The Protection of the Capacity for Resilience in the Provision of Drinking Water from Hybrid Environmental Policy Instruments

Abstract

The use of hybrid environmental policy instruments is an open research topic, particularly in the case of water resources protection. We analyzed the influence of hybrids between command-and-control regulation (CAC) and environmental taxes where the body of water’s capacity for resilience and drinking water supply are critically affected by pollution accumulation over time. We used a general equilibrium model in which it is assumed that a representative company pollutes water bodies with its production and can use pollution abatement technologies to comply with environmental regulations. These water bodies are used by a public utility that provides drinking water to the economy. This paper focuses on the review of the Colombian CAC environmental regulation, which moved from controlling a percentage of pollution to defining specific amounts of pollutants discharged, and its interaction with an environmental tax, which makes it a hybrid policy. Although the new CAC is stricter in principle, we conclude that for different values of the model parameters, a hybrid environmental policy requires periodic revision of pollutant discharge limits as well as a complementary environmental tax that approximates the Pigouvian tax to ensure water bodies’ resilience.