THE INS AND OUTS OF WATER USE – A REVIEW OF MULTI-REGION INPUT–OUTPUT ANALYSIS AND WATER FOOTPRINTS FOR REGIONAL SUSTAINABILITY ANALYSIS AND POLICY

Abstract

This paper reviews current knowledge about water footprints (WFs) and the role of input–output techniques. We first provide an overview of the prevailing ‘bottom-up’, process-based methods and their strengths and limitations. This overview leads to discussion of the benefits of combining process-based water footprints with information from input–output techniques. The central theme and proposition is that environmental multi-region input–output analysis (E-MRIO) has a powerful capacity to establish the geography of embodied water, and to complement process-based approaches to WF by expanding their supply-chain coverage. Combining process and input–output information provides valuable information for a diverse set of water planning and water policy objectives. A comprehensive and systematic outline of potential policy applications of E-MRIO (and process analysis methods) is presented.

Keywords:

• Environmental multi-region input–output analysis
• Water
• Sustainability
• Policy

Notes

¹ For good descriptions and discussion of the water source ‘colour’ classification see Bayart et al. (2010), Canals et al. (2009), Chapagain et al. (2006), Chapagain and Orr (2009), FAO (2006) and Ridoutt and Pfister (2010).

² Exceptions for the latter include Chapagain et al. (2006) and Chapagain and Hoekstra (2004).

³ It is anticipated that the new standards will incorporate many of the methodological and conceptual revision themes advocated by major protagonists in the field (see Canals et al., 2009; Chapagain and Orr, 2009; Koehler, 2008; Pfister and Koehler, 2009; and Pfister et al., 2011).

⁴ Computable general equilibrium models that utilise data from E-MRIO would play an important role here.

⁵ However, total water footprints have been calculated at national levels (e.g. Hoekstra and Chapagain, 2007).

⁶ Economic efficiency consequences (assessed in terms of full social costs and benefits) would depend upon aspects such as the relative scarcity and opportunity cost of water including ecosystem impacts, water stress, elasticity of demand, returns from competing alternative economic options for water use, labour mobility, the economic diversity of users, and variation in technical efficiency based on geographic, technological, socio-economic and other regional factors. There would also be important general equilibrium effects and hence a role for CGE models in evaluating economic (and environmental resource) implications of change and policy for regional production and consumption. However, the basic elasticities would be subject to criticism given the absence or distorted nature of the cost of water as a production input.