Optimal Water Allocation under Short-Run Water Scarcity in the South Saskatchewan River Basin

This paper examines the effect on economic welfare of alternative surface water allocations in the Alberta portion of the South Saskatchewan River Basin in Canada. Growing demands for urban and instream water uses add to significant irrigation withdrawals, all contributing to relative water scarcity. A computational model optimizes the annual value derived from spatially diverse water withdrawals, fully respecting their hydrologic and economic linkages. The model simulates current allocation practices and defines optimal allocations under alternative demand and supply scenarios. The use of the publicly developed Aquarius modeling software illustrates its comparative strengths relative to other models that optimize explicitly with respect to economic values. The model's numerical estimates support the conclusion that there are sufficient surface water resources for users to adapt to a range of alterations in water supply or water demand, but that substantial short-term reallocations of water among users might be required to achieve the greatest benefit.