Hydroeconomic Optimization of Water Management in the Yellow River Basin: Dealing with Scarcity

Abstract. Water scarcity is a key limiting factor for sustainable socioeconomic development especially in arid and semi-arid basins, and managing water effectively there often requires coherent and holistic policies and regulations at the basin scale. This study develops an integrated basin-scale hydroeconomic optimization model. The model reasonably details the representation of the hydrologic, infrastructural, water demand and regulatory components, with an objective to maximize overall economic benefits of irrigated crop production, water supply and hydropower generation, subject to resource, infrastructural, operational and policy constraints. A baseline calibration enhances the model's reliability and empirical validity for analysing interconnected physical processes and decision-making, based on the interdependence of hydrologic and economic components. The model is applied to the Yellow River Basin (YRB), where water has been fully allocated and intense competition exists among different water users across the basin. Results show that water availability decreases by approximately 75 % from upstream to downstream, with the corresponding marginal values rising from CNY 0 to 9.14 m−3 along the river in a severe dry year, implying greater challenges for downstream water security (especially the critical ecological requirements) and a larger requirement for water saving in upstream areas. Basin-wide management strategies highlighted in this study include: reallocating water to economically high-value production sectors; coordinating the operation of cascade reservoirs and taking advantage of reservoirs with inter-year operation capacity; monitoring and balancing water availability between upstream and downstream areas. The stabilization of water supply heavily relies on coordinated operation of aquifers and reservoirs with inter-year storage capacity, which mitigates hydrologic variability and improves downstream water availability. Water valuation analysis based on marginal value underscores the potential benefits of water trading and inter-regional transfers. The results offer insights for basin-scale water management, showing potential of reallocation strategies for improving management flexibility and increasing water productivity. Insights from the YRB are meaningful as guides for managing basins worldwide that face similar challenges.