The high demand of water resources for irrigation purposes is the cause of significant water quantity and quality problems in Mediterranean countries. The reliance of the Water Framework Directive on water pricing may fail in these countries, since water pricing is quite complex to implement in irrigated agriculture, efficiency of water pricing is questionable, and its political acceptability remains to be seen. This calls for alternative Directive instruments, such as the re-allocation of water from off-stream use by agricultural, urban and industrial users to environmental uses both in aquifers and streams, and also in the coastal wetlands. Pollution control instruments such as ambient quality standards and pollution emission limits are also needed. The heated policy debate that has been taking place in Spain over ways to solve water scarcity and resource degradation highlights the difficulties involved in achieving sustainable management of water resources, because of the conflicting interests of diverse stakeholders, such as regions, economic sectors and political and environmental groups. This study presents empirical results on the assessment of alternatives to overcome water scarcity in south-eastern Spain, and also a ranking of abatement measures for agricultural pollution control. These empirical results question water pricing as an efficient or even feasible instrument to allocate irrigation water or to curb pollution. Government water authorities, environmental NGOs and international organisations should look carefully at the implications of sound empirical research that takes into account the underlying biophysical processes and the complex spatial, dynamic and social issues involved in the design of water policies. Water and pollution markets, while difficult to implement, appear to be a much more efficient and feasible policy approach than water pricing. Even the current command and control water policies that most countries have in place seem to be more appropriate for irrigation management than water pricing.