This report describes the results of the study on options for changing the eco-nomic incentive structure for groundwater extraction in Yemen. The study aims to evaluate the potential role of economic incentives to reduce unsustainable ir-rigation water consumption and to make recommendations for implementing water conservation incentives. It first identifies factors that have triggered groundwater overdraft, then studies farmers' behaviour regarding groundwater extraction on the basis of in-depth interviews with farmers in each of the follow-ing three basins - in the Sana'a Basin, the Taiz Basin and Wadi Hadramout. Fi-nally, a number of changes in the incentive structure are evaluated, among others incentives that decrease the profitability of irrigation water use and sub-sidies on improved irrigation technology. The study shows that although the lit-erature and economic theory suggest that the range of possible interventions is wide (water pricing, metering, water rights, water markets, taxes, subsidies, in-formation, participatory management, et cetera), the range of potentially effec-tive interventions in the Yemeni political context is more limited. The Yemeni case is unique, as there is a close linkage between water and a central socio-economic issue: qat. This adds to the difficulties of implementing or enforcing change.
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