Journal of Environmental Management 187 (2017) 482e489

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Journal of Environmental Management

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Research article

Itaipu royalties: The role of the hydroelectric sector in water resource

management
Alexandre Simo~ es Lorenzon a, Carlos Antonio Alvares Soares Ribeiro a,
Alexandre Rosa dos Santos b, *, Gustavo Eduardo Marcatti a, Getulio Fonseca Domingues a,
Vicente Paulo Soares a, Nero Lemos Martins de Castro a, Thaisa Ribeiro Teixeira a,
Sady Júnior Martins da Costa de Menezes c, Elias Silva a, Kelly de Oliveira Barros a,
Gleissy Mary Amaral Dino Alves dos Santos d, Samuel Ferreira da Silva b,
Pedro Henrique Santos Mota a
a
Federal University of Viçosa/UFV, PostGraduate Programme in Forest Science, Av. Peter Henry Rolfs, s/n, 36570-000, Viçosa, MG, Brazil
b
Federal University of Espírito Santo/UFES, Department of Rural Engineering, 29500-000, Alegre, ES, Brazil
c
Federal University Rural of Rio de Janeiro e Institute Tr^
es Rios, Department of Environmental Sciences, 25802-100, Tr^
es Rios, RJ, Brazil
d
Federal University of Viçosa/UFV, PostGraduate Programme in Agrochemistry, Av. Peter Henry Rolfs; s/n, 36570-000, Viçosa, MG, Brazil

a r t i c l e i n f o a b s t r a c t

Article history: For countries dependent on hydroelectricity, water scarcity poses a real risk. Hydroelectric plants are
Received 31 July 2016 among the most vulnerable enterprises to climate change. Investing in the conservation of the hydro-
Received in revised form graphic basin is a solution found by the hydropower sector. Given the importance of the Itaipu plant to
20 October 2016
the energy matrix of Brazil and Paraguay, the aim of this study is to review the current distribution of
Accepted 21 October 2016
royalties from Itaipu, using the hydrographic basin as a of criterion of analysis. Approximately 98.73% of
Available online 14 November 2016
the Itaipu basin is in Brazil. The flow contributes 99% of the total electricity generated there, while the
drop height of the water contributes only 1%. Under the current policy, royalties are shared equally
Keywords:
Catchment management
between Brazil and Paraguay. In the proposed approach, each country would receive a percentage for
Hydroelectricity their participation in the drop height and water flow in the output of the turbines, which are intrinsic
Payment for environmental services factors for electricity generation. Thus, Brazil would receive 98.35% of the royalties and Paraguay, 1.65%.
Water resources The inclusion of the hydrographic basin as a criterion for the distribution of royalties will promote more
efficient water resource management, since the payment will be distributed throughout the basin of the
plant. The methodology can be applied to hydroelectric projects worldwide.
© 2016 Published by Elsevier Ltd.

1. Introduction hydroelectricity in its energy matrix with large binational hydro-

Latin America's extensive river systems and their hydraulic
potential have resulted in this region having a significant share of
* Corresponding author.
E-mail addresses: alelorenzon@yahoo.com.br (A.S. Lorenzon), cribeiro@ufv.br
(C.A. Alvares Soares Ribeiro), alexandre.santos@pq.cnpq.br (A. Rosa dos Santos),
gustavomarcatti@gmail.com (G.E. Marcatti), getulio.floresta@gmail.com
(G.F. Domingues), vicente@ufv.br (V.P. Soares), nerolemos@yahoo.com.br
(N.L. Martins de Castro), thaisarib@gmail.com (T.R. Teixeira), sadymenezes@ufrrj.
br (S.J. Martins da Costa de Menezes), eshamir@ufv.br (E. Silva), kellyobarros@
yahoo.com.br (K. de Oliveira Barros), gleissym@yahoo.com.br (G.M. Amaral Dino
Alves dos Santos), samuelfd.silva@yahoo.com.br (S. Ferreira da Silva), pedromota.
enf@gmail.com (P.H. Santos Mota).
electric projects such as Itaipu, Salto Grande, and Yacyret
a (WWAP,
2015). Hence, hydroelectricity accounts for about 68% of the elec-
tricity generated in Brazil (ANEEL, 2015) and 99.99%, in Paraguay
(ANDE, 2015).
Although hydroelectric plants are highlighted as a source of
sustainable, renewable energy (Azofra et al., 2015; Fu et al., 2014;
Stickler et al., 2013), the supply of water for various uses has
become a critical issue in most nations owing to water scarcity and
increasing conflicts between users of water resources (Habersack
et al., 2016; Kadigi et al., 2008; Maran et al., 2014; WWAP, 2015).
These conflicts are particularly common in areas with hydroelectric
plants, since these enterprises depend on a minimum flow rate
upstream of the plant to meet a certain demand for energy (Fanaian

http://dx.doi.org/10.1016/j.jenvman.2016.10.046
0301-4797/© 2016 Published by Elsevier Ltd.
 A.S. Lorenzon et al. / Journal of Environmental Management 187 (2017) 482e489
et al., 2015; Kadigi et al., 2008; Premalatha et al., 2014).
It is estimated that climate change will affect the future of global
hydroelectricity (Gaudard and Romerio, 2014; Hamududu and
Killimgtveit, 2012; Maran et al., 2014; Volpi et al., 2006). Aronica
and Bonaccorso (2013) note that hydroelectric plants are among
the enterprises most vulnerable to climate change. However,
change in rainfall, higher temperatures, and increases in extreme
weather, are only part of the story (Gaudard and Romerio, 2014;
Hamududu and Killimgtveit, 2012; Mereu et al., 2016). According
to Co^rtes et al. (2015) and Mereu et al. (2016) the reduced avail-
ability of water is also a reflection of population and urban growth,
land use, and the lack of planning and management of water
resources.
Because of human impacts and impacts from climate change on
water resources, there is increasing global concern about the need
to conserve water (Kadigi et al., 2008). In Latin America, payment
for environmental services (PES) is a tool increasingly used by
governments and private agencies in the management of water
resources (Rodríguez-de-Francisco and Budds, 2015). Regularizing
the flow, erosion control, and water infiltration into the soil and
improving water quality are just a few services resulting from good
management of a watershed (Blackman and Woodward, 2010;
Fanaian et al., 2015; Lu and He, 2014; Stickler et al., 2013;
Tuinstra and Wensem, 2014).
Therefore, many power companies have sought solutions to the
water crisis by investing in the conservation of the hydrographic
basin upstream of their plants to ensure the flow of water on which
they depend (Blackman and Woodward, 2010; Rodríguez-de-
Francisco and Budds, 2015). Monetary investments are made in
many ways, such as royalties, environmental management funds or
special taxes (Skinner, 2015). In Colombia, for example, a legal in-
strument addresses part of energy sales to municipalities that are
part of the catchment area of the reservoir. Other countries like
China (Fu et al., 2014), Mexico (Pagiola et al., 2005), Nepal
(Upadhyaya, 2005) and Norway (Skinner, 2015) also have financial
mechanisms for preserve the hydrographic basin of its hydroelec-
tric plants. Engel et al. (2008) argue that electricity sector PES
programs are likely to be effective, because the recipients of the
environmental service benefits are directly involved, and thus,
there is a clear incentive to ensure that the mechanism functions
well.
Brazil and Paraguay are highly dependent on hydroelectricity.
Itaipu provides 17% and 75% of the energy consumed in Brazil and
Paraguay respectively (ANEEL, 2015). This leaves their energy sector
vulnerable to blackouts, as occurred in Brazil in earlier years.
Originally, the hydrographic basin from Itaipu was all covered by
Atlantic Forest and Cerrado biomes. However, the growth of urban
centers and deforestation for agricultural and livestock areas,
generated a lot of pressure on the environment (Watanabe et al.,
2012; Itaipu Binacional, 2015). Today the basin has only some
fragments of its original biomes.
According to a survey conducted by Stickler et al. (2013),
deforestation on a regional scale can dramatically reduce precipi-
tation and prolong the dry season locally and forest loss also re-
duces the water flow of the rivers, which restricts the generation of
electricity and affects the expansion of hydroelectric power. Evi-
dence of the relationship between precipitation and forest cover
was also found by other authors (Hasler et al., 2009; Knox et al.,
2011; Malhi et al., 2008; Werth and Avissar, 2005).
Global demand for energy is expected to grow by more than a
third by 2035 (WWAP, 2015). This will generate more pressure on
water resources, thus increasing conflicts over use. Resource
management policies are fundamental for the allocation of multiple
uses of water and the conservation of water resources. Given the
importance of the Itaipu hydroelectric plant to the energy matrix of
483
Brazil and Paraguay, this study proposes a methodology for the
sharing of royalties from Itaipu, using the hydrographic basin as a
unit of spatial analysis.
2. Materials and methods
2.1. Study area
The Itaipu hydroelectric plant is located in the Parana river basin
on the border of Brazil and Paraguay (Fig. 1). With 20 generating
units and 14,000 MW of installed capacity, it provides about 17% of
the energy consumed in Brazil and 75% of the energy consumed in
Paraguay (ANEEL, 2015). The Itaipu hydroelectric plant has a drop
height of 118.4 m (difference between standard maximum level of
the reservoir and the level of the tailrace). The mean annual pre-
cipitation in the hydrographic basin is 1400 mm. The maximum,
minimum and average flow recorded in Itaipu are, respectively,
39,790 m3 s
1, 6082 m3 s
1 and 11,663 m3 s
1. Although the
reservoir of Itaipu flood an area of 1350 km2, with 770 km2 in Brazil
and 580 km2 in Paraguayan territory, Itaipu is a run-of-the-river
hydroelectric plant, which means, the reservoir does not store
water in order to generate electricity. (Itaipu Binacional, 2015).
On April 26, 1973, it was signed the Itaipu Treaty between Brazil
and Paraguay. In the Treaty, it was decided that each country would
receive 50% of the total energy produced, with recognized priority
purchase in case of not utilized energy by any part. The plant's
construction was funded entirely by Brazil, thus, it was agreed the
reduction of debt Paraguay on payments made by Brazil in buying
of surplus energy not used by Paraguay (Arce, 2010; Itaipu
Binacional, 2008).
Through the generation of electricity, Itaipu paid royalties to
Brazil and Paraguay for the exploitation of water resources of the
Parana river. The payment of royalties is laid down in Annex C of the
Itaipu Treaty, in which it was established that the royalties would
be paid equally to the participating countries. Brazil and Paraguay
have already received more than US$ 4.5 billion (Itaipu Binacional,
2015) since Itaipu started trading energy in March 1985. The value
of the royalties is calculated according to Eq. (1).
Royi ¼ EGi  VE  K  TC (1)
where Royi corresponds to royalties for the month i; EGi is the en-
ergy generated (GWh) in Itaipu in the month i; VE is the value of
gigawatt-hour, defined at US$ 650 by the Itaipu Treaty; K is the
adjustment factor of the megawatt-hour value; and TC is the cur-
rent exchange rate on the day of the royalties payment.
2.2. Data processing
In this study, we used the following information layers: Digital
elevation model Shuttle Radar Topography Mission (SRTM) version
3.0, with cell size of 30 m; a mean monthly precipitation data file,
made available by the international organization Worldclim (ob-
tained to a period of at least 10 years) and Xavier et al. (2015)
(obtained for the period 1980e2013), with approximate cell size
of 1000 m and 28,000 m, respectively; annual evapotranspiration
data (MODIS), provided by the National Aeronautics and Space
Administration (NASA); a vector file with the political divide in
South America; and a vector file with the geographic location of the
Itaipu dam.
The boundary of the hydrographic basin of the Itaipu plant was
derived from the SRTM database. To ensure proper delimitation of
the basin, a set of 244 grid cells from SRTM were selected, with
intervals 15 S 1 S and 40 W to 60 W. The 244 grid cells from the
SRTM were combined into a single set of data, resulting in a
484 A.S. Lorenzon et al. / Journal of Environmental Management 187 (2017) 482e489
Fig. 1. Geographical location of the Itaipu hydroelectric plant.
continuous digital elevation model (DEM). The resulting DEM was
then processed to remove anomalies, or spurious depressions,
which could disrupt the flow of water and cause errors in the de-
limitation of the hydrographic basin.
With the processed DEM, a raster of flow direction was gener-
ated and, from this, the flow accumulation. The dam location point
was visually adjusted to coincide with the cell of highest flow
accumulation. This point, along with the raster of flow direction,
was used to define the respective Itaipu hydrographic basin. The
vector file of South America was cut, using as a clipping mask of the
limit of the Itaipu hydrographic basin. Next, with the new vector file
of South America policy divisions, the geographical area of each
country was identified.
In calculating the long-term mean stream flow, we used the
mean monthly precipitation data files and mean annual evapo-
transpiration. Only monthly precipitation data are available, and so,
the values were summed to obtain a mean annual precipitation file.
As the mean monthly precipitation data are derived from two
separate bases, an interpolation was performed to obtain a
continuous basis covering the entire study area. The data was
converted to points (centroids of the raster cells) and interpolated
by inverse distance weighted (IDW) method, adopting a variable
radius of 12 input sample points and power value equal 2. The
power value controls the significance of surrounding points on the
interpolated process. Higher values, for example, results in less
influence from distant points. The resolution of the output raster
was 1 km2. For raster evapotranspiration, which is made available
per year (2000e2014), the values were added together and divided
by 15, generating a mean annual evapotranspiration file.
The value of royalties used in this study was taken from 2014
data (ANEEL, 2015). To ensure the quality of the operations, World
Geodetic System 1984 (WGS 84) was adopted, and the entire
database was projected to the cartesian coordinate system of Albers
Equal Area Conic. Spatial information was processed using mainly
the resources of the Spatial Analyst extension, available in the
ArcToolbox interface of the software ArcGIS® version 10.3.
2.3. Calculation of royalties
In the case of hydroelectric plants, hydraulic potential is a
function of both the height the water and the water flow (ANEEL,
2008; Ribeiro et al., 2015), that is, it depends on relief, which al-
lows the formation of the necessary slope for configuring the hy-
draulic energy and the hydrographic basin, which captures
rainwater in adequate volume to form the water flow.
In this context, two criteria were defined to establish the divi-
sion of the Itaipu royalties: the first is the percentage related to the
drop height of water in the generation of electricity and, the second,
the percentage related to the water flow.
2.3.1. Determination of percentage related to water drop height and
water flow to generation of electricity
The hydropower capacity of a storage plant installed at a
reservoir can be expressed as shown in Eq. (2) (Gaudard and
Romerio, 2014; Yoo, 2009):
P ¼hrgQ h (2)
Where P is the hydropower capacity (W); h is the efficiency of
turbine-generator set; r is the water density (kg m
3); g is the
gravity acceleration (m s
2); Q is the water flow (m3 s
1); h is the
water drop height (m).
If h  r  g  Q  h ¼ 100% of hydropower capacity, then are
valid expressions (Eq. (3) and Eq. (4)):
 A.S. Lorenzon et al. / Journal of Environmental Management 187 (2017) 482e489 485

basin, as a function of the contribution of each country to the water

Q  100 100 flow (Eq. (12)).
PQ ¼ /PQ ¼ (3)
hrgQ h hrgh
PQroy ¼ PQ  PQld  Roy (12)
or
where PQroy (US$) is the value of the royalties related to the water
h  100 100 flow; PQ is the relative percentage of water flow in the generation of
Ph ¼ /Ph ¼ (4)
hrgQ h hrgQ electricity; PQld is the relative percentage of long-term mean water
flow of each country intercepted by the Itaipu hydrographic basin;
Where PQ is the relative participation of the water flow; Ph is the and Roy (US$) is the total value of the royalties.
relative participation of the water drop height; P is the hydropower The water balance considers annual cycles in which the water
capacity (W); 100 is 100% of hydropower capacity. storage in the soil would be balanced. In a long-term mean, the
Developing the ratio PQ =Ph , it can be established that (Eq. (5)): water storage in the soil can be disregarded (Cardoso et al., 2006).
100 The long-term mean water flow was obtained by the difference
PQ hrgh 100 h  r  g  Q Q PQ between the input (precipitation) and output (evapotranspiration)
¼ 100 ¼  ¼ /
Ph hrgQ
h  r  g  h 100 h Ph of water in the Itaipu hydrographic basin (Coe et al., 2009; Pirone
et al., 2015; Stickler et al., 2013; Touhami et al., 2015) (Eq. (13)).
Q Q
¼ /PQ ¼  Ph (5)
h h ðP  AÞ
ðEVT  AÞ
Qld ¼ (13)
Considering that the water flow and drop height are intrinsic 31; 536; 000
factors for electricity generation, according to Oliveira (2009) and
Ribeiro et al. (2015), it can be established that (Eq. (6)): where Qld (m3 s
1) is the long-term mean water flow; P (m year
1)
is the mean annual precipitation; EVT (m year
1) is the mean
PQ þ Ph ¼ 100 (6) annual evapotranspiration; A is the pixel area of the data source
(m2); and 31,536,000 is a constant that converts (m3 year
1) in
Substituting (5) into (6) has Eq. (7):
(m3 s
1).
Q Thus, the royalties received by each country are the sum of Phroy
 Ph þ Ph ¼ 100 (7) and PQroy values. The details about the original data and the cal-
h
culations are shown in supplementary material. The steps for the
Putting Ph in evidence, obtain Eq. (8): implementation of this method work are shown in Fig. 2.
 
Q þh
Ph  ¼ 100 (8) 3. Results and discussions
h
Thus, the relative participation of water drop height in elec- The drainage area of the Itaipu hydrographic basin, delimited
tricity generation is represented by Eq. (9): from the raster of flow direction and of the reference cell of the
respective dam, covers 822,017.37 km2, with 98.73% of them
100  h
Ph ¼ (9) located in Brazilian territory (Fig. 3).
Q þh The percentage refers to the water flow (PQ) and the water drop
Similarly, the relative participation of water flow in electricity height (Ph) in the generation of electricity, as shown in Table 1. It is
generation is given by Eq. (10): observed that for the 99.00% of electricity related to the water flow,
Brazil contributes 98.77% and Paraguay 1.23%, because 1.27% of the
100  Q Itaipu hydrographic basin is in Paraguayan territory (Table 1). Thus,
PQ ¼ (10)
Q þh Brazil is responsible for 98.35% of the electricity generated at Itaipu.
These values pose an important question: What was the crite-
rion adopted in the Itaipu Treaty for the equitable sharing of roy-
alties? Almost certainly, it was based on the area inundated by the
2.3.2. Distribution of the royalties reservoir, which is practically equal for the two countries.
After determining the percentage values of the water drop Approximately 57% of the Itaipu lake surface is in Brazil, and the
height and the water flow in the generation of electricity, it is other 43% is on the Paraguayan side (Table 1). Although the Itaipu
possible to quantify the contributions of each country from these reservoir is the seventh largest lake in Brazil (Itaipu Binacional,
percentages. The value of Ph should be divided among the benefi- 2015), the hydroelectric plant receives practically no benefits
ciaries, in relation to the area inundated by the reservoir, since the from its reservoir, because only 1% of the electrical energy is owing
height of drop of water from a dam results directly on the surface to the water drop height; that is, Itaipu mainly depends on the
flooded by the reservoir. water flow of its hydrographic basin. In practice, Itaipu works like a
Thus, the value of royalties related to the water drop height is hydroelectric plant running off a river. This shows that the current
calculated as shown in Eq. (11): form of distribution of royalties has, over the years, substantially
benefited Paraguay, which contributes only 1.65% of the total
Phroy ¼ Ph  PAal  Roy (11) electricity generated at Itaipu.
In 2014, US$ 252.87 million in royalties was paid by Itaipu
where Phroy (US$) is the value of the royalties relating to the water Binacional to Brazil. The same amount was paid to Paraguay.
drop height; Ph is the percentage relative water drop height in the Comparing the current model with the proposed methodology, it is
generation of electricity; PAal is the percentage relative of the area observed that the total value of royalties paid to each country
inundated of each country intercepted by Itaipu reservoir; and Roy changes significantly (Table 1). Brazil will receive 98.35% of the
(US$) is the total value of the royalties. royalties, representing a gain of 96.69%. On the other hand,
The value of PQ should be divided by the whole hydrographic Paraguay will receive 1.65%, which corresponds to a loss of 96.69%
486 A.S. Lorenzon et al. / Journal of Environmental Management 187 (2017) 482e489
Fig. 2. Methodological steps for the implementation of work.
in relation to the current payment. These results show a more
rational division model that, far from motivating diplomatic con-
flict between the beneficiary countries, establishes a distribution
that contributes to the conservation of the hydrographic basin.
Even considering only the inundated areas, since 1985, Paraguay
has received 16% more than it should have received under a
distribution.
The value of the long-term mean water flow, calculated by the
difference between precipitation and evapotranspiration, was
16,644 m3 s
1 (Eq. (13)). This value was 42.71% higher than the
mean water flow measured in the Itaipu dam, which is
11,663 m3 s
1. This can influence the distribution of monetary
amounts related to the flow, since it changes the value of the long-
term mean water flow (PQld). This difference will be relevant to
basins that are equally distributed over the recipient countries. In
the case of Itaipu, as 98.73% of the basin is in a single country, it
does not produce a significant difference.
The calculation of the long-term mean water flow does not take
into consideration variations resulting from the use of water for
activities such as agriculture, industry, domestic consumption, and
water transposition between basins. The Itaipu hydrographic basin
includes large extensions of agricultural land, and a large part of the
~o Paulo, one of the most industrialized regions of Brazil. It
state of Sa
is estimated that agriculture is responsible for 70% of the water
consumed in the world (Pen ~ a-Arancibia et al., 2016; Pimentel et al.,
2004; Shiklomanov, 2000; WWAP, 2015). In Brazil, agriculture is
responsible for 72% of water consumption (ANA, 2015). Moreover,
in Brazil and in South America, the lack of detailed information on
the distribution of precipitation and evapotranspiration, owing to
the low density of weather stations (Haylock et al., 2006; Michaud
and Sorooshian, 1994; Tetzlaff and Uhlenbrook, 2005; Xavier et al.,
2015), also contributes to this difference. To obtain an accurate
estimate, the method requires more consistent, up-to-date data-
bases. Moreover, other uses of water should be incorporated into
the methodology, since, when removed from the system, the water
ceases to contribute to the generation of hydroelectric power.
The demand for water for various uses has continuously
increased (Kadigi et al., 2008; Mcnally et al., 2009). As it is a primary
input to many economic activities, conflicts for water use have also
increased (ANA, 2015). Brazil is undergoing a generalized water
crisis, which is caused mainly by poor planning and management of
water resources (Co ^rtes et al., 2015; Lemos and Oliveira, 2004;
Pereira and Cuellar, 2015; Tundisi, 2008). Allied to this fact, in
recent years, climate change has affected the global distribution of
rainfall (ANA, 2015; WWAP, 2015), causing, in 2014, one of the
worst water crises of the history of Brazil (ANEEL, 2015). This water
 A.S. Lorenzon et al. / Journal of Environmental Management 187 (2017) 482e489 487

Fig. 3. Area of each country intercepted by the hydrographic basin of the hydroelectric plant of Itaipu.

scarcity has significantly decreased the supply of water for energy
generation and for domestic supply, industry, and agriculture,
intensifying conflicts for water use in the country (ANA, 2015). With
the current water management policies, the tendency is aggrava-
tion and dissemination of this crisis.
As 99% of the electricity generated at Itaipu is owing to the
rainfall intercepted by its hydrographic basin, these countries may
be vulnerable. In the case of hydroelectric power plants, the main
problems for effective and efficient operation are from environ-
mental degradation processes upstream of the plant (Barroso and
Silva, 1992; Blackman and Woodward, 2010; Chomitz et al., 1999;
Guedes and Seehusen, 2011; Fu et al., 2014). A consequence of
this is the high variability of water flow at the Itaipu hydroelectric
plant, between the dry and rainy periods (Itaipu Binacional, 2015).
This situation creates a significant problem, reducing the capacity
of electricity generation in times of drought (ANEEL, 2015; Itaipu
Binacional, 2015).
In the last decades there were significant advances regarding
the conservation of water, deriving from the implementation of
environmental conservation policies and efforts to promote the
appropriate management of water resources. However, today's
environmental problems require holistic approaches (Cooter et al.,
2013.) and greater engagement and articulation with both the
public and private sectors (Lemos and Oliveira, 2004).
Though the Itaipu royalties were not originally designed as a
mechanism for managing water resources, they have the potential

Table 1
Distribution of Itaipu royalties in accordance with the proposed methodology.

Country PQ Ph PAal PQld Royalty PQroy Phroy Total

(US$ millions)
(%) (US$ millions)

Brazil 57.04 98.77 252.87 494.49 2.90 497.39

99.00 1.00
Paraguay 42.96 1.23 252.87 6.17 2.18 8.35

Total 100 100 100 505.74 505.74

PQ: percentage of the water flow in the generation of electricity; Ph: percentage of the water drop height in the generation of electricity; PAal: percentage of inundated area of
each country intercepted by Itaipu reservoir; PQld: percentage of long-term mean water flow of each country intercepted by Itaipu hydrographic basin; Royalty: total royalties
received by Brazil and Paraguay in 2014; Phroy: royalty referring to water drop height; PQroy: royalty referring to water flow.
488 A.S. Lorenzon et al. / Journal of Environmental Management 187 (2017) 482e489
to be used for the preservation of the hydrographic basin as a
payment for environmental services (Ribeiro et al., 2015). In many
Latin American countries such as Colombia, Costa Rica, Ecuador,
and Mexico, there is already financing from the hydroelectric sector
for the conservation of the hydrographic basin upstream from their
reservoirs (Echavarria et al., 2004; Fu et al., 2014; Pagiola et al.,
2005; Rojas and Aylward, 2002; Zamora, 2002).
In 2023, the Itaipu Treaty will be reviewed. On this occasion, the
two countries should redefine the royalties for the use of the hy-
droelectric potential of the Parana river. This can be a great op-
portunity for the two countries to perfect instruments and policies
to reduce regional socio-economic disparities, ensuring that a
substantial portion of energy sales resources is applied to the
conservation of the hydrographic basin. However, this will require
that those interested in hydroelectric production clearly under-
stand the benefits of conserving the basin in the maintenance and
regulation of the water flow.
4. Conclusions
Based on the methodology adopted in this study, it can be
concluded that:

Brazil should receive 98.35% of Itaipu royalties.

The inclusion of the water flow as a criterion for the distribution
of royalties will promote a more efficient management of water
resources, since the resource will be distributed to the entire
hydrographic basin.

The royalties from electricity generation, distributed adequately
in the hydrographic basin, can be used to promote the payment
for environmental services.

The methodology can be applied to any hydroelectric project at
the level of countries, states, and municipalities.
Acknowledgements
The authors would like to extend thanks to the National Electric
Energy Agency (ANEEL), National Water Agency (ANA) for
providing the necessary data for implementing this work and group
research Geotecnology Applied to Global Environment (GAGEN).
Appendix A. Supplementary data
Supplementary data related to this article can be found at http://
dx.doi.org/10.1016/j.jenvman.2016.10.046.
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