Hydro-economic Modeling in River Basin Management: Implications and Applications for the European Water Framework Directive

Economic ideas and processes are becoming increasingly integrated with more traditional engineering and hydrologic models of water management problems. Combining economic management concepts and performance indicators with an engineering-level of understanding of a hydrologic system can provide results and insights more directly relevant for water management decisions and policies. When such models are developed and used with involvement of stakeholders, they can become a basis for shared understanding of water problems as a foundation for negotiated management and policy solutions. When implemented with optimization software, integrated hydro-economic models also can suggest promising innovative solutions for policy-makers to consider. Their applications to river basin management problems are reviewed. Economic and integrated economic-engineering-hydrologic modeling is then discussed in the context of the evolving European Water Framework Directive. Relevant items are cost recovery and water pricing, cost-effectiveness of water management measures, and public participation in decision processes.