Many river basins throughout the world are increasingly under pressure aswater demands keep rising due to population growth, industrialization,urbanization and rising living standards. In the past, the typical answer tomeet those demands focused on the supply side and involved the constructionof hydraulic infrastructures to capture more water from surface water bodiesand from aquifers. As river basins have become more and more developed,downstream water users and ecosystems have become increasingly dependent onthe management actions taken by upstream users. The increasedinterconnectedness between water users, aquatic ecosystems and the builtenvironment is further compounded by climate change and its impact on thewater cycle. Those pressures mean that it has become increasingly importantto measure and account for changes in water fluxes and their correspondingeconomic value as they progress throughout the river system. Such basin wateraccounting should provide policy makers with important information regardingthe relative contribution of each water user, infrastructure and managementdecision to the overall economic value of the river basin. This paperpresents a dynamic water accounting approach whereby the entire river basinis considered as a value chain with multiple services including productionand storage. Water users and reservoir operators are considered as economicagents who can exchange water with their hydraulic neighbors at a pricecorresponding to the marginal value of water. Effective water accounting ismade possible by keeping track of all water fluxes and their correspondinghypothetical transactions using the results of a hydro-economic model. Theproposed approach is illustrated with the Eastern Nile River basin in Africa.
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