Climate change and economic approaches into water allocation: optimization via direct benefits of water—the case study of Rudbar Lorestan hydropower dam (Iran)

Climate change will affect hydrologic patterns in the Middle East over future decades. Already limited water resources will become further limited, creating further challenges for water allocation protocols. While there is no integrated climate/water allocation framework to develop sophisticated dynamic allocation patterns, determining the economic value of water in various markets is one way to optimize water allocation. In this paper, a non-linear optimizer code through the Conjugate Gradient Method has been applied to optimize water allocation in the Rudbar Lorestan Hydropower system (Iran) across four sectors (agriculture, industry, power, and urban). Climate scenarios and direct benefits of water in each sector have been considered as the inputs of the model for a 37 years period (2014–2050). The results of optimized allocation show that while each particular sector is impacted substantially from different climate scenarios, the total direct benefits of water in the basin vary between the narrow ranges of 14.75–16.75 billion USD for the same period. By considering the major characteristics of flexibility and adjustability, this methodology (Optimization via Economic Value of Water) can be considered an adaptive approach for addressing climate change and water allocation challenges.