Economic Instruments for Groundwater Management

Abstract

Groundwater comprises 97 percent of the world’s readily accessible freshwater and provides the rural, urban, industrial and irrigation water supply needs of 2 billion people around the world. As the more easily accessed surface water resources are already being used, pressure on groundwater is growing. In the last few decades, this pressure has been evident through rapidly increasing pumping of groundwater, accelerated by the availability of cheap drilling and pumping technologies and, in some countries, energy subsidies that distort decisions about exploiting groundwater. This accelerated growth in groundwater exploitation —unplanned, unmanaged, and largely invisible—has been dubbed by prominent hydro geologists —the silent revolution. It is a paradox that such a vast and highly valuable resource —which is likely to become even more important as climate change increasingly affects surface water sources—has been so neglected by governments and the development community at a time when interest and support for the water sector as a whole is at an all-time high. Under such circumstances, this paper tries to see whether the economic instruments can help in the conservation of the resource since economics deals with the allocation and use of scarce resources. As the resource becomes more scarce (due to quantity or quality constraints) questions about how to utilize and protect it (preferably for the best of society) arise. Economic considerations can help the decision-making process and promote more efficient resource use.