The main objective of this core modelling component is to develop a new generation of integrated hydro-economic models for Canada, establishing links and relationships between socio-economic activities and water use, both in terms of water extraction (quantity) and wastewater discharge (quality), to reliably predict the direct and indirect impacts of future climate change and water policy interventions (e.g. water allocation across water users or water quality improvement) on the Canadian economy across different drainage basins. The integrated hydro-economic models aim to support policy analysis in watersheds and river basins across Canada, focusing on the costs and benefits of policy action and inaction under climate change and the design of economically efficient future policy interventions. Economic models will be developed based on available economic data at provincial and national level and coupled with existing hydrological and environmental models. The integrated hydro-economic models are run based on simulation and economic optimization principles, including the cost-effectiveness of policy interventions, and provide policymakers with important information on their return on investment in water projects. Special attention will be paid to both market and non-market values of water resources. The potential of coupling market-based and non-market-based modelling frameworks will be explored. We will advance hydro-economic modelling frameworks in the following ways:

a. The consistent up and downscaling of hydrological, environmental and economic data from watershed and drainage basin to provincial and national level,

b. The introduction of water and substance flows in watershed and macro-economic modelling frameworks, and

c. The introduction of feedback loops, i.e. how water use affects water flow and quality and this in term economic productivity. Furthermore, the sources, interactions and accumulation of uncertainties across environmental and economic modelling domains will be addressed, as well as the general applicability of the developed integrated hydro-economic modelling frameworks across Canadian drainage basins.