Dams provide water supply, flood protection, and hydropower generation benefits, but also harm native species by altering the natural flow regime and degrading aquatic and riparian habitat. Restoring some rivers reaches to free-flowing conditions may restore substantial environmental benefits, but at some economic cost. This study uses a systems analysis approach to preliminarily evaluate removing rim dams in California's Central Valley to highlight promising habitat and unpromising economic use tradeoffs for water supply and hydropower. CALVIN, an economic-engineering optimization model, is used to evaluate water storage and scarcity from removing dams. A warm and dry climate model for a 30-year period centered at 2085, and a population growth scenario for year 2050 water demands represent future conditions. Tradeoffs between hydropower generation and water scarcity to urban, agricultural, and instream flow requirements were compared with additional river kilometers of habitat accessible to anadromous fish species following dam removal. Results show that existing infrastructure is most beneficial if operated as a system (ignoring many current institutional constraints). Removing all rim dams is not beneficial for California, but a subset of existing dams are potentially promising candidates for removal from an optimized water supply and free-flowing river perspective. Removing individual dams decreases statewide delivered water by 0–2282 million cubic meters and provides access to 0 to 3200 km of salmonid habitat upstream of dams. The method described here can help prioritize dam removal, although more detailed, project-specific studies also are needed. Similarly, improving environmental protection can come at substantially lower economic cost, when evaluated and operated as a system.