From Water-Use to Water-Scarcity Footprinting in Environmentally Extended Input-Output Analysis

Environmentally extended input-output analysis (EEIOA) supports environmental policy by quantifying how demand for goods and services leads to resource use and emissions across the economy. However, some types of resource use and emissions require spatially explicit impact assessment for meaningful interpretation, which is not possible in conventional EEIOA. For example, water use in locations of scarcity and of abundance are not environmentally equivalent. Opportunities for spatially explicit impact assessment in conventional EEIOA are limited because official input-output tables tend to be produced at the scale of political units, which are not usually well-aligned with environmentally relevant spatial units. In this study, spatially explicit water-scarcity factors and a spatially disaggregated Australian water-use account were used to develop water-scarcity extensions that were coupled with a multiregional input-output model (MRIO). The results link demand for agricultural commodities to the problem of water scarcity in Australia and globally. Important differences were observed between the water-use and water-scarcity footprint results as well as the relative importance of direct and indirect water use, with significant implications for sustainable production and consumption-related policies. The approach presented here is suggested as a feasible general approach for incorporating spatially explicit impact assessments in EEIOA.