An important challenge for policymakers worldwide is how to respond to increasing water demand while still assuring healthy ecosystems via ‘environmental flows’. In the case of Chile, increasing water demand and frequent water supply shortages are putting pressure on ecosystem water requirements. On the other hand, new environmental regulations are being implemented to improve the quality of several bodies of water. Consequently, there is a call for water policies that can properly tackle these complex issues. The purpose of this paper is to estimate the costs of a programme to buy back water rights to restore an environmental flow in the Maipo River, as well as assess the performance of ‘pollution-dilution’ as a measure to comply with water quality standards in the river's basin. Results suggest that a programme that aims to buy back 440 l/s requires expending US$1.9 million, as a one-time expense. We also find that buying and leaving water flows in the river for the distinct purpose of pollution-dilution could be an efficient policy, albeit limited in impact, to reduce nutrient contamination costing about one-fifth of alternative measures to attain the same level of pollution reduction.

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