Date of Award
Carsey School of Public Policy
Program or Major
Master in Public Policy
The objective of this case-study is to analyze the effects and the perception of different groups in possibly implementing market-based approaches of Pigouvian tax and Cap-and-Trade to manage the Guarani Aquifer, Brazil. The Pigouvian Tax is a corrective taxation that assigns a price for the negative impacts water consumption creates to aquifers, as a way to influence a more sustainable level of water consumption. Cap-and-Trade sets a maximum quantity of water allowed to be used from aquifers, and allow economic agents to trade quantities of water they have the right to use, as a way to adapt to the cap. As methods of analysis, the case study combines quantitative data, economic theory, as well as political and sociological analysis. The case-study emphasizes that the current regulatory system of Guarani’s management is not guided towards the efficient level of water consumption, which may negatively impact the environment and economic resources. As a way to improve efficiency of water allocation from the Guarani and mitigate the already apparent environmental impacts, the instruments of Pigouvian Tax and Cap-and-Trade could be possible policy solutions. The case-study also outlines the perceptions of different societal sectors to the creation of market-based approaches to govern Guarani’s water resources, in terms of their risk perceptions. Broader discourses that were used in previous attempts to establish other water management instruments were described as an attempt to correlate these to a possible implementation of Pigouvian Tax or Cap-and-Trade to manage water use from the Guarani Aquifer. Overall, the analysis inferred that several groups could perceive a Pigouvian Tax positively because it could foster a more rational use of water and protect the Guarani. However, some groups may be against a Pigouvian Tax for fearing a lack of predictability in the cost of production, as well as the fear it could increase inequality in low-income groups’ access to water. In terms of a Cap-and-Trade, most groups may perceive negatively the implementation of such approach. This is mainly related to the fact that it would completely change the regulatory system to access water, which could be interpreted as privatizing water access.
Hayes Vieira, Julia, "Market-base solutions to manage the Guarani Aquifer: Pigouvian Fee and Cap-and-Trade" (2019). Master's Theses and Capstones. 1374.