Economic Instruments, Innovation, and Efficient Water Use.

Governments are increasingly concerned that current levels of water use are unsustainable, particularly in the face of threats posed by climate change. This paper examines recent research on water-using innovation in three key water-using sectors (residential, manufacturing, and agriculture) for evidence to support the call for greater reliance on economic instruments as part of the suite of policy measures to promote water innovation, conservation, and efficiency. The findings illustrate the need to understand water’s role in production (industrial, agricultural, and household) and the way changes in unit costs of other inputs (particularly energy and capital) influence innovation. In addition, the available research indicates that policies based on economic instruments should be tailored to the specific features and contexts of the different water-using sectors. [ABSTRACT FROM AUTHOR]