Economic water management decisions: trade-offs between conflicting objectives in the sub-middle region of the São Francisco watershed

Hydro-economic models can measure the economic effects of different reservoir operating rules, environmental restrictions, maintenance of ecosystems, technical constraints, institutional constraints, land use change, and climate change. To determine the optimal economic water allocation, for its main uses in the sub-middle of the São Francisco River Basin, a hydro-economic optimization model was developed and applied. Demand curves were used rather than fixed requirements for water resources. The results show that operation rules of reservoirs and institutional constraints, such as priorities for human consumption, have high impacts on costs and benefits of the principal economic uses in the study area. Especially, costs of environmental demands, like minimum ecological river flow, have high impacts on the water resource management. Scarcity costs of irrigation users associated with maintaining ecosystems and environmental constraints are particularly significant. The results from this study provide a better understanding of the water trade-offs for future policymaking and efficient water management. Policymaking for the water resources should consider the food-water-energy-environment nexus at a regional scale to minimize environmental and economic cost under water scarcity and land use change.