Economic Incentives— Loans, Grants, and Water Pricing (Resource Management Strategy)

Economic incentives include financial assistance, water pricing, and water market policies intended to influence water management. Economic incentives can influence the amount and time of water use, wastewater volume, and source of water supply.

Examples of economic incentives include low interest loans, grants, and water rates and rate structures. Free services, rebates, and the use of tax revenues to partially fund water services also have a direct effect on the prices paid by water users. Government financial assistance can provide incentives for integrated resource plans by regional and local agencies. Also, government financial assistance can help water suppliers make incentives available to their water users for a specific purpose. Assistance programs can also help align the economic and financial drivers affecting local, regional, and statewide water management decisions to minimize unintended consequences and maximize the benefits of working cooperatively with consistent goals and objectives. As opposed to incentives, penalties are a type of economic disincentive that can be used to discourage undesirable water use behavior.

Incentives can be created or enhanced by facilitating water market transfers, by creating market opportunities where they did not exist, by expanding opportunities where they currently exist, or by reducing market transaction costs. In each case, new or enhanced market opportunities can influence water management decisions.