The average water consumption per capita in Abu Dhabi is almost three times the world average. As a result, the demand for desalinated water has got much higher due this exaggerated consumption rates and other factors such as very hot climate conditions, population growth and the limited natural resources across the country. A new approach for limiting high consumption rates is essential. Effluent tax is the process of taxing the waste water discharged from dwelling units and connected to municipality sewer network. It showed a success in different countries around the world such as Germany and Canada. This study measures the feasibility of applying this tax in the residential sector of Abu Dhabi emirate. It is assumed that the tax is applicable to high consumptions only and can be avoided for low consumption consumers. A survey was designed to measure the percentage of people who will try to lower their water consumption to avoid the tax, and the percentage of people who will continue their current consumption and pay the tax. Then a calculation model was built to study the economic feasibility as well as the carbon savings from three water reduction scenarios (5%, 10%, and 15%) of the residents' current consumption and 2-baseline scenarios (Abu Dhabi current consumption and world average consumption). The study is projected up to year 2030 which matches the Abu Dhabi vision 2030. The results came to support the expectation of the success of effluent taxation policy at Abu Dhabi Emirate if applied correctly. It also clearly showed how sensitive water saving can be to the environment due to the high carbon footprint of water desalination plants.