Use of economic measures for establishing environmental flow in upstream river basins

Abstract Environmental flow is a hot and current issue in water resources management in many countries in the world. In upstream river basins, it introduces a new constraint to hydropower sector. In the implementation stage of environmental flow economic aspects play a key role in river basin management. Economic measures are useful tools in management because they give strong incentive to conventional water users to change their behavior. We can take advantage of economic measures such as levy and subsidy to achieve consensus among all stakeholders in river basin management. A subsidy system for setting environmental flow release from hydropower stations is proposed based on a benefit function of environmental flow formulated in terms of flow rate. Under this subsidy, each hydropower station estimates the possible amount of subsidy to compensate the power production loss by flow release. Consequently, environmental flow is determined by optimum decision procedure by each hydropower station. This paper pr...