Incorporating Hydrological Variability into a Hydroeconomic Input-Output Model

Environmentally extended input-output (IO) models have mainly used to study water demand. Studies that have incorporated water supply (availability) do not consider its natural variability, an essential element when performing a water stress analysis. The present study integrates the hydrological variability of water availability into a hydroeconomic IO model, considering its effects on water supply and demand. Besides the exogenous variability of water supply two endogenous effects are considered: i) changes in blue water requirements in agriculture due to variations in precipitation and evapotranspiration, and ii) changes in grey water requirements in all discharging industries due to variations in the runoff and groundwater recharge. By means of a T-years hydrological series and Monte Carlo simulations, the model allows estimating the empirical probability distribution of an Extended Water Exploitation Index (EWEI), to be compared with conventional scarcity thresholds. The model includes a methodology to incorporate intra-annual variation to define an endogenous regional-specific scarcity threshold. The model is empirically implemented for Tuscany (Italy) Results shows the existence of water scarcity problems beyond the aggregate hydrological balance resulting when annual average and conventional scarcity thresholds are considered