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Disentangling Water Usage in the European Union: A Decomposition Analysis

Abstract

The Water Framework Directive (WFD) defines common objectives for water resources throughout the European Union (EU). Given this general approach to water preservation and water policy, the objective of this paper is to analyse whether common patterns of water consumption exist within Europe. In particular, our study uses two methods to reveal the reasons behind sectoral water use in all EU countries. The first method is based on an accounting indicator that calculates the water intensity of an economy as the sum of sectoral water intensities. The second method is a subsystem input-output model that divides total water use into different income channels within the production system. The application uses data for the years 2005 and 2009 on water consumption in the production system of the 27 countries of the EU. From our analysis it emerges that EU countries are characterized by very different patterns of water consumption. In particular water consumption by the agriculture sector is extremely high in Central/Eastern Europe, relative to the rest of Europe. In most countries, the water used by the fuel, power and water sector is consumed to satisfy domestic final demand. However, our analysis shows that for some countries exports from this sector are an important driver of water consumption. Focusing on the agricultural sector, the decomposition analysis suggests that water usage in Mediterranean countries is mainly driven by final demand for, and exports of, agricultural products. In Central/Eastern Europe domestic final demand is the main driver of water consumption, but in this region the proportion of water use driven by demand for exports is increasing over time. Given these heterogeneous water consumption patterns, our analysis suggests that Mediterranean and Central/Eastern European countries should adopt specific water policies in order to achieve efficient levels of water consumption in the European Union.

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Notes

  1. The Directive is available here: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2000:327:0001:0072:EN:PDF

  2. See Alcántara (1995), Sánchez-Choliz and Duarte (2003), Alcántara and Padilla (2009), Cardenete and Fuentes (2011) and Butnar and Llop (2011) for applications to Spanish emissions; and Llop and Tol (2013) for an application to Irish emissions.

  3. See Timmer (2012) for a list of the sectors and countries presented in this database.

  4. Croatia joined the EU in the summer of 2013, however, it is not included in our analysis as it is not covered by the WIOD database.

  5. http://epp.eurostat.ec.europa.eu/portal/page/portal/short_term_business_statistics/data/database. Data are missing for Ireland in the Eurostat series for years prior to 2005, therefore we use the wholesale price index published by Ireland’s Central Statistics Office for these years. Furthermore, producer price deflators are missing for Portugal in all years, and thus we deflate the Portuguese I-O tables using the producer price deflator for Spain. Similarly data are missing for Slovakia in some years, and for these years we use the deflator for the Czech Republic.

  6. http://epp.eurostat.ec.europa.eu/portal/page/portal/hicp/data/database.

  7. http://epp.eurostat.ec.europa.eu/portal/page/portal/agriculture/data/database.

  8. Mendiluce et al. (2010) proposed a similar method to measure energy intensity in the Spanish economy.

  9. Specifically, we will consider the four activities that show a level of water intensity above the EU median (see Table 1).

  10. The literature on input-output subsystems usually assumes that the final demand in one subsystem is zero and, accordingly, this subsystem is thought to only produce for the intermediate demand (see, for instance, Alcántara and Padilla (2009)). Unlike other similar studies, expression ( 4) captures all the income relations within the production system.

  11. Note that if we are interested in the S subsystem, this part of the M production can be avoided.

  12. The domestic final demand includes sectoral private consumption, public consumption and investment.

  13. Results for all the EU countries are available by the authors upon request.

  14. Note that data on water use in the Electricity, Gas and Water Supply sector is incomplete for Malta and Cyprus, and thus these countries are excluded from any analyses of this sector.

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Acknowledgments

Useful comments and suggestions by two anonymous reviewers have substantially improved the manuscript. The usual disclaimer applies.

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Correspondence to Valeria Di Cosmo.

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Maria Llop acknowledges funding by the Spanish Ministry of Education and Culture (grant ECO2010-17728) and the Catalan Government (grants SGR2009-322 and “RDI Reference Network in Economics and Public Policies”).

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Di Cosmo, V., Hyland, M. & Llop, M. Disentangling Water Usage in the European Union: A Decomposition Analysis. Water Resour Manage 28, 1463–1479 (2014). https://doi.org/10.1007/s11269-014-0566-6

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Keywords

  • Water use
  • Subsystem input–output model
  • Water intensity
  • European Union