Preliminary principles to guide best practice water quality regulation from an economic perspective

Regulatory regimes intended to enforce changes to land use or management impose costs on landholders and governments. Landholder costs comprise changes to capital equipment, changes to crop or enterprise management including direct compliance costs, opportunity costs of lost production, and transaction costs from informing themselves about regulatory requirements, potential compliance strategies and administration associated with implementation of these strategies. Governments must design and implement the regulatory framework along with an appropriate compliance structure and other associated costs. In this paper we apply economic theory, in particular relating to institutional economics and transaction costs, and the degree of heterogeneity landholder net cost to propose a set of principles to guide selection of appropriate regulatory targets and design of implementation frameworks.