A Simplified Hydro-Economic Model of Guadalquivir River Basin for Analysis of Water-Pricing Scenarios

This study describes an economic model in the Guadalquivir river basin (Southern Spain) that considers inter-sectoral and hydrological effects of changes in water use as a response to various water-pricing policy scenarios. The main economic variables include water use, gross regional product, return flows in the river basin, and employment at sectoral and basin levels. The response of the different sectors to water pricing and of the sectoral productivity is derived from official data. The background of the model is based on previous research for the implementation of the UN System of Environmental-Economic Accounts and on the application of this framework to the Guadalquivir basin. Results based on the elicited curves illustrate that the structure of the demand function for irrigated agriculture passes from inelastic to elastic sections, while the function corresponding to the remaining economic sectors shows a continuous decreasing function with minor change in the elasticity structure of the curve. Results show that the impact of extreme measures of water pricing reduces water abstraction by up to 42% vs. the baseline scenario, with an economic reduction in regional Gross Domestic Product (GDP) of 1%.