Efficiency improvements and water policy in the balearic islands: a general equilibrium approach

We use an Applied General Equilibrium Model of the Balearic Islands to explore the impact of increasing the technical efficiency of water use in the tourism sector. We show that water efficiency measures do not reduce economic pressures on water ecosystems. Consequently water price increases and reductions in water withdrawals are needed as ancillary measures. This water policy package opens a menu of possible outcomes in terms of conservation of water resources and the production of market goods. We also provide information about distributional impacts that should be considered to determine the convenience of implementing water saving programs.