it will point out the issues raised in the literature that will be most useful to understanding and evaluating the case studies of water EIs that are fully described in the following chapters. In doing so, it will not only present these theoretical and practical issues but it will also discuss the existing experiences that...

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