A Method for Optimal Allocation between Instream and Offstream Uses in the Maipo River in Central Chile

Minimum instream flows (MIF) have been established in Chile with the aim of protecting aquatic ecosystems. In practice, since current water law only allocates water rights to offstream water uses, MIF becomes the only instrument for instream water allocation. However, MIF do not necessarily maintain an adequate flow for instream uses. Moreover, an efficient allocation of water for instream uses requires the quantification of the benefits obtained from those uses, so that tradeoffs between instream and offstream water uses are properly considered. A model of optimal allocation between instream and offstream uses is elaborated. The proposed method combines two pieces of information. On one hand, benefits of instream use are represented by qualitative recreational benefit curves as a function of instream flow. On the other hand, the opportunity cost given by lost benefits of offstream uses is employed to develop a supply curve for instream flows. We applied this method to the case of the Maipo River, where the main water uses are recreation, hydropower production and drinking water. Based on available information we obtained the qualitative benefits of various recreational activities as a function of flow attributes. Then we developed flow attributes curves as a function of instream flow for a representative number of sections in the river. As a result we obtained the qualitative recreational benefit curve for each section. The marginal cost curve for instream flows was developed from the benefit functions of hydropower production interfering with recreation in the Maipo River. The purpose of this supply curve is to find a range of instream flow that will provide a better quality condition for recreation experience at a lower opportunity cost. Results indicate that offstream uses adversely influence recreational activities in the Maipo River in certain months of the year, significantly decreasing the quality of these in instream uses. As expected, the impact depends of the magnitude of diverted flows, and therefore these impacts can be reduced restricting the amount of water extracted from the river. Accordingly, it is possible to define the optimum amount of water to be allocated to each use for each month such that instream flows are appropriate for recreation and the loss of hydropower production benefits is lowest.