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Measuring Gains and Losses in Virtual Water Trade from Environmental and Economic Perspectives

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Abstract

Virtual water trade can generate an aggregate value gain or loss when there is a regionally disparity in the value of water resources. This paper proposes a novel integrated model to evaluate the impact of virtual water trade on the gain and loss in both environmental and economic dimensions. Environmentally, when virtual water flows from regions rich in water to regions short of water, the scarcity of water resources at the aggregate level is alleviated and positive gains are obtained. Economically, as virtual water is transferred from economically less developed regions to those that are economically developed, the marginal economic value of water resources is enhanced, resulting in a positive gain. China is characterized by significant disparities in the degree of water scarcity and the level of economic development in different areas of the country. This study therefore focuses on China as a case of how interregional virtual water trade leads to a loss or gain in aggregate value. We employ a Multi-regional Input–Output model to analyze the virtual water flows within China and adopt the Data Envelopment Analysis to evaluate the water shadow price. Results show that the virtual water flow in China in 2015 was mostly from water-scarce to water-rich regions, resulting in a loss of 8 billion m3 of scarce water; however, at the same time, economically developed areas received large amounts of virtual water from less developed areas, thereby generating a net economic gain of 8.5 trillion CNY. In particular, the virtual water trade from Heilongjiang to Shandong yielded the largest of environmental gains, saving 1.65 billion m3 of scarce water, and the virtual water trade from Xinjiang to Guangdong produced the largest of economic gains, hitting 479 billion CNY. This paper aims to serve as an inspiration for regional, national and even global virtual water trade practices.

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Acknowledgements

This work was supported by Beijing Natural Science Foundation (9204027) and the National Key Technologies R&D Program of China (2022YFD1500205)

Funding

This work was supported by Beijing Natural Science Foundation (9204027) and the National Key Technologies R&D Program of China (2022YFD1500205).

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Authors and Affiliations

  1. International College Beijing, China Agricultural University, Beijing, China

    Aixi Han, Ao Liu & Li Chai

  2. Department of Environment Science and Engineering, Fudan University, Shanghai, China

    Aixi Han

  3. The School of Language, Cultures and Societies, University of Leeds, Leeds, UK

    Zhenshan Guo

  4. Rutgers Business School, Rutgers University, Newark, USA

    Yi Liang

  5. College of Economics and Management, China Agricultural University, Beijing, China

    Li Chai

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  1. Aixi Han
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Correspondence to Li Chai.

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Han, A., Liu, A., Guo, Z. et al. Measuring Gains and Losses in Virtual Water Trade from Environmental and Economic Perspectives. Environ Resource Econ 85, 195–209 (2023). https://doi.org/10.1007/s10640-023-00763-9

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