Economic incentives in integrated water resource management – Hydroeconomic modeling as decision support

In this contribution a hydro-economic modeling approach to assist the valuation of hydrological ecosystem services in order to define economic compensations mechanisms that promote improved land use in rural areas is analyzed. By coupling of a rainfall-run-off model with an economic model different development scenarios are investigated. Whether economic incentives, payments for hydrological ecosystem services in this particular case, may promote sustainable land use for economic reasons and how the payment should be defined are leading questions of this investigation. In this context the cost and benefit sharing of both the ecosystem service provider and buyer are consider in detail. The Gil González River Basin in the Southwest of Nicaragua, Central America, is used as a case study example. In this River Basin a mechanism of economic incentives for the promotion of sustainable land use has already been established, but is still not managed sustainably. The valuation of the hydrological ecosystem services has yet not been executed on a physical basis, also are the impacts of land use changes on the future provision of the hydrological service uncertain. By the application of a coupled hydro-economic model a substantial improvement in incentive allocation and outcome forecast is expected