Impacts of Climate Change on Reservoir Management and Downstream Watershed

Although it is well known that sedimentation may reduce the storage capacity of a dam, there is relatively modest amount of economic research on the subject. Furthermore, there is no economic literature as yet on the important relationship between climate change and reservoir management. This paper attempts to address both issues in the context of a dynamic optimization model that maximizes social welfare by allowing for periodic sediment removal from a dam in a way that is responsive to changing climatic conditions and the needs of downstream users. The model is applied to the Aswan High Dam in Egypt. The reservoir of this dam impounds 90 km3 of water from two main Nile Rivers. The dam provides substantial economic benefits to Egypt in terms of hydropower, irrigation, and flood control. However, the dam’s storage capacity is being reduced over time due to sedimentation, and climate change is also likely to significant impact it’s future net benefits by altering evaporation and precipitation rates. Our model computes effective storage capacity of a reservoir by considering sedimentation, evaporation, and precipitation rates simultaneously. Reservoir-level sediment removal is our control variable and this allows us to influence downstream agriculture productivity, which is also determined in part by climate change. Hydrologic data of the Aswan High Dam is obtained from the International River and Lake Network and regional agricultural data is obtained from the FAO. Climate change forecasting data for the Nile River Basin is based on IPPC reports. Our simulation results indicate that, without climate change, optimal sediment control increases reservoir life indefinitely and social welfare by 36%, compared to the situation with no sediment control. With climate change that involves relatively high evaporation rates, however, optimum reservoir life is curtailed to 319 years and social welfare is reduced by 21%