Water tradable permits: a review of theoretical and case studies

Over the last few years the growing problems of water scarcity and water pollution have induced ever increasing attention towards the application of market mechanisms based on tradable permits in the water sector, similar to those adopted for air pollution. In spite of the growing interest surrounding this instrument, a general critical valuation of the application of tradable permits for water management is still missing in the literature. This paper aims to fill this gap by critically analysing the experiences of various countries who have adopted tradable water permit programmes, underlining both the advantages and disadvantages that have emerged in each case, in order to provide useful indications for possible future applications in other regions. Despite the merits of tradable water permits and their success in some contexts, the case studies analysed highlight the existence of significant difficulties during implementation, which can prevent the full functioning of such an instrument.