The phenomenon of the clearance of deep-rooting vegetation leading to dryland salinity exhibits a number of characteristics which indicate the presence of market failure. These are discussed in the context of identifying an optimal level of clearance in a particular catchment. Various policies could be applied in order to correct for these problems. The potential for the use of taxes and regulations is examined and their limitations are identified. A scheme involving the use of transferable rights to cleared land is described and evaluated by means of a hypothetical example. Controls over land clearance will be more easily achieved when they are introduced at an early stage in the land development process.