ABSTRACT
In this study, we develop a hydro-economic modelling framework for river-basin scales by integrating a water resources system model and an economic model. This framework allows for the representation of both local-scale features, such as reservoirs, diversions, and water licenses and priorities, and regional- and provincial-scale features, such as cross-sectoral and inter-regional connectedness and trade flows. This framework is able to: (a) represent nonlinearities and interactions that cannot be represented by either of typical water resources or economic models; (b) analyze the sensitivity of macro-scale economy to different local water management decisions (called 'decision levers' herein); and (c) identify water allocation strategies that are economically sound across sectors and regions. This integrated model is applied to the multi-jurisdictional Saskatchewan River Basin in Western Canada. Our findings reveal that an economically optimal water allocation strategy can mitigate the economic losses of water stress up to 80% compared to the existing water allocation strategy. We draw lessons from our analysis and discuss how integrated inter-regional hydro-economic modelling can benefit vulnerability assessment and robust decision making.
