Physical Water Use and Water Sector Activity in Environmental Input-Output Analysis

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 results indicate that the price paid for water varies greatly amongst different uses; in particular, household consumption is charged at a higher price than intermediate industrial demand. We argue that decision makers (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.

Proposition for an additional input output multiplier metric to access the value contribution of regional cluster industries

“…In recent years, Allan, McGregor et al (2007), use input output to demonstrate the economic distinctiveness emerging from effectively disaggregating sectoral activity when considering systemwide impacts and employment levels. Using the extended input output framework developed by (Leontief, 1970), Allan, Hanley et al (2007) with further developments in Alabi et al (2019), consider how multipliers can be used to identify price pressures throughout the economy that may manifest if the input cost of any one industry is pushed up, which has the potential to affect the size of the employment multipliers. Emonts‐Holley et al (2021) proposes alternative calculations for considering the impact of exogenous expenditure and household final demand on the size of the employment multipliers.…”