This project addresses three key industry issues of how to:
- Design of effective economic policy mechanisms, institutions and risk sharing strategies to encourage uptake of water-sensitive practices by individuals and organisations.
- Analyse the optimal mix of policy mechanisms (including regulatory, market, incentive and educative mechanisms) to promote uptake of water-sensitive practices in different situations and contexts.
- Develop appropriate funding mechanisms, including consideration of public and private benefits and who should pay.
These issues are being addressed through the use of a range of economic tools and frameworks, including experimental economics, empirical modelling methods and institutional economics.
The research is designed to be directly relevant to government departments and utilities responsible for urban water supplies and infrastructure. It will help them to identify policy mechanisms and to design those mechanisms in ways that are effective in prompting appropriate behaviour change. It will also broaden the portfolio of policy options available to regulators.
The adoption of water sensitive practices that better reflect community-wide benefits and costs, rather than private benefits and costs, is a key outcome of this project. The target audience for this research is policy makers and managers in government agencies.
The tools and frameworks of environmental and resource economics can deliver information needs for improved decision making in this area. Different kinds of economic tools can be used to improve our understanding of how people make decisions. In the environmental area, decisions may be influenced by many factors: for example, preferences, risk and uncertainty, economic motivations, intrinsic motivations, etc.
The methodology of economic experiments has an important role to play in this context. Results from economic experimental methods will be analysed through two case studies. The case studies will develop economic policies to address the interrelated problems of outdoor water use and fertiliser applications in urban and peri-urban sub-catchments. The case studies also integrate economic incentives with spatial data and the regulations applicable in two jurisdictions.