Historically, publicly funded irrigation development plans promoted economic growth in agrarian Spain, but they also increased environmental damage and led to excessive and inefficient exploitation of water resources. Currently, water policies in Spain focus on rehabilitating and improving the efficiency of irrigation systems, and are moving from technocratic towards integrated water management strategies driven by the European Union (EU) Water Framework Directive (WFD).

This study analyzes the effects of national and European water policies under normal and dry climate conditions, using a novel hydro-economic model based on the integration of a multiscale economic optimization model and a hydrology water management simulation model built in WEAP . Application of the model was carried out in the Middle Guadiana basin, a surface-irrigated area of about 29,000 km2 in the southwestern Iberian Peninsula.

Balancing the trade-offs between agricultural production and nature conservation is one of the major tasks that face policy makers in Spain, and especially in the Guadiana Basin. This paper contributes to the debate by providing an integrated economic-hydrologic modeling framework that captures the dynamics and outcomes of human-hydrological interactions, from farm-level to river-basin levels.

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