HYDROLOGIC AND ECONOMIC IMPACTS OF DROUGHT UNDER ALTERNATWE POLICY RESPONSES1

Abstract

ABSTRACT: A severe sustained drought in the Colorado River Basin would cause economic damages throughout the Basin. An integrated hydrologic‐economic‐institutional model introduced here shows that consumptive water users in headwaters states are particularly vulnerable to very large shortfalls and hence large damages because their rights are effectively junior to downstream users. Chronic shortfalls to consumptive users relying on diversions in excess of rights under the Colorado River Compact are also possible. Nonconsumptive water uses (for hydropower and recreation) are severely affected during the worst drought years as instream flows are reduced and reservoirs are depleted. Damages to these uses exceeds those to consumptive uses, with the value of lost hydropower production the single largest economic impact of a severe sustained drought. Modeling of alternative policy responses to drought suggests three general policy approaches with particular promise for reducing damages. Consumptive use damages can be reduced by over 90 percent through reallocation from low to high valued uses and through reservoir storage strategies which minimize evaporation losses. Reservoir management to preserve minimum power pool levels for hydropower production (and to maintain reservoir recreation) may reduce damages to these nonconsumptive uses by over 30 percent, but it may increase consumptive use shortfalls.