Marginal Economic Value of Streamflow: A Case Study for the Colorado River Basin

Abstract

The marginal economic value of streamflow leaving forested areas in the Colorado River Basin was estimated by determining the impact on water use of a small change in streamflow and then applying economic value estimates to the water use changes. The effect on water use of a change in streamflow was estimated with a network flow model that simulated salinity levels and the routing of flow to consumptive uses and hydroelectric dams throughout the Basin. The results show that, under current water management institutions, the marginal value of streamflow in the Colorado River Basin is largely determined by nonconsumptive water uses, principally energy production, rather than by consumptive agricultural or municipal uses. The analysis demonstrates the importance of a systems framework in estimating the marginal value of streamflow. INTRODUCTIONAs surface water supplies approach full utilization and competition for existing supplies increases, it becomes increasingly important to know the value of changes in flow. Estimates of the value of flow changes are useful for evaluating water supply augmentation projects, such as alterations in vegetation of upland watersheds, cloud seeding, and transbasin diversions.Such value estimates are also useful in understanding the effect of flow decreases, such as might occur from increasing vegetative cover, climatic changes, or increased upstream consumption. Perhaps nowhere in the United States is the specter of water scarcity more prominent than in the Colorado River Basin. Efforts to control the Colorado's flow and to allocate its water have long been a focal point of concern among water interests [e.g., Fradkin, 1981;Hundley, 1975;Ingram, 1969]. This highly regulated and much litigated river provides a fitting setting for a study of the marginal value of water.The specific objective of this study was to estimate the economic value of increases in runoff that could be created by timber harvest in forested areas of the Colorado River Basin. Watershed research has shown that overstory removal in some vegetation types can reduce evapotranspiration and thereby increase streamflow, and much of this research has been carried out at sites in the Colorado River Basin [e.g., Leaf, 1975;Hibbert, 1979; Troendle, 1983]. Although this study focuses on the effects of timber harvest, the analysis has implications for all the aforementioned sources of flow change. The effect of streamflow change on water use is shown, via a systems approach [Maass et al., 1962], to depend on when the flow increases occur and on all the factors affecting water allocation, including storage and delivery facilities and the institutions affecting water management.The analysis incorporates in considerable detail the complex and highly developed water management arrangements that currently determine water allocation in the Basin, including current water laws, major facilities and reservoir operation rules. The sensitivity of the allocation and marginal value of flow to changes in existing management arrangements was ...

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