1. INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE Water Policy and Institutions—A Basin Perspective Addis Ababa, May 28-29 Claudia Ringler

2. Why?  Many economic decisions [HP/water supply infrastructure/blasting for navigation/sea- dykes] are taken at the river basin level or affect water, food and environmental outcomes in river basins  need for sound economic analyses  Changes in basin institutions and economic incentives can increase water use efficiency, reduce investment needs, reduce adverse environmental outcomes [water marketing]

3. Challenges for water policy analysis  Difficulty in handling stochastic nature of precipitation and runoff  Difficulty in handling transactions costs in different water allocation systems  Difficulty in accounting for political factors and multi-agent bargaining and decision making  Equity aspects of water allocation decisions  Data…data…data….[water use, price and income elasticities, env value, GW, WQ..]

4. Challenges for water policy analysis  Fluidity of the resource across space and time with change values  Combination of three or more sources (SW/GW, precipitation) with different economic values  Limited direct tradability, difficult to establish a price for water  The compartmentalization in both thinking and treatment of water for different users  Economic value of improved water quality

5. Key policies and institutions  Water rights  Water transfers  Water investments  Rules (priority in use) and regulations (f.ex. for environmental flows)  Water prices  Water brokerage systems / Water markets  Rotational systems  One basin decision-maker or multiple individual decision-makers

6. Recent modeling advances  Agent based modeling systems (F.ex. Yellow River basin model)  Linkage of river basin models with CGE models (Indus basin model)  Linkage of river basin models with household data (already done with multi- market sector models, ongoing IWMI Nile basin model)  issue—representativeness of household data generally at the administrative level, not at the river basin level

7. Recent modeling advances  Agent based modeling systems (F.ex. Yellow River basin model)  Linkage of river basin models with CGE models (Indus basin model)  Linkage of river basin models with household data (already done with multi- market sector models, ongoing IWMI Nile basin model)  issue—representativeness of household data generally at the administrative level, not at the river basin level

8. Recent modeling advances  New advances in virtual water trade analysis  Integrated assessment models now increasingly incorporate water allocation models  Better interfaces to inform stakeholder dialogues