IWRA Proceedings

AbstractHydroeconomic models help water managers design, operate and expand water resource systems efficiently and in accord with explicitly represented societal values and priorities. These models have emerged as a privileged tool for investigating and fostering integrated management of water resources. The cross-fertilization of engineering and economics allows more realistic representation within mathematical models of how water is managed in practice and how management could be improved. Hydroeconomic models are distinguished by a solution-oriented and integrated approach. The discipline’s central idea is that water demands are not fixed requirements but rather functions where different quantities of water at different times have varying total and marginal values. In this approach water management is driven by the economic value of water rather than by (or in addition to) other requirements or priorities. Economic concepts used include: economic water demand, value of environmental services, consumer surplus, willingness-to-pay, and supply-side economics. Hydroeconomic models are built with diverse aims, formulations, levels of integration, spatial and temporal scales, and solution techniques. This paper surveys several hydroeconomic applications from the United States, Jordan, Spain, and Mexico. Policy insights and management practices revealed by the applications are discussed to show how such modeling efforts promote integrated water resource management. Hydroeconomic models go well beyond minimizing costs and maximizing profits, they provide a common framework through which the value of all water services can be considered and used to direct system planning and operation.