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In this paper options for changing the incentive structure to reduce unsustainable groundwater consumption in Yemen are evaluated. Special attention is paid to incentives that decrease the profitability of irrigation water use and subsidies on improved irrigation technology. Although the literature and economic theory suggest that the range of possible incentives is wide (water pricing, metering, water rights, water markets, taxes, subsidies, information, participatory management, etc.), the results of this study show that the range of potentially effective incentives in the Yemeni political context is more limited due to difficulties of implementing and enforcing change. The Yemeni case is unique, as there is a close linkage between water and qat production. Reducing water consumption will substantially reduce the benefits from qat production and consequently farm income, which is a politically sensitive way of bringing about a balance between supply and demand of water. Copyright © 2009 John Wiley & Sons, Ltd.
