This paper explores the sensitivity of the benefits of alternative wat
er allocation schemes and of project evaluation to global warming. If
global warming shifts the mean of annual water supplies, there could b
e large impacts on the expected values of alternative water allocation
schemes. The first section of the paper explores how well alternative
schemes (such as market mechanisms, prior rights, or percentage flows
) perform if the distribution of flows changes. In a case study of the
Colorado River, market mechanisms and flow guarantees result in small
er impacts than rules which allocate inefficient percentages of flows
to heterogeneous users. The second part of the paper explores the effe
ct of a gradually changing distribution of flows on project evaluation
s. Project evaluation is sensitive to predicted future changes in mean
flows. Project evaluation is not sensitive to changes in the variance
of future flows unless the variance increase is large and the benefit
measure is highly curvilinear. Because basin-specific changes in runo
ff from global warming are currently uncertain and much delayed, most
project analyses will be unaffected by global warming. The most import
ant response by water managers to climate change may simply be to clos
ely monitor runoff and incorporate flexible rules in order to adapt th
eir behavior to observed changes.