Physical water use and water sector activity in environmental input-output analysis

Alabi, Oluwafisayo and Munday, Max and Swales, Kim and Turner, Karen (2018) Physical water use and water sector activity in environmental input-output analysis. Special Issue:The Review of Regional Studies on Water and Regional Science. (In Press)

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    Abstract

    This paper uses input-output accounting methods to identify the direct, indirect and induced physical demand for water. The seminal work by Leontief (1970) has previously motivated a more extensive account of issues related to those sectors that generate and those that clean/treat polluting outputs. The present paper extends this approach to deal with sectors that use a natural resource and those that supply it. We take as a case study public water use and supply in Wales. The analysis shows how the proposed method, using both the quantity input-output model and the associated price dual, can be used to investigate the economy-wide implications of the deviation between expenditures on the output of the water sector and actual physical water supplied. The paper shows that the price paid for water appears to vary greatly amongst different uses, in particular household consumption is charged at a higher price than intermediate industrial demand. We argue that decision makers (that is in this case, policy makers and industry regulators) require such analysis and information in order to understand the demands on and supply of water resources and their role in supporting economic expansion, whilst simultaneously adopting appropriate strategies for achieving water sustainability objectives.