HYDROLOGIC AND ECONOMIC-IMPACTS OF DROUGHT UNDER ALTERNATIVE POLICY RESPONSES

A severe sustained drought in the Colorado River Basin would cause eco nomic damages throughout the Basin. An integrated hydrologic-economic- institutional model introduced here shows that consumptive water users in headwaters states are particularly vulnerable to very large shortf alls and hence large damages because their rights are effectively juni or to downstream users. Chronic shortfalls to consumptive users relyin g on diversions in excess of rights under the Colorado River Compact a re also possible. Nonconsumptive water uses (for hydropower and recrea tion) are severely affected during the worst drought years as instream flows are reduced and reservoirs are depicted. Damages to these uses exceeds those to consumptive uses, with the value of lost hydropower p roduction the single largest economic impact of a severe sustained dro ught. Modeling of alternative policy responses to drought suggests thr ee general policy approaches with particular promise for reducing dama ges. Consumptive use damages can be reduced by over 90 percent through reallocation from low to high valued uses and through reservoir stora ge strategies which minimize evaporation losses. Reservoir management to preserve minimum power pool levels for hydropower production (and t o maintain reservoir recreation) may reduce damages to these nonconsum ptive uses by over 30 percent, but it may increase consumptive use sho rtfalls.