Many of the developing economies in the Middle East and North Africa face serious constraints due to limited access to freshwater. Prescriptions for overcoming these constraints have tended to concentrate on increasing supply. An increasingly important alternative is to dampen demand and alter the allocation of freshwater by pricing water at levels that more accurately reflect its scarcity. This paper discusses the role of economic instruments in achieving these ends, including: how the instruments might be structured; what types of outcomes could be produced; what limitations will need to be faced, and what institutional resources will be required.

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