Environmental constraints in hydropower systems serve to ensure sustainable use of water resources. Through accurate treatment in hydropower scheduling, one seeks to respect such constraints in the planning phase while optimizing the utilization of hydropower. However, many environmental constraints introduce state-dependencies and even nonconvexities to the scheduling problem, making them challenging to capture. This paper describes how the recently developed stochastic dual dynamic integer programming (SDDiP) method can incorporate nonconvex environmental constraints in the medium-and longterm scheduling of a hydropower system in a liberalized market context. A mathematical model is presented and tested in a multireservoir case study, emphasizing on the improvements observed when accurately modelling a particular type of nonconvex environmental constraint.