Egypt seems to be on the brink of a new era in water management. The country suppose to follow a different operational mode that is “water conservation oriented, decentralized, environmentally sensitive, private sector oriented, equitable and operationally efficient” The focus of this study was on market-based instruments (MBI’s) as complements to traditional command and control measures for managing water quantity and quality. Prior to evaluating potential water MBIs, it was necessary to identify the water management problems and challenges that need to be addressed through policy adjustments. These challenges were threat of water shortages, service delivery in municipal water supply, lake Nasser pollution, Irrigation service delivery challenges, Nile River pollution above Cairo, Insufficient irrigation system upkeep, water pollution in the Nile Delta, Pollution of lakes , low user contribution to irrigation system upkeep, groundwater contamination, and Weak attention to in-stream flows. Such challenges have impacts on: (1) Nonrenewable groundwater management, (2) Adverse effects on human health, (3) Subsidies affecting water use efficiency, (4) Reduced agricultural productivity, (5) Rainfall capture and flash flood protection. The impacts generated some Threats to aquatic ecosystems, particularly, Negative consequences of rising water tables and Negative impacts on aesthetics (incl. tourism) A two-step screening process was developed and utilized to evaluate the likely success of alternative market-based policy instruments in response to one or more of water management challenges. The instruments were screened based on economic efficiency and equity and other economic factors relating to the nature of the instrument itself. They also were evaluated based on criteria that considered the specific social, cultural, political, and institutional context in which the instrument will be applied. Thereon, the study explored the applicability of economic instruments to help address Egypt’s current water management challenges. It resulted in an initial evaluation of twenty instruments that seemed most promising. Screening criteria were developed and applied to assess the merits of each, and direction also was received from nearly 60 participants who attended the study’s concluding Workshop on Economic Incentives for Water. The most promising policy instruments that concluded from the study were: Woith respect to the water quantity management deemed of highest priority for follow-up analysis and possible policy action were: Groundwater Extraction Charges, Tariff Reductions for Imported Water Meters and Water Conserving Equipment, Several other measures were identified as warranting careful further analysis. These include area-based irrigation service charges; volumetric water delivery charges for large agricultural enterprises; and increased user fees for the supply of urban and industrial water services. Likewise, the most promising policy measures identified to address water quality problems were: Increased User Fees for Wastewater Treatment, Increased Subsidies to Finance Wastewater Treatment Facilities, Subsidized Rural Sanitation, and Subsidized Pollution Control Equipment To achieve such model four approaches to positive change have been identified. These include Creating incentives and disincentives for water management to protect its quality. In addition to Institutionalizing the role private participation; environmental protection and identifying mechanisms to ensure appropriate benefits for participating private sector partners, decentralizing decision making, institutionalizing environmental protection, changing the role of government and improving personnel policies at macro-level decision making regarding uses of the Nile River, and improving awareness of water resources and associated environmental issues.
