Deciphering the Synergies between Carbon Tax and Water Conservation: A Water Footprint Analysis

Water poverty poses significant challenges to regional environmental conservation and socioeconomic development, with water footprints providing valuable insights into assessing the severity of this poverty. A carbon tax, an environmental charge imposed on the carbon emissions from energy sources, is known for quickly reducing emissions at minimal public expense, and can indirectly influence water footprints. While past research has detailed the previous characteristics of water footprints, it has not yet predicted how these characteristics might evolve under the influence of a carbon tax. In this paper, variations in the water footprint are examined using an input-output model, and the impacts of carbon taxes on water footprints are forecasted through a computable general equilibrium (CGE) model. CGE models are essential for low-carbon policy design, enabling policymakers to simulate the socioeconomic and environmental impacts of interventions, thereby offering insights to refine integrated strategies for emissions reduction and water footprint efficiency. The simulation results indicated in the case of imposing carbon tax simulation, the coal industry experienced the largest reduction in virtual water content at 34.81%, followed by heavy industry and transport. Additionally, the carbon tax has a more pronounced effect on virtual water content in secondary industries compared to primary and tertiary industries. With carbon taxes set at 100 and 200, the total water footprint decreased by 3.15% and 4.72%, respectively, which corresponds to a reduction in water usage per person in China by 3.2% and 4.8%. Furthermore, the simulation also suggested that social welfare reached its maximum value of 181.36 when the carbon tax was 196 RMB/t-CO₂. Our research also provides a new point of view on assessing the effectiveness and fairness of carbon taxes and can further be used to develop compensation strategies that tackle emission and water limitations in the energy sector, thereby optimizing the benefits for water conservation that arise from emission reduction measures.