Transboundary resource management in the EU: transnational welfare maximization and transboundary water sharing on the Iberian peninsula?

The purpose of this paper is to elucidate the treatment of the value of transnational welfare maximization as based on welfare economics in transboundary river sharing in the EU. The paper draws on theorizing on spillovers and on game theory and it contrasts these with other ways of explaining transnational agreements. The second part of the paper discusses the implications of an approach trying to maximize transnational welfare in a situation of shared resources by means of mutual payments between sharing states and it looks at their treatment throughout the negotiations and at the outcome of the Luso-Spanish Convention. The conclusions from the case reject a welfare economic evaluation of the negotiations on transnational agreements. In reality, mutual payments as described here might only be applied in the long term and only to specific transboundary spillovers. The negotiations of the Luso-Spanish Convention were tightly intertwined with developments in the Water Policy of the EU. Some elements of the currently implemented Water Framework Directive favour a future use of mutual payments to achieve an increase in efficiency in the use of shared rivers.