Water and Benefit Sharing in Transboundary River Basins

Abstract:

Growing water scarcity underlies the importance of cooperation for the effective management of river basins, particularly in the context of international rivers in which unidirectional externalities can lead to asymmetric relationships between riparian countries. Studies have shown that significant economic benefits can be expected through basin-wide cooperation, however, the equitable partitioning of these benefits over the basin is less well studied and tends to overlook the importance of stakeholder input in the definition of equitability. In this study, an institutional arrangement to maximize welfare and then share the scarcity cost in a river basin is proposed. A river basin authority plays the role of a bulk water market operator, efficiently allocating bulk water to the users and collecting bulk water charges which are then equitably redistributed among water users. This highly regulated market restrains the behaviour of water users to control externalities and to ensure basin-wide coordination, enhanced efficiency, and the equitable redistribution of the scarcity cost. The institutional arrangement is implemented using the Eastern Nile River basin as a case study. The importance of this arrangement is that it can be adopted for application in negotiations to cooperate in trans-boundary river basins. The benefit sharing solution proposed is more likely to be perceived as equitable because water users help define the sharing rule. As a result, the definition of the sharing rule is not in question, as it would be if existing rules, such as bankruptcy rules or cooperative game theory solutions, are applied, with their inherent definitions of fairness. Results of the case study show that the sharing rule is predictable. Water users can expect to receive between 93.5% and 95% of their uncontested benefits (benefits that they expect to receive if water was not rationed), depending on the hydrologic scenario.