Marginal Economic Value of Streamflow: A Case Study for the Colorado River Basin

The marginal economic value of streamflow leaving forested areas in the Colorado River Basin was estimated by determining the impact on water use of a small change in streamflow and then applying economic value estimates to the water use changes. The effect on water use of a change in streamflow was estimated with a network flow model that simulated salinity levels and the routing of flow to consumptive uses and hydroelectric dams throughout the Basin. The results show that, under current water management institutions, the marginal value of streamflow in the Colorado River Basin is largely determined by nonconsumptive water uses, principally energy production, rather than by consumptive agricultural or municipal uses. The analysis demonstrates the importance of a systems framework in estimating the marginal value of streamflow.