Economic Costs of Sustaining Water Supplies: Findings from the Rio Grande

Water claims in many of the world's arid basins exceed reliable supplies. Water demands for irrigation, urban use, the environment, and energy continue to grow, while supplies remain constrained by unsustainable use, drought and impacts of climate change. For example, policymakers in North America's Upper Rio Grande Basin face the challenge of designing plans for allocating the basin's water supplies efficiently and fairly to support current uses and current environments. Managers also seek resilient institutions that can ensure adequate supplies for future generations. This paper addresses those challenges by designing and applying an integrated basin-scale framework that accounts for the basin's most important hydrologic, economic, and institutional constraints. Its unique contribution is a quantitative analysis of three policies for addressing long term goals for the basin's reservoirs and aquifers: (1) no sustainability for water stocks, (2) sustaining water stocks, and (3) renewing water stocks. It identifies water use and allocation trajectories over time that result from each of these three plans. Findings show that it is hydrologically and institutionally feasible to manage the basin's water supplies sustainably. The economic cost of protecting the sustainability of the basin's water stocks can be achieved at 6-11 percent of the basin's average annual total economic value of water over a 20 year time horizon.