Policies to Achieve Sustainability in the Colorado River Basin under Climate Change Conditions and Growing Demand: A Hydro-economic Analysis

Colorado River Basin faces a supply crisis that makes the water system vulnerable to failure, economic losses, conflicts between regions and water users, and ecosystem degradation. The crisis results from water management that allows excessive water withdrawals, legal restrictions established on historical facts, and decreased water availability due to climate change. The agricultural sector, urban centers, hydropower production, and aquatic ecosystems compete for the exhaust water resources in the basin. Despite the reduction in per capita urban water usage and reduction of irrigated land, projections of population and economic growth and increasing crop evapotranspiration indicate an expansion of water demand. The shrinking water availability and growing demand for water will exacerbate existing problems, hampering water management. This article evaluates several alternatives to water management to identify the sectoral and spatial trade-offs of water use by the agricultural sector, urban centers, hydropower production, and aquatic ecosystems. A hydro-economic model is developed to assess current and alternative water allocation’s economic impact on drought, climate change, and growing population. The model examines coalition arrangements among some or all basin states, Tribal Nations and Mexico and the implementation of institutional reforms such as water markets, proportional sharing, and mechanisms that promote water savings. The development of existing but unused Tribal Nation rights is analyzed to evaluate its impact and to determine the potential for new agreements. Simulation shows that shrinking water allocation promotes efficiency improvements and strengthens the sustainability of the water system. However, droughts and climate change erode the benefits of water use and environmental conditions. Reductions in hydropower generation results in economic losses and higher greenhouse gas emissions. Urban centers endure heavy welfare reductions due to water use restrictions, but purchasing water from irrigation districts alleviates the burden and enhances the social surplus. Water markets and cooperation mitigate benefit losses but increase the pressure on ecosystems. Water exchange and side payments (for improved water savings) between states and irrigation districts indicate potential improvements in water use efficiency. Crops with high economic value that are irrigated with advanced technologies are maintained in production. Instead, field crop producers suffer from water shortages. Improvements in irrigation technology reduce the risk of exposure to water scarcity but curtail water returns than sustain ecosystems and downstream activities. Maintaining tribal Nations' rights and establishing environmental flows rectify the inefficient use of water by other users.