ABSTRACT
Water security addresses multiple water-related risks for people, economies, and the environment and has multiple meanings and disciplinary traditions (Cook and Bakker, 2012; Grey and Garrick, 2012). Acknowledging the extensive political ecology literature on market environmentalism and neoliberal environmental policy (e.g., Bakker, 2002, 2005), this chapter takes a pragmatic look at economic instruments through the lens of risk science and institutional economics. This chapter focuses on (1) a risk-based framework to elaborate key concepts, categories, and dimensions of risk; and (2) the logic (design, sequencing, and performance) and limits (transaction costs and governance failures) of economic instruments to reduce and manage water-related risks to society. This chapter will consider both established and emerging economic instruments and consider how the instruments address specific water-related risks. Examples from the United States, Australia, India, Latin American, and Africa illustrate the risk implications, necessary conditions, and lessons learned from economic instruments used to manage multiple water security risks. This analysis will be used to argue that managing multiple risks and tradeoffs is integral to water security and requires a mixture of governance and economic instruments to enhance efficiency and cost effectiveness while ensuring equitable outcomes and accountability (Hope et al., 2012)
