Economic incentives for water conservation on the Monterey Peninsula: The market proposal

Literatures on price-based urban water conservation and on market-based mec hanisms to manage natural resources suggest that market-based management of urban/suburban water use may be feasible. A market-based proposal that eme rged from a water shortage on California's Monterey Peninsula is presented. In the proposal, conservation incentives arise both from an ability among end-users of water to reduce consumption and sell use-rights to water, and from a penalty price for consumption in excess of one's use rights. The amo unt of water associated with use rights is capped and varies according to h ydrological, meteorological, ecological, and other criteria. Requirements f or further study of the proposal are listed, and the role that similar mark et-based mechanisms could play in urban water management is discussed.