Production and consumption-based water dynamics: A longitudinal analysis for the EU27

Area of Science:

• Environmental Economics
• Global Supply Chain Analysis
• Water Resource Management

Background:

• Global supply chains increasingly influence economic systems.
• Understanding the link between economic development and water resource pressure is crucial.
• Previous analyses often overlook the nuances of production vs. consumption-based water metrics.

Purpose of the Study:

• To investigate the relationship between economic development and water pressures within the EU27.
• To analyze differences in water indicator outcomes based on income levels and measurement approaches (production vs. consumption).
• To identify the role of trade flows in the transmission of water-related environmental burdens.

Main Methods:

• Utilized a global Multiregional Input-Output (MRIO) model dataset.
• Employed panel fixed effects regressions to analyze water resource dynamics from 1995 to 2008.
• Controlled for individual country heterogeneity and economic development levels.

Main Results:

• Water consumption and per capita Gross Domestic Product (GDP) show opposite trajectories.
• Measurement approach significantly impacts water indicator outcomes, especially when conditioned on economic development.
• Water embodied in trade flows acts as a key transmission mechanism for environmental burdens.

Conclusions:

• The economic growth of developed EU27 nations is associated with externalizing environmental water burdens onto less developed European partners and external developing countries.
• Integrated water resource management, targeted technological policies, and environmental regulations are essential.
• Policy interventions are needed to balance water ecosystem conservation with sustainable economic growth at multiple levels.