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In many situations subsidies can lead to inefficient use of water or can even create false incentives to increase water use. Removing environmentally harmful subsidies, notably in the agricultural sector but also in other sectors of the economy, can help to reduce water use and will contribute to efficiency gains.

An important, but potentially controversial, area of demand-side adaptation is water pricing. Common measures include charges for water usage, charges for pollution, environmental taxes and fines. The idea behind water pricing strategies is to make water use as efficient as possible and to ensure water quality. One of the main prerequisites for putting appropriate water pricing mechanisms in place is the availability of metering systems, particularly apparent in regions with greater water stress, and registration of illegal abstractions. Efficient metering will allow accurate water pricing based on volume usage and may be useful for establishing a sector-by-sector approach to demand-side adaptation (EEA 2012b).

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