Handbook of Water Economics
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Handbook of Water Economics

Edited by Ariel Dinar and Kurt Schwabe

Water scarcity, whether in the quality or quantity dimension, afflicts most countries. Decisions on water management and allocation over time, space, and among uses and users involve economic considerations. This Handbook assembles research that represents recent thinking and applications in water economics. The book chapters are written by leading scholars in the field who address issues related to its use, management, and value. The topics cover analytical methods, sectoral and intersectoral water issues, and issues associated with different sources of water.
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Chapter 23: The economics of transboundary water management

Erik Ansink and Harold Houba


We assess a very general economic model of transboundary river water allocation and show how it has been used in the literature and how it can be applied to assess three key objectives of transboundary river management: efficiency, sustainability and fairness. Efficiency deals with using water for its highest-value use so that no gains from reallocation remain unexploited. Sustainability deals with the strategic incentives of countries to comply with some agreed water allocation schedule so that the allocation is stable over time or under (water) stress. Fairness deals with the acceptability, both ethically and legally, of the water allocation schedule and its characteristics. The relevance of assessing these characteristics of transboundary river management is evident. There are more than 250 international transboundary rivers and many more when one considers rivers that cross federal, state, provincial and other sub-national borders. Many of these rivers are located in regions where demand for water exceeds supply. Existing transboundary allocation regimes, if present, are under pressure due to increasing demand caused by population growth, and developments in industry and agriculture. Simultaneously, in many river basins, water supply is negatively affected by climate change, both in average runoff and in variability of runoff. Widening gaps between demand and supply imply increasing scarcity of water. Increasing scarcity implies that countries are under pressure to increase or at least preserve their share of the available water.

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