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Water use in the Spanish economy: an input–output approach
Ecological Economics 43 (2002) 71 /85 www.elsevier.com/locate/ecolecon
ANALYSIS
Water use in the Spanish economy: an input output approach /
Rosa Duarte *, Julio Sa´nchez-Cho´liz, Jorge Bielsa Departamento de Ana´lisis Econo´mico, Facultad Ciencias Econo´micas y Empresariales, Universidad de Zaragoza, Gran Vı´a 2, 50005 Zaragoza, Spain Received 25 February 2002; received in revised form 15 July 2002; accepted 18 July 2002
Abstract Against the background of the water limitations that often appear in Spain, the aim of this paper is to study the behaviour of the productive sectors of the Spanish economy as direct and indirect consumers of water. To that end, we employ input /output analysis, with the particular methodology being based on the linkages analysis known as the Hypothetical Extraction Method (HEM). We have introduced three modifications to this method. First, the valuation is made in terms of water consumption. Secondly, we obtain the components of the impacts of each block of activity into which the economy is divided, with these components being described as the internal effect, mixed linkage, net or external backward linkage, and net or external forward linkage. Thirdly, this methodology is used to detect key sectors. Our results confirm the marked importance of the Agriculture, Food and Other Services blocks as regards the direct and indirect consumption of water in general. We also find that Other Services, Chemicals, Metals and Electronics and Agriculture blocks play an important role in explaining the consumption of drinking water. Moreover, the HEM analysis allows us to classify productive sectors according to their forward or backward linkage character in a way that is more precise than that permitted by earlier methods. Finally, this methodology can be extended to other types of environmental pressures. # 2002 Elsevier Science B.V. All rights reserved. Keywords: Input /output; Water use; Backward linkage; Forward linkage
1. Introduction According to Wipenny (1994): ‘water is becoming one of the largest, and certainly the most universal of the problems facing mankind as the earth moves into the 21st century’. Whilst for some this may be an exaggerated view, we should
* Corresponding author E-mail address: [email protected] (R. Duarte).
nevertheless recall that only 2.5% of the total water resources of the planet is in the form of fresh water and that its spatial and time distribution is, in the majority of cases, quite irregular. The problem of the availability of water can be viewed from at least three perspectives. First, that the resource is a clearly limited one. Secondly, that the demand for water caused by economic and demographic growth is increasing. Thirdly, that the fit between the time, place and quality of the requirements, on the one hand, and the availability, on
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the other, cannot be automatically assumed. We will concentrate our analysis on the second and third perspectives. With respect to the evolution of demand in response to economic growth, one important field of study is the calculation of the direct and indirect water requirements associated with the production of each sector of the economy. More specifically, interest has been shown in estimating the imbalances that arise when account is taken of the space, time and quality variables associated with the resource. These three variables are particularly important in Spain, where a mixture of the spatial and time irregularity of precipitation and a deficient hydrological planning regime have given rise to permanent imbalances between resources and requirements. The traditional response to these problems in Spain has been to increase the regulation of the rivers and to extend the areas under irrigation. Additionally, the Spanish Parliament has recently approved a National Water Plan (Plan Hidrolo´gico Nacional) that proposes to transfer water from the River Ebro toward the Southeast (even as far as the area of Almerı´a, some 700 km away from the delta), and to the north, to the city of Barcelona, 100 km from the delta. The aim is to guarantee that the water demands coming from the use of intensive irrigation systems in Murcia and Almerı´a and the tourism-based demands of the Mediterranean coast are met. This plan has been strongly criticised by environmentalists and some economists as unsustainable, due both to its ecological impact (change to the Ebro Delta and decreasing flows resulting from climatic changes) and to the high water prices required by the supply costs. Thus, whilst water policy in Spain is a very controversial issue, there is a growing awareness that the productive structure of a territory must be compatible with the endowment of water resources upon which it rests. Furthermore, any approximation to the concept of sustainable development must involve a consideration of the set of economic-water interactions and the resilience of ecosystems (Holling, 1973), especially with respect to the subject of desertification. This is precisely the starting point adopted in this paper. In her
excellent work ‘Ecological Economics: the Second Stage’, Faye Duchin specifically recommends the input /output methodology as a powerful tool to analyse and understand the interrelations between the economy and the physical environment (Duchin, 1996). The aim of our paper is to put this recommendation into practice for the particular case of water use in the Spanish economy, following the line opened in Sa´nchez Cho´liz and Duarte (2002a,b), but now including what we believe to be significant empirical and methodological improvements. To that end, our paper focuses on the direct and indirect water requirements of each economic sector and its impact on the availability of the resource. In meeting this objective we have used a highquality statistical source that has appeared only recently, namely the Satellite Water Accounts (Cuentas Sate´lite del Agua */ CSA) prepared by Spanish National Institute of Statistics (Instituto Nacional de Estadı´stica., 2001). These are the first accounts drawn up by this body for the Spanish case, and they offer very reliable information on both the amount of water used by each productive sector and on the volume of waste water1. The CSA have filled an important statistical lacuna, allowing us to present our results with a significant degree of reliability. To the best of our knowledge, this paper represents the first application of this new statistical source. Regarding the methodology, our contribution turns on the adaptation of developments in the Hypothetical Extraction Method (HEM) to the particular case of the water productive structure interrelationships. Specifically, we adapt the HEM technique so as to capture the total impact of the sectors on water availability, as well as to identify the main intersectoral flows with respect to the use of the resource. In the standard analysis using HEM, prices are unitary and do not explicitly appear. By contrast, in this paper we weight the matrices to the left with water use vectors in such a way that the above1 The Spanish National Institute of Statistics accounts for ‘waste water’ as the waste water produced by the sectors and sent to any depuration and treatment plant.
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mentioned impact is valued in this resource. Similarly, in HEM it is usual to draw the distinction between two basic components of impact, namely the internal effect and the induced effect, in this way obtaining the total effect as the sum of the two. However, in our analysis we speak of four basic components, i.e. the internal effect, mixed linkage, external backward linkage and external forward linkage which, in our view, allows for a more precise study. Finally, we work with blocks of sectors, without having to aggregate more than is required by the available data. The rest of the paper is organised as follows. In Section 2 we describe these new methodological elements. Section 3 is devoted to the empirical analysis and results, with the latter appearing in the form of Tables in an Appendix. Here, we particularly focus on the estimation of the consumption of each type of water and its transfer between sectors. Similarly, we estimate the sectoral intensity of the use of water and its link with the generation of income. Section 4 closes the paper with a review of the main conclusions.
2. Methodology The starting point is an input /output model where an economy made up of n sectors can be described by the equality x/Ax/y, where x / (xi ) is the production vector, y /(yi ) is the vector of final demands and A /(aij ) is the matrix of technical coefficents. This economy can also be written as x/(I/A) 1y, where (I/A) 1 is the Leontief inverse. We use u? to denote the vector (1,. . .,1). Furthermore, if Bs represents a block of sectors of the economy, Bs will represent the remaining sectors and all vector q and all matrix Q ? ) and can be represented as q?/(qs?, qs Q Qs;s Q s;s Qs;s Qs;s The origin of the approach we use to analyse the impact of the use of water in every productive activity rests on two pillars. First, the concept of vertically integrated sector, based on the work of Pasinetti (1977), as well as on the traditional interpretation of the Leontief inverse. Secondly,
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the HEM, widely used to analyse the economic impact of changes in the activity of a sector and whose antecedents can be found in Strassert (1968) and Schultz (1977). The original idea was very simple, namely to measure the impact of a sector i on the economy, comparing the production x of that economy with the x* that would be obtained in a hypothetical economy in which this sector does not exist and where this economy could be described by A*; x* would be given by x* /(I/ A*) 1y*, where y* is the vector obtained by removing the yi , that is to say, the final demand of sector i, from vector y. Under these assumptions, the production of all the sectors falls. This methodology offers its greatest potential when it is applied to an economy made up of blocks of sectors. This allows us to distinguish the relationships between similar sectors (within the block) and the rest of the economy (the remaining blocks). For each block Bs , which can be made up of a single sector, the economy is described as: As;s A xs y x xs s;s 1 U s As;s As;s xs xs xs y2 D Ds;s ys s;s ; with (IA)1 Ds;s Ds;s ys Ds;s D s;s : Ds;s Ds;s The hypothetical economy with which it is compared is obtained by eliminating, or making null, one or various blocks Ai,j . On the different proposals and the impacts obtained from each of them, see Heilmer (1991), Cella (1984), Clements (1990), Dietzenbacher and Los (2000). However, in order to better present the changes that we introduce into the method, it is helpful to consider the proposal of Cella (1984) in greater detail. Specifically, for this author, block Bs in the hypothetical economy neither purchases from, nor sells to, the other sectors and the hypothetical productive relationships are given by: 0 A xs y xs x s;s s U s 0 As;s xs xs xs ys " # (IAs;s )1 0 ys : 0 (IAs;s )1 ys
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The change in production, which reflects the impact of the block, is obtained with: x x s xx s xs xs " # Ds;s (IDs;s )1 Ds;s Ds;s Ds;s (IDs;s )1 y s ys C Cs;s ys s;s ; Cs;s Cs;s ys where the total, backward and forward linkages of block Bs are defined as follows: Cs;s TL u?(xx); BLs u? y; Cs;s s C FLs u? s;s ys Cs;s From these last relationships we can note that the activity associated with Bs has four separate components, namely: an internal effect: us?(I/ As,s )1ys , a mixed effect: us?Cs,s ys /us?[Ds,s /(I/ As,s )1]ys , an external or net backward linkage: ? D s,s ys , an external or net us ?C s,s ys /us ? Ds ,s y s . forward linkage: us ?Cs ,s ys /us The BLs of Cella is the total of the mixed effect and of the external backward linkage, whilst the FLs is the total of the external forward linkage of Bs (which coincides with the external backward linkage of Bs ) and of the mixed effect of block Bs . Similar expressions can be obtained for the impact found by other economists who use HEM. Specifically, the so-called induced backward and forward linkages are the total of the mixed effect and the external backward linkage or external forward linkage, respectively. We can observe that the total of the first three components, that is D u? s;s ys Ds;s is the vertically integrated production of the sectors making up the block and, therefore, they represent the direct and indirect requirements to obtain the final demand ys . The total of the first,
second and fourth components, u?s [Ds;s ; Ds;s ]y; sometimes described as the horizontally integrated production, is simply the xs , the gross production of the block. As a consequence, the external backward linkage is the vertically integrated production of the block corresponding to those sectors which are not included in that block. That is to say, it represents the direct and indirect requirements from B s to obtain the final demand ys and it reflects the real or net ‘imports’ made by the block to obtain its own demand. The external forward linkage is that part of gross production which is not used either directly or indirectly to obtain ys , that is to say, the part sold by Bs and used by Bs to produce ys , and thus it is the real or net ‘exports’ made by Bs . Furthermore, the part of the vertically integrated production of the block represented by the products of the block itself, which are the direct and indirect requirements of products from Bs to obtain ys , is divided into two, namely that obtained solely with the processes of the block itself, which is the internal effect, and that obtained with the participation of other sectors, which is the mixed effect. We have chosen to describe the first part as ‘internal’, given that it represents goods produced, sold and purchased exclusively inside the block Bs ; by contrast, we describe the second part as ‘mixed’ because it is sold by the block and later re-purchased by that block, in such a way that it has the dual character of both backward and forward linkage. These factors allow us to carry out a standard analysis of the HEM type. However, bearing in mind that we wish to study the intersectoral dependence linked to the use of water, our approach is to value the earlier-mentioned components with a vector of unitary inputs of water. Thus, if c is a vector of unitary inputs of water, then for each Bs we again have the four components, namely: an internal effect: cs?(I/As,s ) 1ys , a mixed effect: cs?Cs,s ys /cs? [Ds,s /(I/As,s )1]ys , an external or net backward linkage: cs C s,s ys / ? D s,s ys , an external or net forward linkage: cs cs ?Cs, s ys /cs ?Ds, s ys ; but where these now measure the amount of water embodied or incorporated into the part of the production that these components represent. Thus, the internal effect is the water consumed in the sectors of the
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block, and which never forms part of the inputs of other sectors; the mixed effect is the water consumed in the block which enters to form part of the goods of other sectors, where these goods are then used as an input by the original block to generate the final demand; the external backward linkage is the water consumed outside the sectors of the block, and which is then used in that block to obtain the final demand, that is to say, it is the net imports of water; finally, the external forward linkage is the water consumed in the block, which is transferred to other sectors by way of inputs and which never returns, that is to say, it is the net exports of water. We can similarly define the induced backward and forward linkages. The former are the total of the net imports of water and of the imports of water previously exported, whilst the latter are the net exports of water, plus that part of the exports subsequently re-purchased. We can say that these induced linkages represent the gross imports and exports of water, respectively. A more complete development of the foundations of this methodology can be found in Sa´nchez Cho´liz and Duarte (2002b).
3. Empirical analysis The economic and water use data employed in this paper come from the 1995 Input /Output Table for Spain (Instituto Nacional de Estadı´stica., 2000) and the Satellite Water Accounts (Instituto Nacional de Estadı´stica., 2001), respectively. Currently, this second data source offers information for 1997, 1998 and 1999 on water uses by productive sectors, distinguishing between irrigation water (irrigation services), drinking water, non-drinking water and waste water. We use the 1997, given that these are the closest in time to the input /output table. The Water Accounts operate at a 24-sector level of disaggregation, and it is these sectors that will be used to reduce the Input /Output Table. In order to carry out a more detailed analysis, these sectors are grouped into eight blocks and, as we have already mentioned, the sectoral differentia-
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tion is maintained within each of them. The eight blocks in question are as follows: B1: Agriculture, comprising the sectors (1) Agriculture, livestock, hunting and forestry and (2) Fishing. B2: Energy, water and mining, comprising the sectors (3) Extraction of energy products, (4) Extraction of other mineral products, (10) Oil refining and nuclear fuels, (19) Water collection, purification and distribution and (20) Energy, gas and water production and distribution. B3: Food industry, comprising sector (5) Food, drinks and tobacco. B4: Transformation industry, comprising the sectors (6) Textile and clothing, (7) Leather and footwear, (8) Timber and cork, (9) Paper and publishing and (13) Other non-metallic mineral products industries. B5: Chemicals, metals and electronics industry, comprising the sectors (11) Chemicals, (12) Rubber and plastic materials transformation, (14) Metallurgy and manufacture of metal products, (15) Machinery and mechanical equipment, (16) Electric and electronic material, (17) Transport material and (18) Diverse manufacturing industries. B6: Construction, comprising sector (21) Construction. B7: Public sanitation, comprising sector (23) Public sanitation activities. B8: Other services, comprising the sectors (22) Public Administration and (24) Other servicesector activities. The data on water use allows us to obtain three vectors2 of unitary inputs of water for the 24sectors. The first gives us the unitary consumption
2 The statistical data available to us is such that we can obtain a fourth vector of unitary consumption of non-drinking water which only has positive components in the agriculture and other services blocks. For the sake of simplicity, we have not considered this vector in this analysis.
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of irrigation water; the second represents the uses or unitary consumption of drinking water3; finally, the third is a vector of unitary waste water, which gives us the preliminary information on water pollution in the economy4. Our analyses, which rest on the above 24-sector Input/Output Table, grouped into eight blocks, and the use of three vectors of water inputs, have two clearly differentiated parts. In the first we obtain the water flows of the economic structure; we concentrate on the role of each sector as forward or backward linkage and on the importance of the internal use of the water. For clarity, we gather our observations under three headings, namely: vertically integrated water uses and direct consumption; internal, mixed, external or net and induced effects; and relative effects. In the second part of our analysis we study the intensity/productivity obtained by the sectors that use this water and the impact on the generation of income. On the basis of these two aspects, we are able to suggest a number of new proposals for the saving and more efficient use of the water resource.
3.1. Vertically integrated water uses and direct consumption The key to this analysis is the earlier-mentioned four basic components of the linkages of the eight blocks, as reflected in Tables 1/4. For each of the three types of water, we know the water value of the production of the block (vertically integrated consumption), the direct consumption of that block, the gross and net imports of water (external and induced backward linkages), the gross and net exports (external and induced forward linkages), 3 We do not distinguish between uses and consumption because this type of water is used only once, with the returns being converted into non-drinkable waste water. Unfortunately, estimations of irrigation returns are not available and we have estimated these returns at some 20%, as is usual in Spain. 4 To improve this preliminary information we need the types of pollution in the waste water, as well as, its concentration index. With these data, a similar analysis can be run.
and the water inevitably consumed in each block (internal and mixed effects). As we can note, the total vertically integrated consumption and the total direct consumption coincide under the two approaches. The vertically integrated consumption of water reflects the total water associated with the final demand of a block, whether the water is used by the block itself in obtaining its own demand, or whether other blocks use it on its behalf. If this consumption is greater than the direct consumption, we are faced with blocks of sectors, which stand out because their products require that the economy consumes water for them. However, if the contrary is the case, then we are dealing with blocks, which fundamentally transfer water to the economy. Thus, with respect to irrigation water, only the Agriculture block has a positive direct consumption, because irrigation exists solely in relation to agricultural activities. Part of the water consumed is transferred to the other sectors of the economy in the form of the inputs that these need to obtain their final demands. By contrast, none of the remaining sectoral blocks have an associated direct use; however, the vertically integrated water in them is nevertheless positive. Again referring to the Agriculture block, we can see that the direct consumption is markedly higher than the vertically integrated consumption (it is only 19.84% of the direct consumption), which indicates that this block transfers water to other sectors in its direct and indirect sales of inputs. By contrast with the other blocks, the demands of these sectors force the agriculture one to produce certain inputs and, as a consequence, to consume water in order to meet their productive inputs requirements. The case of irrigation water is an extreme one. The normal situation, which can be seen in Tables 2 and 3, is that the blocks have direct and indirect consumption, where one or the other can dominate, thereby giving them the character of suppliers of water (sources) in the economy, or of receivers (drains) of the same. Thus, in the case of drinking water, the Agriculture, Energy, Water and Mining, Transformation Industry, Chemicals, Metals and Electronics, and Public Sanitation blocks are essentially suppliers of water, with direct consumption being higher than vertically
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Table 1 Vertically integrated and direct consumption of irrigation water (in thousands of cubic metres) B1
B2
B3
B4
B5
B6
B7
B8
Total
Vertically integrated effect 2 797 206 5304 6 430 484 464 869 353 495 471 736 7224 3 567 611 14 097 928 (vertically integrated consumption) (a) % over b 19.841 0.000 0.000 0.000 0.000 0.000 0.000 0.000 100.000 Direct effect (direct con14 097 928 0 0 0 0 0 0 0 14 097 928 sumption) (b) % over a 504.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 100.000 Internal effect 2 569 363 0 0 0 0 0 0 0 2 569 363 % over a 91.855 0.000 0.000 0.000 0.000 0.000 0.000 0.000 18.225 External backward linkage 0 5304 6 430 484 464 869 353 495 471 736 7224 3 567 611 11 300 722 % over a 0.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 80.159 External forward linkage 11 300 722 0 0 0 0 0 0 0 11 300 722 % over b 80.159 0.000 0.000 0.000 0.000 0.000 0.000 0.000 80.159 Mixed effect 227 843.194 0.000 0.000 0.000 0.000 0.000 0.000 0.000 227 843.194 % over a 8.145 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.616
integrated consumption. On the other hand, in the Food, Construction, and Other Services blocks, the vertically integrated consumption exceeds the direct consumption. As regards waste water, the main direct polluters are the Chemicals, Metals and Electronics, Other Services blocks and, to a lesser extent, the Food block. In the cases of Food, Construction and Other Services, the value of the vertically integrated waste water is higher than that of the direct component, which means that these blocks provoke the water pollution in other sectors of the economy in order for them to obtain their final demand products
3.2. Internal, mixed, external or net and induced effects The breakdown of the direct consumption and the vertically integrated consumption of water into the earlier-mentioned four components allows us to examine in more detail how the blocks of sectors are water-related in the economy and what is the character of the water transfers.
Specifically, by breaking down the vertically integrated consumption of each type of water into internal, mixed and net backward linkage, we can determine which part of the respective types of water contained in the demands of a block is due to the own consumption of the sectors of the block in obtaining its inputs, which to the manufacture of inputs sold to other groups and subsequently repurchased, and which to the incorporation of inputs coming from other sectors external to the block. Similarly, the breakdown of direct consumption into three components */internal, mixed and net backward linkage*/allows us to analyse the impact of a block that results from the sales it makes to the economy. Thus, it is possible for us to estimate the effects that the substitution by imports of the purchases of a block from the rest of the economy and, similarly, the substitution by exports of the sales of such a block, would have on water consumption and demand. Beginning with irrigation water, we find that practically all the water of this type contained in the products that represent final agricultural demand is due to consumption within the block
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B1 Vertically integrated effect (vertically integrated consumption) (a) % over b Direct effect (direct consumption) (b) % over a Internal effect % over a External backward linkage % over a External forward linkage % over b Mixed effect % over a
35 905
B2
B3
B4
B5
B6
B7
B8
Total
13 449
137 718
45 816
136 219
127 050
42 517
700 366
1 239 042
25.787 14.909 247.343 92.467 66.197 395.401 84.679 113.650 100.000 139 236 90 208 55 679 49 549 205 779 32 132 50 210 616 249 1 239 042 387.786 670.724 40.430 108.147 151.065 25.291 118.093 87.990 100.000 26 384 12 446 31 983 15 038 86 982 26 610 40 419 510 712 750 575 73.481 92.543 23.224 32.822 63.855 20.944 95.066 72.921 60.577 7332 925 102 639 30 333 44 478 100 092 2083 164 992 452 874 20.419 6.880 74.528 66.206 32.652 78.781 4.900 23.558 36.550 110 662 77 684 20 600 34 066 114 039 5174 9776 80 875 452 874 79.478 86.116 36.997 68.752 55.418 16.102 19.470 13.124 36.550 2190 78 3096 445 4758 348 15 24 662 35 593 6.100 0.577 2.248 0.972 3.493 0.274 0.035 3.521 2.873
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Table 2 Vertically integrated and direct consumption of drinking water (in thousands of cubic metres)
B1
B2
Vertically integrated effect (vertically integrated consump- 6545 9957 tion) (a) % over b 53.290 28.327 Direct effect (direct consumption) (b) 12 281 35 150 % over a 187.653 353.021 Internal effect 2811 9612 % Over a 42.947 96.541 External backward linkage 3570 320 % Over a 54.542 3.212 External forward linkage 9306 25 513 % over b 75.776 72.583 Mixed effect 164 25 % Over a 2.511 0.247
B3
B4
46 811
19 842
B5 59 021
B6
B7
B8
Total
53 166
905
307 443
503 690
124.178 93.698 58.040 388.301 0.000 109.021 100.000 37 697 21 177 101 689 13 692 0 282 004 503 690 80.529 106.726 172.294 25.753 0.000 91.725 100.000 21 654 7245 39 687 11 339 0 234 812 327 160 46.258 36.513 67.242 21.327 0.000 76.376 64.953 23 061 12 430 16 850 41 679 905 61 603 160 417 49.264 62.643 28.549 78.393 100.000 20.037 31.848 13 947 13 764 59 518 2205 0 36 164 160 417 36.997 64.997 58.530 16.102 0.000 12.824 31.848 2096 168 2484 148 0 11 028 16 114 4.478 0.844 4.209 0.279 0.000 3.587 3.199
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Table 3 Vertically integrated and direct waste water (in thousands of cubic metres)
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Table 4 Relative values of the different effects
Irrigation water
Waste water
Direct effect
Internal effect
External backward linkage
External forward linkage
Mixed effect
1.587 0.003 3.649 0.264 0.201 0.268 0.004 2.024 1.000 0.232 0.087 0.889 0.296 0.880 0.820 0.275 4.522 1.000 0.104 0.158 0.743 0.315 0.937 0.844 0.014 4.883 1.000
8.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.000 0.899 0.582 0.359 0.320 1.329 0.207 0.324 3.979 1.000 0.195 0.558 0.599 0.336 1.615 0.217 0.000 4.479 1.000
8.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.000 0.281 0.133 0.341 0.160 0.927 0.284 0.431 5.443 1.000 0.069 0.235 0.529 0.177 0.970 0.277 0.000 5.742 1.000
0.000 0.004 4.552 0.329 0.250 0.334 0.005 2.526 1.000 0.130 0.016 1.813 0.536 0.786 1.768 0.037 2.915 1.000 0.178 0.016 1.150 0.620 0.840 2.079 0.045 3.072 1.000
8.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.000 1.955 1.372 0.364 0.602 2.014 0.091 0.173 1.429 1.000 0.464 1.272 0.696 0.686 2.968 0.110 0.000 1.803 1.000
8.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.000 0.492 0.017 0.696 0.100 1.069 0.078 0.003 5.543 1.000 0.082 0.012 1.041 0.083 1.233 0.074 0.000 5.475 1.000
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Drinking water
B1 B2 B3 B4 B5 B6 B7 B8 Average B1 B2 B3 B4 B5 B6 B7 B8 Average B1 B2 B3 B4 B5 B6 B7 B8 Average
Vertically integrated effect
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(91.85%), that is to say, it is an internal effect. The remaining 8.15% is due to the purchase of inputs previously sold by the block, that is to say, the mixed effect. This means that the consumption of water embodied in the obtaining of agricultural products has it origin in the block itself. As regards the destination of the water consumed in a direct manner by the Agriculture block, we can note that the external forwards linkage represents 80.16% of the total. This indicates that the block generates a significant part of its water consumption when obtaining the inputs that the rest of the economy requires in order to obtain their final demand. The comparison between the external and the induced forward linkage shows that this block rarely consumes water in obtaining repurchased inputs, and here we should recall that livestock production is included within it. Similarly, the internal effect only supposes 18.22% of direct consumption. Thus, we can appreciate that the substitution by imports of the purchases of inputs that Agriculture makes with the other blocks of the economy will have hardly any effect on the water consumed within the economy. However, given that a large part of its direct consumption is due to the production of inputs for other sectors, the substitution of these sales will have an important effect on the consumption of irrigation water by this block and, in turn, on the economy. The irrigation water contained in the products of all the remaining sectors comes from the purchases made, directly or indirectly, from the Agriculture block. The largest external backward linkages are found in the Food Industry and Other Services blocks. This result should not be viewed as strange, given that the Other Services block reflects both the retail trade and hotels and restaurants. If we now turn to the consumption of drinking water, we find that the panorama is significantly different. Let us first analyse the Food, Construction, and the Other Services blocks. We have seen that their vertically integrated consumption exceeds that of direct consumption. As we can see from Table 2, more than 74% of the vertically integrated drinking water in the Food and Construction blocks comes from the purchase of inputs from other sectors of the economy. By
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contrast, in the case of the Other Services block, it is only 23.558%, with its internal effect being very high, 72.92% of the direct consumption. The blocks with the highest direct consumption of drinking water are Other Services (616.249 Hm3), Chemicals, Metals and Electronics (205.779 Hm3) and Agriculture (139.236 Hm3). In the case of Other Services, the principal destination of water consumed directly is in the obtaining of their own inputs (internal effect plus mixed effect). However, the Agriculture and the Chemicals, metals and electronics blocks are more oriented toward the rest of the economy, in that they transfer 79.478 and 55.418% of their direct consumption, respectively, to the other sectors. Furthermore, of the vertically integrated consumption of drinking water associated with their final demands, the majority comes from the same block and is used in the production of its own inputs, with its internal effects being 72.921, 63.855 and 73.481%, respectively. In summary, the blocks that are the highest direct consumers of water obtain the majority of their direct and vertically integrated consumption from themselves. In this sense, a hypothetical substitution of purchases and sales of inputs to other blocks for goods that are external to the economy would not have a particularly relevant impact on the total consumption of that economy. In regards waste water (we have to remember that we only account for the waste water sent to some depuration and treatment plant), the activities with the largest volume of direct waste water are, therefore, the Other Services (282.004 Hm3), Chemicals, Metals and Electronics (101.689 Hm3) blocks and Food (37.697 Hm3). Furthermore, whilst in the Chemical Industry the direct consumption is significantly greater than the vertically integrated consumption, in the other two groups the vertically integrated waste water dominates over the direct waste water. The breakdown of the vertically integrated waste water into its components demonstrates that, for Chemicals, Metals and Electronics, and Other Services, the majority of waste water associated to its final demand comes from the sectors themselves and remains there. Thus, we can see that 67.24% of the integrated waste water of
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the of the Chemicals, Metals and Electronics and 76.37% of the Other Services blocks can be explained as an internal effect and, furthermore, with the mixed effect being minimum. In the case of Food, the waste water generated by the sector and that remaining in it (the internal effect is 46.258%) is very similar to the part coming, via the purchase of inputs, from the other blocks of the economy (the external backward effect is 49.264%). Additionally, 36.997% of the direct outflow of waste water of the Food, 58.53% of the Chemicals, Metals and Electronics and 12.82% of the Other Services blocks comes from obtaining the inputs required by other blocks; that is to say, it is exported to the other sectors of the economy. In this sense, the substitution of the sale of inputs by these blocks to the rest of the economy might lead to reductions in direct waste water of above 36% in the industries corresponding to the Food and Chemicals, Metals and Electronics blocks, and to close to 13% in Other Services. However, the substitution of purchases modifies the waste water outflows in the case of the Food block by 49.26% (the external backward linkage), whilst it would reduce it by 28.55 and 20.04% in the case of the Chemicals, Metals and Electronics and Other Services blocks, respectively. Thus, we can appreciate that the Other Services, Food and Chemicals, Metals and Electronics blocks act both directly and indirectly as the main consumers and polluters.
3.3. Relative effects Up to now we have seen how directly consumed water and vertically integrated water are distributed within each block. However, when analysing the impact that these transfers have on the total water consumed in the system, it is necessary to speak of relative size. To that end, we have constructed relative indicators by dividing the earlier-mentioned effects of each block by the arithmetic mean, with indicators higher than 1 showing that the block stands out as regards this particular component when compared with the rest of the economy. Table 4 presents these indicators.
In the case of irrigation water, only the Agriculture block stands out in the economy regards the internal, mixed, external forward linkage, induced forward linkage and direct consumption components. However, the ranking of the blocks does allow us to determine which blocks essentially receive the water consumed by Agriculture. Specifically, the main receivers of the water that has been consumed directly by Agriculture correspond to Food, to Agriculture itself and to Other Services. In the case of the consumption of drinking and waste water, we can see that the block corresponding to Other Services stands out in the economy with respect to both direct and indirect effects. Its high ratios are, as we have seen, due both to the internal component and to the sale and purchase of inputs linkages maintained with other blocks. Thus, this block exceeds the average for the economy with respect to the internal effect, the external backward linkage and the external forward linkage. Indeed, this is a key block. However, the Chemicals, Metals and Electronics block has a fundamentally forward linkage character, consuming drinking water and waste water in the system either in obtaining the requirements of the other sectors. The Construction and Food blocks have a clearly backward linkage character. As we can appreciate, their internal effect is reduced and their products are the main receivers of the drinking water and waste water from other sectors. Additionally, the Energy, Water and Mining block for drinking water and waste water, and the Agriculture block but only for drinking water, stand out in the economy by virtue of their high external forward linkage. Let us now turn to the second part of our analysis, where we will consider the sectoral intensities of the use of water and the impact on the generation of income. 3.4. Relationships between water use and income generation in the economy Table 5 reflects these relationships for each of the eight blocks in question and for the three types of water been considered. Here, we can find the ratios between vertically integrated consumption,
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Table 5 Ratio between vertically integrated water and vertically integrated income (in thousands of cubic metres per million of pesetas) Irrigation water B1 B3 B4 B8 B5 B6 B7 B2
Drinking water 3.171 1.485 0.202 0.080 0.057 0.052 0.024 0.014
B7 B1 B2 B3 B5 B4 B8 B6
that is to say, water requirements to obtain the final demand, and the income generated by the corresponding processes, in other words, the value of the final demand. These ratios measure the water use intensities and their inverses are a first approximation to the return obtained by, or the productivity with which, the sectors use the water in a global form. The ratios are calculated in thousands of cubic meters per million pesetas. If we first consider irrigation water, we can note that the lowest value of the ratio, i.e. the highest productivity of its use, is obtained, logically enough, by the blocks with the weakest linkages to Agriculture, namely Energy, Water and Mining, Public Sanitation and Construction. By contrast, the highest ratios correspond to Agriculture itself and to Food, a block that is closely linked to Agriculture. However, the table confirms a different pattern of water use in each block. As we can appreciate, Other Services obtains a higher return on the water received from Agriculture than other, less dependent, industries such as those in the Transformation block. In regards to drinking water, we can see that it is the Public Sanitation, Agriculture and Energy, Water and Mining blocks that present the highest total consumption of water per unit of income generated. We can further appreciate that the Construction and Other Services blocks are those that generate the highest productivity in the consumption of this type of water. Finally, in the case of waste water we can observe that the highest volume by unit of income generated can be found in the Energy, Water and Mining, Food and Chemicals, Metals and Electro-
Waste water 0.141 0.041 0.036 0.032 0.022 0.020 0.016 0.014
B2 B3 B5 B4 B1 B8 B6 B7
0.027 0.011 0.010 0.009 0.007 0.007 0.006 0.003
nics blocks, with Public Sanitation, Construction and Other Services now enjoying the highest productivity.
4. Conclusion In this paper, we have analysed the ‘water composition’ of the production of goods and services in the Spanish economy. To that end, we have studied the role of the different productive sectors as direct or indirect users of the resource. Using the concepts of vertically integrated water consumption and direct consumption, we have obtained the internal effect, the mixed effect, the external forward and backward linkages and the induced effects, with our aim being to characterise the behaviour of these sectors. The methodology, derived from the HEM, has allowed us to distinguish between each of these components in a very detailed and precise manner. The significant volume of data made available by the CSA on sectoral direct consumption and quality of water used (irrigation, drinking and waste water) has enabled us to assemble a relatively precise picture of the distribution of the resource over the length of the productive process, as well as of its impact in a given vector of final demands. A first conclusion that can be drawn is that when speaking of the macro-figures of water consumption in Spain, it is essential to focus on the Agriculture block and its associated linkages. The need to reconvert this sector, and even to limit its activities, with the aim of achieving a global saving of water is a point of view that has often
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been advanced. Our results offer some clarification on this point. The analysis of the induced effects shows that the majority of this sector’s direct consumption is produced in obtaining the products that supply other sectors of Spanish industry. Here, we are fundamentally thinking in terms of the Food and Other Services blocks, which include the retail trade, hotels and catering and the rest of the services sector. The significant linkage between these sectors suggests, on the one hand, that all these activities are responsible in the use of the resource and, on the other, that a reduction in agricultural activity, whilst supposing a water saving within the economy would pose a risk for the production of other economically key sectors of the Spanish economy. We cannot ignore the importance that the food industry has in Spain, nor the clear orientation of the national economy towards the retail trade/hotel and catering/other services group. Any hypothetical substitution of agricultural production for imports would convert the current water imbalances from a resource management problem into a balance of payments problem. At the same time, we recognise that whilst agriculture plays an important role as a consumer of large volumes of water, the role played by this sector in relation to drinking water is much more limited (six out of the eight blocks have a higher vertically integrated consumption). However, its direct consumption is around 10% of total direct consumption. Indeed, the quality of drinking water and its correct use is an emerging problem in Spain, but unfortunately it is all too frequent to encounter analyses that place the water problem in an exclusively quantitative context. As we have seen, for the three types of water considered in this paper it is the Other Services, together with the Chemicals, Metals and Electronics blocks (plus Agriculture in the case of irrigation water) that are the main users, with this being the case for both direct and vertically integrated consumption. In terms of external backward linkage, the Construction and the Food blocks are also strong sources of demand for drinking water and waste water from the economy. The high level of direct and indirect use of drinking water in these five blocks, together
with the requirements of continuous flows and the concentration of these activities in urban centres explain the majority of the drinking water deficits that can be found at certain times in different parts of Spain. As a consequence, we are faced with the need to consider water saving measures in these activities based on the reuse of the resource, improvements in the conduction network and, particularly, the proper fit between the quality of water offered by the system and that required for its use. Such measures would undoubtedly relieve the pressure on urban resources and reduce the current cost of supply. In regards to the intensity or productivity of the resource, we should note that whilst it is true that some activities, such as construction, offer good results in terms of water consumed-income generated, it is also the case that these activities are often using a resource which has a much higher quality than that actually required. The installation of separate supply networks for drinking and non-drinking water would probably solve some water quality problems and change the surprising productivity ratios of the drinking water used in economic activities such as those reflected in the Construction block. In the case of the Agriculture block, it is our view that the high values of irrigation used per unit of production are in part due to an incorrect valuation of the resource by the users, who ignore a significant proportion of the supply cost and do not consider water as a scarce resource. In this area there is a significant margin for savings if the agriculture agents in some way or another perceive the cost of the resource they are using. In summary, and on the basis of the main lines that emerge from our results, the problems derived from the ‘scarcity’ of the water resource in Spain should be confronted from two points of view, namely those of quantification and of valuation. First, the resource should be quantified in a differentiated manner by reference to quality levels. The traditional consideration of a homogenous level of quality hides relevant information, which we have set-out to process and demonstrate in this paper. As regards valuation, we believe that a correct internalisation of the costs associated to the resource would allow for improvements in the
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technical efficiency of its use, which implies economic and environmental efficiency. In closing, we offer some final remarks on the methodological properties of the input/output analysis used in this paper. This analysis is based both on the HEMs and the vertically integrated processes, and has been applied to the analysis of water uses. However, the methodology can also be applied, without problems, to other natural resources or pollutions. Thus, it is possible to apply it to CO2, non-drinking water, different types of pollution in waste water or to dioxines, to name but a few examples. In any event, the analysis allows us to classify the productive sectors according to forward and backward linkages in a way that is more precise than is the case with earlier methods.
Acknowledgements The authors would like to express their thanks to J. Roca and to an anonymous referee for their helpful comments on an earlier version of this paper. The usual disclaimer applies. This work has been funded by Project PO17/2000 of the Diputacio´n General de Arago´n.
References Cella, G., 1984. The input /output measurement of interindustry linkages. Oxford Bulletin of Economics and Statistics 46, 73 /84.
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Clements, B.J., 1990. On the decomposition and normalization of interindustry linkages. Economic Letters 33, 337 /340. Dietzenbacher, E., Los, B., 2000. Analyzing R&D multipliers. Thirteenth International Conference on Input /Output Techniques 21 /25 August, 2000, Macerata, Italy. Duchin, F., 1996. Ecological economics: the second stage. In: Costanza, R., Segura, O., Martinez Alier, J. (Eds.), Getting Down to Earth: Practical Applications of Ecological Economics. Island Press, Covelo, CA. Heilmer, A., 1991. Linkages and vertical integration in the Chinese economy. Review of Economics and Statistics 73, 261 /267. Holling, C.S., 1973. Resilience and stability of ecological systems. Annual Review of Ecological Systems 4, 1 /23. Instituto Nacional de Estadı´stica (INE), 2000. Tabla input output sime´trica de Espan˜a, 1995, Instituto Nacional de Estadı´stica Madrid. Instituto Nacional de Estadı´stica (INE), 2001. Las cuentas sate´lite del agua en Espan˜a, 1995, Instituto Nacional de Estadı´stica Madrid. Pasinetti, L., 1977. Contributi alla teoria della produzione congiunta. Ed. Societa` Editrice il Mulino, Bologna. Spanish version, 1986. Lecciones de Teorı´a de la produccio´n. Fondo de Cultura Econo´mica, Madrid. Sa´nchez Cho´liz, J., Duarte, R., 2002a. Analysing pollution by way of vertically integrated coefficients, with an application to the water sector in Aragon. Cambridge Journal of Economics, 26, 6, in press. Sa´nchez Cho´liz, J., Duarte, R., 2002b. Cadenas productivas, valor econo´mico y linkage coefficients. Working Paper, Department of Economic Analysis, University of Zaragoza. Schultz, S., 1977. Approaches to identifying key sectors empirically by means of input /output analysis. The Journal of Development Studies 1, 77 /96. Strassert, G., 1968. Zur Bestimmung strategischer Sektoren mit Hilfe von Input /Output-Modellen. Jahrbu¨cher fu¨r Nationalo¨konomie und Statistik 182 (3), 211 /215. Wipenny, J., 1994. Water as an Economic Resource. Routledge.
ANALYSIS
Water use in the Spanish economy: an input output approach /
Rosa Duarte *, Julio Sa´nchez-Cho´liz, Jorge Bielsa Departamento de Ana´lisis Econo´mico, Facultad Ciencias Econo´micas y Empresariales, Universidad de Zaragoza, Gran Vı´a 2, 50005 Zaragoza, Spain Received 25 February 2002; received in revised form 15 July 2002; accepted 18 July 2002
Abstract Against the background of the water limitations that often appear in Spain, the aim of this paper is to study the behaviour of the productive sectors of the Spanish economy as direct and indirect consumers of water. To that end, we employ input /output analysis, with the particular methodology being based on the linkages analysis known as the Hypothetical Extraction Method (HEM). We have introduced three modifications to this method. First, the valuation is made in terms of water consumption. Secondly, we obtain the components of the impacts of each block of activity into which the economy is divided, with these components being described as the internal effect, mixed linkage, net or external backward linkage, and net or external forward linkage. Thirdly, this methodology is used to detect key sectors. Our results confirm the marked importance of the Agriculture, Food and Other Services blocks as regards the direct and indirect consumption of water in general. We also find that Other Services, Chemicals, Metals and Electronics and Agriculture blocks play an important role in explaining the consumption of drinking water. Moreover, the HEM analysis allows us to classify productive sectors according to their forward or backward linkage character in a way that is more precise than that permitted by earlier methods. Finally, this methodology can be extended to other types of environmental pressures. # 2002 Elsevier Science B.V. All rights reserved. Keywords: Input /output; Water use; Backward linkage; Forward linkage
1. Introduction According to Wipenny (1994): ‘water is becoming one of the largest, and certainly the most universal of the problems facing mankind as the earth moves into the 21st century’. Whilst for some this may be an exaggerated view, we should
* Corresponding author E-mail address: [email protected] (R. Duarte).
nevertheless recall that only 2.5% of the total water resources of the planet is in the form of fresh water and that its spatial and time distribution is, in the majority of cases, quite irregular. The problem of the availability of water can be viewed from at least three perspectives. First, that the resource is a clearly limited one. Secondly, that the demand for water caused by economic and demographic growth is increasing. Thirdly, that the fit between the time, place and quality of the requirements, on the one hand, and the availability, on
0921-8009/02/$ - see front matter # 2002 Elsevier Science B.V. All rights reserved. PII: S 0 9 2 1 - 8 0 0 9 ( 0 2 ) 0 0 1 8 3 - 0
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the other, cannot be automatically assumed. We will concentrate our analysis on the second and third perspectives. With respect to the evolution of demand in response to economic growth, one important field of study is the calculation of the direct and indirect water requirements associated with the production of each sector of the economy. More specifically, interest has been shown in estimating the imbalances that arise when account is taken of the space, time and quality variables associated with the resource. These three variables are particularly important in Spain, where a mixture of the spatial and time irregularity of precipitation and a deficient hydrological planning regime have given rise to permanent imbalances between resources and requirements. The traditional response to these problems in Spain has been to increase the regulation of the rivers and to extend the areas under irrigation. Additionally, the Spanish Parliament has recently approved a National Water Plan (Plan Hidrolo´gico Nacional) that proposes to transfer water from the River Ebro toward the Southeast (even as far as the area of Almerı´a, some 700 km away from the delta), and to the north, to the city of Barcelona, 100 km from the delta. The aim is to guarantee that the water demands coming from the use of intensive irrigation systems in Murcia and Almerı´a and the tourism-based demands of the Mediterranean coast are met. This plan has been strongly criticised by environmentalists and some economists as unsustainable, due both to its ecological impact (change to the Ebro Delta and decreasing flows resulting from climatic changes) and to the high water prices required by the supply costs. Thus, whilst water policy in Spain is a very controversial issue, there is a growing awareness that the productive structure of a territory must be compatible with the endowment of water resources upon which it rests. Furthermore, any approximation to the concept of sustainable development must involve a consideration of the set of economic-water interactions and the resilience of ecosystems (Holling, 1973), especially with respect to the subject of desertification. This is precisely the starting point adopted in this paper. In her
excellent work ‘Ecological Economics: the Second Stage’, Faye Duchin specifically recommends the input /output methodology as a powerful tool to analyse and understand the interrelations between the economy and the physical environment (Duchin, 1996). The aim of our paper is to put this recommendation into practice for the particular case of water use in the Spanish economy, following the line opened in Sa´nchez Cho´liz and Duarte (2002a,b), but now including what we believe to be significant empirical and methodological improvements. To that end, our paper focuses on the direct and indirect water requirements of each economic sector and its impact on the availability of the resource. In meeting this objective we have used a highquality statistical source that has appeared only recently, namely the Satellite Water Accounts (Cuentas Sate´lite del Agua */ CSA) prepared by Spanish National Institute of Statistics (Instituto Nacional de Estadı´stica., 2001). These are the first accounts drawn up by this body for the Spanish case, and they offer very reliable information on both the amount of water used by each productive sector and on the volume of waste water1. The CSA have filled an important statistical lacuna, allowing us to present our results with a significant degree of reliability. To the best of our knowledge, this paper represents the first application of this new statistical source. Regarding the methodology, our contribution turns on the adaptation of developments in the Hypothetical Extraction Method (HEM) to the particular case of the water productive structure interrelationships. Specifically, we adapt the HEM technique so as to capture the total impact of the sectors on water availability, as well as to identify the main intersectoral flows with respect to the use of the resource. In the standard analysis using HEM, prices are unitary and do not explicitly appear. By contrast, in this paper we weight the matrices to the left with water use vectors in such a way that the above1 The Spanish National Institute of Statistics accounts for ‘waste water’ as the waste water produced by the sectors and sent to any depuration and treatment plant.
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mentioned impact is valued in this resource. Similarly, in HEM it is usual to draw the distinction between two basic components of impact, namely the internal effect and the induced effect, in this way obtaining the total effect as the sum of the two. However, in our analysis we speak of four basic components, i.e. the internal effect, mixed linkage, external backward linkage and external forward linkage which, in our view, allows for a more precise study. Finally, we work with blocks of sectors, without having to aggregate more than is required by the available data. The rest of the paper is organised as follows. In Section 2 we describe these new methodological elements. Section 3 is devoted to the empirical analysis and results, with the latter appearing in the form of Tables in an Appendix. Here, we particularly focus on the estimation of the consumption of each type of water and its transfer between sectors. Similarly, we estimate the sectoral intensity of the use of water and its link with the generation of income. Section 4 closes the paper with a review of the main conclusions.
2. Methodology The starting point is an input /output model where an economy made up of n sectors can be described by the equality x/Ax/y, where x / (xi ) is the production vector, y /(yi ) is the vector of final demands and A /(aij ) is the matrix of technical coefficents. This economy can also be written as x/(I/A) 1y, where (I/A) 1 is the Leontief inverse. We use u? to denote the vector (1,. . .,1). Furthermore, if Bs represents a block of sectors of the economy, Bs will represent the remaining sectors and all vector q and all matrix Q ? ) and can be represented as q?/(qs?, qs Q Qs;s Q s;s Qs;s Qs;s The origin of the approach we use to analyse the impact of the use of water in every productive activity rests on two pillars. First, the concept of vertically integrated sector, based on the work of Pasinetti (1977), as well as on the traditional interpretation of the Leontief inverse. Secondly,
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the HEM, widely used to analyse the economic impact of changes in the activity of a sector and whose antecedents can be found in Strassert (1968) and Schultz (1977). The original idea was very simple, namely to measure the impact of a sector i on the economy, comparing the production x of that economy with the x* that would be obtained in a hypothetical economy in which this sector does not exist and where this economy could be described by A*; x* would be given by x* /(I/ A*) 1y*, where y* is the vector obtained by removing the yi , that is to say, the final demand of sector i, from vector y. Under these assumptions, the production of all the sectors falls. This methodology offers its greatest potential when it is applied to an economy made up of blocks of sectors. This allows us to distinguish the relationships between similar sectors (within the block) and the rest of the economy (the remaining blocks). For each block Bs , which can be made up of a single sector, the economy is described as: As;s A xs y x xs s;s 1 U s As;s As;s xs xs xs y2 D Ds;s ys s;s ; with (IA)1 Ds;s Ds;s ys Ds;s D s;s : Ds;s Ds;s The hypothetical economy with which it is compared is obtained by eliminating, or making null, one or various blocks Ai,j . On the different proposals and the impacts obtained from each of them, see Heilmer (1991), Cella (1984), Clements (1990), Dietzenbacher and Los (2000). However, in order to better present the changes that we introduce into the method, it is helpful to consider the proposal of Cella (1984) in greater detail. Specifically, for this author, block Bs in the hypothetical economy neither purchases from, nor sells to, the other sectors and the hypothetical productive relationships are given by: 0 A xs y xs x s;s s U s 0 As;s xs xs xs ys " # (IAs;s )1 0 ys : 0 (IAs;s )1 ys
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The change in production, which reflects the impact of the block, is obtained with: x x s xx s xs xs " # Ds;s (IDs;s )1 Ds;s Ds;s Ds;s (IDs;s )1 y s ys C Cs;s ys s;s ; Cs;s Cs;s ys where the total, backward and forward linkages of block Bs are defined as follows: Cs;s TL u?(xx); BLs u? y; Cs;s s C FLs u? s;s ys Cs;s From these last relationships we can note that the activity associated with Bs has four separate components, namely: an internal effect: us?(I/ As,s )1ys , a mixed effect: us?Cs,s ys /us?[Ds,s /(I/ As,s )1]ys , an external or net backward linkage: ? D s,s ys , an external or net us ?C s,s ys /us ? Ds ,s y s . forward linkage: us ?Cs ,s ys /us The BLs of Cella is the total of the mixed effect and of the external backward linkage, whilst the FLs is the total of the external forward linkage of Bs (which coincides with the external backward linkage of Bs ) and of the mixed effect of block Bs . Similar expressions can be obtained for the impact found by other economists who use HEM. Specifically, the so-called induced backward and forward linkages are the total of the mixed effect and the external backward linkage or external forward linkage, respectively. We can observe that the total of the first three components, that is D u? s;s ys Ds;s is the vertically integrated production of the sectors making up the block and, therefore, they represent the direct and indirect requirements to obtain the final demand ys . The total of the first,
second and fourth components, u?s [Ds;s ; Ds;s ]y; sometimes described as the horizontally integrated production, is simply the xs , the gross production of the block. As a consequence, the external backward linkage is the vertically integrated production of the block corresponding to those sectors which are not included in that block. That is to say, it represents the direct and indirect requirements from B s to obtain the final demand ys and it reflects the real or net ‘imports’ made by the block to obtain its own demand. The external forward linkage is that part of gross production which is not used either directly or indirectly to obtain ys , that is to say, the part sold by Bs and used by Bs to produce ys , and thus it is the real or net ‘exports’ made by Bs . Furthermore, the part of the vertically integrated production of the block represented by the products of the block itself, which are the direct and indirect requirements of products from Bs to obtain ys , is divided into two, namely that obtained solely with the processes of the block itself, which is the internal effect, and that obtained with the participation of other sectors, which is the mixed effect. We have chosen to describe the first part as ‘internal’, given that it represents goods produced, sold and purchased exclusively inside the block Bs ; by contrast, we describe the second part as ‘mixed’ because it is sold by the block and later re-purchased by that block, in such a way that it has the dual character of both backward and forward linkage. These factors allow us to carry out a standard analysis of the HEM type. However, bearing in mind that we wish to study the intersectoral dependence linked to the use of water, our approach is to value the earlier-mentioned components with a vector of unitary inputs of water. Thus, if c is a vector of unitary inputs of water, then for each Bs we again have the four components, namely: an internal effect: cs?(I/As,s ) 1ys , a mixed effect: cs?Cs,s ys /cs? [Ds,s /(I/As,s )1]ys , an external or net backward linkage: cs C s,s ys / ? D s,s ys , an external or net forward linkage: cs cs ?Cs, s ys /cs ?Ds, s ys ; but where these now measure the amount of water embodied or incorporated into the part of the production that these components represent. Thus, the internal effect is the water consumed in the sectors of the
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block, and which never forms part of the inputs of other sectors; the mixed effect is the water consumed in the block which enters to form part of the goods of other sectors, where these goods are then used as an input by the original block to generate the final demand; the external backward linkage is the water consumed outside the sectors of the block, and which is then used in that block to obtain the final demand, that is to say, it is the net imports of water; finally, the external forward linkage is the water consumed in the block, which is transferred to other sectors by way of inputs and which never returns, that is to say, it is the net exports of water. We can similarly define the induced backward and forward linkages. The former are the total of the net imports of water and of the imports of water previously exported, whilst the latter are the net exports of water, plus that part of the exports subsequently re-purchased. We can say that these induced linkages represent the gross imports and exports of water, respectively. A more complete development of the foundations of this methodology can be found in Sa´nchez Cho´liz and Duarte (2002b).
3. Empirical analysis The economic and water use data employed in this paper come from the 1995 Input /Output Table for Spain (Instituto Nacional de Estadı´stica., 2000) and the Satellite Water Accounts (Instituto Nacional de Estadı´stica., 2001), respectively. Currently, this second data source offers information for 1997, 1998 and 1999 on water uses by productive sectors, distinguishing between irrigation water (irrigation services), drinking water, non-drinking water and waste water. We use the 1997, given that these are the closest in time to the input /output table. The Water Accounts operate at a 24-sector level of disaggregation, and it is these sectors that will be used to reduce the Input /Output Table. In order to carry out a more detailed analysis, these sectors are grouped into eight blocks and, as we have already mentioned, the sectoral differentia-
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tion is maintained within each of them. The eight blocks in question are as follows: B1: Agriculture, comprising the sectors (1) Agriculture, livestock, hunting and forestry and (2) Fishing. B2: Energy, water and mining, comprising the sectors (3) Extraction of energy products, (4) Extraction of other mineral products, (10) Oil refining and nuclear fuels, (19) Water collection, purification and distribution and (20) Energy, gas and water production and distribution. B3: Food industry, comprising sector (5) Food, drinks and tobacco. B4: Transformation industry, comprising the sectors (6) Textile and clothing, (7) Leather and footwear, (8) Timber and cork, (9) Paper and publishing and (13) Other non-metallic mineral products industries. B5: Chemicals, metals and electronics industry, comprising the sectors (11) Chemicals, (12) Rubber and plastic materials transformation, (14) Metallurgy and manufacture of metal products, (15) Machinery and mechanical equipment, (16) Electric and electronic material, (17) Transport material and (18) Diverse manufacturing industries. B6: Construction, comprising sector (21) Construction. B7: Public sanitation, comprising sector (23) Public sanitation activities. B8: Other services, comprising the sectors (22) Public Administration and (24) Other servicesector activities. The data on water use allows us to obtain three vectors2 of unitary inputs of water for the 24sectors. The first gives us the unitary consumption
2 The statistical data available to us is such that we can obtain a fourth vector of unitary consumption of non-drinking water which only has positive components in the agriculture and other services blocks. For the sake of simplicity, we have not considered this vector in this analysis.
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of irrigation water; the second represents the uses or unitary consumption of drinking water3; finally, the third is a vector of unitary waste water, which gives us the preliminary information on water pollution in the economy4. Our analyses, which rest on the above 24-sector Input/Output Table, grouped into eight blocks, and the use of three vectors of water inputs, have two clearly differentiated parts. In the first we obtain the water flows of the economic structure; we concentrate on the role of each sector as forward or backward linkage and on the importance of the internal use of the water. For clarity, we gather our observations under three headings, namely: vertically integrated water uses and direct consumption; internal, mixed, external or net and induced effects; and relative effects. In the second part of our analysis we study the intensity/productivity obtained by the sectors that use this water and the impact on the generation of income. On the basis of these two aspects, we are able to suggest a number of new proposals for the saving and more efficient use of the water resource.
3.1. Vertically integrated water uses and direct consumption The key to this analysis is the earlier-mentioned four basic components of the linkages of the eight blocks, as reflected in Tables 1/4. For each of the three types of water, we know the water value of the production of the block (vertically integrated consumption), the direct consumption of that block, the gross and net imports of water (external and induced backward linkages), the gross and net exports (external and induced forward linkages), 3 We do not distinguish between uses and consumption because this type of water is used only once, with the returns being converted into non-drinkable waste water. Unfortunately, estimations of irrigation returns are not available and we have estimated these returns at some 20%, as is usual in Spain. 4 To improve this preliminary information we need the types of pollution in the waste water, as well as, its concentration index. With these data, a similar analysis can be run.
and the water inevitably consumed in each block (internal and mixed effects). As we can note, the total vertically integrated consumption and the total direct consumption coincide under the two approaches. The vertically integrated consumption of water reflects the total water associated with the final demand of a block, whether the water is used by the block itself in obtaining its own demand, or whether other blocks use it on its behalf. If this consumption is greater than the direct consumption, we are faced with blocks of sectors, which stand out because their products require that the economy consumes water for them. However, if the contrary is the case, then we are dealing with blocks, which fundamentally transfer water to the economy. Thus, with respect to irrigation water, only the Agriculture block has a positive direct consumption, because irrigation exists solely in relation to agricultural activities. Part of the water consumed is transferred to the other sectors of the economy in the form of the inputs that these need to obtain their final demands. By contrast, none of the remaining sectoral blocks have an associated direct use; however, the vertically integrated water in them is nevertheless positive. Again referring to the Agriculture block, we can see that the direct consumption is markedly higher than the vertically integrated consumption (it is only 19.84% of the direct consumption), which indicates that this block transfers water to other sectors in its direct and indirect sales of inputs. By contrast with the other blocks, the demands of these sectors force the agriculture one to produce certain inputs and, as a consequence, to consume water in order to meet their productive inputs requirements. The case of irrigation water is an extreme one. The normal situation, which can be seen in Tables 2 and 3, is that the blocks have direct and indirect consumption, where one or the other can dominate, thereby giving them the character of suppliers of water (sources) in the economy, or of receivers (drains) of the same. Thus, in the case of drinking water, the Agriculture, Energy, Water and Mining, Transformation Industry, Chemicals, Metals and Electronics, and Public Sanitation blocks are essentially suppliers of water, with direct consumption being higher than vertically
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Table 1 Vertically integrated and direct consumption of irrigation water (in thousands of cubic metres) B1
B2
B3
B4
B5
B6
B7
B8
Total
Vertically integrated effect 2 797 206 5304 6 430 484 464 869 353 495 471 736 7224 3 567 611 14 097 928 (vertically integrated consumption) (a) % over b 19.841 0.000 0.000 0.000 0.000 0.000 0.000 0.000 100.000 Direct effect (direct con14 097 928 0 0 0 0 0 0 0 14 097 928 sumption) (b) % over a 504.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 100.000 Internal effect 2 569 363 0 0 0 0 0 0 0 2 569 363 % over a 91.855 0.000 0.000 0.000 0.000 0.000 0.000 0.000 18.225 External backward linkage 0 5304 6 430 484 464 869 353 495 471 736 7224 3 567 611 11 300 722 % over a 0.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 80.159 External forward linkage 11 300 722 0 0 0 0 0 0 0 11 300 722 % over b 80.159 0.000 0.000 0.000 0.000 0.000 0.000 0.000 80.159 Mixed effect 227 843.194 0.000 0.000 0.000 0.000 0.000 0.000 0.000 227 843.194 % over a 8.145 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.616
integrated consumption. On the other hand, in the Food, Construction, and Other Services blocks, the vertically integrated consumption exceeds the direct consumption. As regards waste water, the main direct polluters are the Chemicals, Metals and Electronics, Other Services blocks and, to a lesser extent, the Food block. In the cases of Food, Construction and Other Services, the value of the vertically integrated waste water is higher than that of the direct component, which means that these blocks provoke the water pollution in other sectors of the economy in order for them to obtain their final demand products
3.2. Internal, mixed, external or net and induced effects The breakdown of the direct consumption and the vertically integrated consumption of water into the earlier-mentioned four components allows us to examine in more detail how the blocks of sectors are water-related in the economy and what is the character of the water transfers.
Specifically, by breaking down the vertically integrated consumption of each type of water into internal, mixed and net backward linkage, we can determine which part of the respective types of water contained in the demands of a block is due to the own consumption of the sectors of the block in obtaining its inputs, which to the manufacture of inputs sold to other groups and subsequently repurchased, and which to the incorporation of inputs coming from other sectors external to the block. Similarly, the breakdown of direct consumption into three components */internal, mixed and net backward linkage*/allows us to analyse the impact of a block that results from the sales it makes to the economy. Thus, it is possible for us to estimate the effects that the substitution by imports of the purchases of a block from the rest of the economy and, similarly, the substitution by exports of the sales of such a block, would have on water consumption and demand. Beginning with irrigation water, we find that practically all the water of this type contained in the products that represent final agricultural demand is due to consumption within the block
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B1 Vertically integrated effect (vertically integrated consumption) (a) % over b Direct effect (direct consumption) (b) % over a Internal effect % over a External backward linkage % over a External forward linkage % over b Mixed effect % over a
35 905
B2
B3
B4
B5
B6
B7
B8
Total
13 449
137 718
45 816
136 219
127 050
42 517
700 366
1 239 042
25.787 14.909 247.343 92.467 66.197 395.401 84.679 113.650 100.000 139 236 90 208 55 679 49 549 205 779 32 132 50 210 616 249 1 239 042 387.786 670.724 40.430 108.147 151.065 25.291 118.093 87.990 100.000 26 384 12 446 31 983 15 038 86 982 26 610 40 419 510 712 750 575 73.481 92.543 23.224 32.822 63.855 20.944 95.066 72.921 60.577 7332 925 102 639 30 333 44 478 100 092 2083 164 992 452 874 20.419 6.880 74.528 66.206 32.652 78.781 4.900 23.558 36.550 110 662 77 684 20 600 34 066 114 039 5174 9776 80 875 452 874 79.478 86.116 36.997 68.752 55.418 16.102 19.470 13.124 36.550 2190 78 3096 445 4758 348 15 24 662 35 593 6.100 0.577 2.248 0.972 3.493 0.274 0.035 3.521 2.873
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Table 2 Vertically integrated and direct consumption of drinking water (in thousands of cubic metres)
B1
B2
Vertically integrated effect (vertically integrated consump- 6545 9957 tion) (a) % over b 53.290 28.327 Direct effect (direct consumption) (b) 12 281 35 150 % over a 187.653 353.021 Internal effect 2811 9612 % Over a 42.947 96.541 External backward linkage 3570 320 % Over a 54.542 3.212 External forward linkage 9306 25 513 % over b 75.776 72.583 Mixed effect 164 25 % Over a 2.511 0.247
B3
B4
46 811
19 842
B5 59 021
B6
B7
B8
Total
53 166
905
307 443
503 690
124.178 93.698 58.040 388.301 0.000 109.021 100.000 37 697 21 177 101 689 13 692 0 282 004 503 690 80.529 106.726 172.294 25.753 0.000 91.725 100.000 21 654 7245 39 687 11 339 0 234 812 327 160 46.258 36.513 67.242 21.327 0.000 76.376 64.953 23 061 12 430 16 850 41 679 905 61 603 160 417 49.264 62.643 28.549 78.393 100.000 20.037 31.848 13 947 13 764 59 518 2205 0 36 164 160 417 36.997 64.997 58.530 16.102 0.000 12.824 31.848 2096 168 2484 148 0 11 028 16 114 4.478 0.844 4.209 0.279 0.000 3.587 3.199
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Table 3 Vertically integrated and direct waste water (in thousands of cubic metres)
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Table 4 Relative values of the different effects
Irrigation water
Waste water
Direct effect
Internal effect
External backward linkage
External forward linkage
Mixed effect
1.587 0.003 3.649 0.264 0.201 0.268 0.004 2.024 1.000 0.232 0.087 0.889 0.296 0.880 0.820 0.275 4.522 1.000 0.104 0.158 0.743 0.315 0.937 0.844 0.014 4.883 1.000
8.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.000 0.899 0.582 0.359 0.320 1.329 0.207 0.324 3.979 1.000 0.195 0.558 0.599 0.336 1.615 0.217 0.000 4.479 1.000
8.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.000 0.281 0.133 0.341 0.160 0.927 0.284 0.431 5.443 1.000 0.069 0.235 0.529 0.177 0.970 0.277 0.000 5.742 1.000
0.000 0.004 4.552 0.329 0.250 0.334 0.005 2.526 1.000 0.130 0.016 1.813 0.536 0.786 1.768 0.037 2.915 1.000 0.178 0.016 1.150 0.620 0.840 2.079 0.045 3.072 1.000
8.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.000 1.955 1.372 0.364 0.602 2.014 0.091 0.173 1.429 1.000 0.464 1.272 0.696 0.686 2.968 0.110 0.000 1.803 1.000
8.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 1.000 0.492 0.017 0.696 0.100 1.069 0.078 0.003 5.543 1.000 0.082 0.012 1.041 0.083 1.233 0.074 0.000 5.475 1.000
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Drinking water
B1 B2 B3 B4 B5 B6 B7 B8 Average B1 B2 B3 B4 B5 B6 B7 B8 Average B1 B2 B3 B4 B5 B6 B7 B8 Average
Vertically integrated effect
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(91.85%), that is to say, it is an internal effect. The remaining 8.15% is due to the purchase of inputs previously sold by the block, that is to say, the mixed effect. This means that the consumption of water embodied in the obtaining of agricultural products has it origin in the block itself. As regards the destination of the water consumed in a direct manner by the Agriculture block, we can note that the external forwards linkage represents 80.16% of the total. This indicates that the block generates a significant part of its water consumption when obtaining the inputs that the rest of the economy requires in order to obtain their final demand. The comparison between the external and the induced forward linkage shows that this block rarely consumes water in obtaining repurchased inputs, and here we should recall that livestock production is included within it. Similarly, the internal effect only supposes 18.22% of direct consumption. Thus, we can appreciate that the substitution by imports of the purchases of inputs that Agriculture makes with the other blocks of the economy will have hardly any effect on the water consumed within the economy. However, given that a large part of its direct consumption is due to the production of inputs for other sectors, the substitution of these sales will have an important effect on the consumption of irrigation water by this block and, in turn, on the economy. The irrigation water contained in the products of all the remaining sectors comes from the purchases made, directly or indirectly, from the Agriculture block. The largest external backward linkages are found in the Food Industry and Other Services blocks. This result should not be viewed as strange, given that the Other Services block reflects both the retail trade and hotels and restaurants. If we now turn to the consumption of drinking water, we find that the panorama is significantly different. Let us first analyse the Food, Construction, and the Other Services blocks. We have seen that their vertically integrated consumption exceeds that of direct consumption. As we can see from Table 2, more than 74% of the vertically integrated drinking water in the Food and Construction blocks comes from the purchase of inputs from other sectors of the economy. By
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contrast, in the case of the Other Services block, it is only 23.558%, with its internal effect being very high, 72.92% of the direct consumption. The blocks with the highest direct consumption of drinking water are Other Services (616.249 Hm3), Chemicals, Metals and Electronics (205.779 Hm3) and Agriculture (139.236 Hm3). In the case of Other Services, the principal destination of water consumed directly is in the obtaining of their own inputs (internal effect plus mixed effect). However, the Agriculture and the Chemicals, metals and electronics blocks are more oriented toward the rest of the economy, in that they transfer 79.478 and 55.418% of their direct consumption, respectively, to the other sectors. Furthermore, of the vertically integrated consumption of drinking water associated with their final demands, the majority comes from the same block and is used in the production of its own inputs, with its internal effects being 72.921, 63.855 and 73.481%, respectively. In summary, the blocks that are the highest direct consumers of water obtain the majority of their direct and vertically integrated consumption from themselves. In this sense, a hypothetical substitution of purchases and sales of inputs to other blocks for goods that are external to the economy would not have a particularly relevant impact on the total consumption of that economy. In regards waste water (we have to remember that we only account for the waste water sent to some depuration and treatment plant), the activities with the largest volume of direct waste water are, therefore, the Other Services (282.004 Hm3), Chemicals, Metals and Electronics (101.689 Hm3) blocks and Food (37.697 Hm3). Furthermore, whilst in the Chemical Industry the direct consumption is significantly greater than the vertically integrated consumption, in the other two groups the vertically integrated waste water dominates over the direct waste water. The breakdown of the vertically integrated waste water into its components demonstrates that, for Chemicals, Metals and Electronics, and Other Services, the majority of waste water associated to its final demand comes from the sectors themselves and remains there. Thus, we can see that 67.24% of the integrated waste water of
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the of the Chemicals, Metals and Electronics and 76.37% of the Other Services blocks can be explained as an internal effect and, furthermore, with the mixed effect being minimum. In the case of Food, the waste water generated by the sector and that remaining in it (the internal effect is 46.258%) is very similar to the part coming, via the purchase of inputs, from the other blocks of the economy (the external backward effect is 49.264%). Additionally, 36.997% of the direct outflow of waste water of the Food, 58.53% of the Chemicals, Metals and Electronics and 12.82% of the Other Services blocks comes from obtaining the inputs required by other blocks; that is to say, it is exported to the other sectors of the economy. In this sense, the substitution of the sale of inputs by these blocks to the rest of the economy might lead to reductions in direct waste water of above 36% in the industries corresponding to the Food and Chemicals, Metals and Electronics blocks, and to close to 13% in Other Services. However, the substitution of purchases modifies the waste water outflows in the case of the Food block by 49.26% (the external backward linkage), whilst it would reduce it by 28.55 and 20.04% in the case of the Chemicals, Metals and Electronics and Other Services blocks, respectively. Thus, we can appreciate that the Other Services, Food and Chemicals, Metals and Electronics blocks act both directly and indirectly as the main consumers and polluters.
3.3. Relative effects Up to now we have seen how directly consumed water and vertically integrated water are distributed within each block. However, when analysing the impact that these transfers have on the total water consumed in the system, it is necessary to speak of relative size. To that end, we have constructed relative indicators by dividing the earlier-mentioned effects of each block by the arithmetic mean, with indicators higher than 1 showing that the block stands out as regards this particular component when compared with the rest of the economy. Table 4 presents these indicators.
In the case of irrigation water, only the Agriculture block stands out in the economy regards the internal, mixed, external forward linkage, induced forward linkage and direct consumption components. However, the ranking of the blocks does allow us to determine which blocks essentially receive the water consumed by Agriculture. Specifically, the main receivers of the water that has been consumed directly by Agriculture correspond to Food, to Agriculture itself and to Other Services. In the case of the consumption of drinking and waste water, we can see that the block corresponding to Other Services stands out in the economy with respect to both direct and indirect effects. Its high ratios are, as we have seen, due both to the internal component and to the sale and purchase of inputs linkages maintained with other blocks. Thus, this block exceeds the average for the economy with respect to the internal effect, the external backward linkage and the external forward linkage. Indeed, this is a key block. However, the Chemicals, Metals and Electronics block has a fundamentally forward linkage character, consuming drinking water and waste water in the system either in obtaining the requirements of the other sectors. The Construction and Food blocks have a clearly backward linkage character. As we can appreciate, their internal effect is reduced and their products are the main receivers of the drinking water and waste water from other sectors. Additionally, the Energy, Water and Mining block for drinking water and waste water, and the Agriculture block but only for drinking water, stand out in the economy by virtue of their high external forward linkage. Let us now turn to the second part of our analysis, where we will consider the sectoral intensities of the use of water and the impact on the generation of income. 3.4. Relationships between water use and income generation in the economy Table 5 reflects these relationships for each of the eight blocks in question and for the three types of water been considered. Here, we can find the ratios between vertically integrated consumption,
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Table 5 Ratio between vertically integrated water and vertically integrated income (in thousands of cubic metres per million of pesetas) Irrigation water B1 B3 B4 B8 B5 B6 B7 B2
Drinking water 3.171 1.485 0.202 0.080 0.057 0.052 0.024 0.014
B7 B1 B2 B3 B5 B4 B8 B6
that is to say, water requirements to obtain the final demand, and the income generated by the corresponding processes, in other words, the value of the final demand. These ratios measure the water use intensities and their inverses are a first approximation to the return obtained by, or the productivity with which, the sectors use the water in a global form. The ratios are calculated in thousands of cubic meters per million pesetas. If we first consider irrigation water, we can note that the lowest value of the ratio, i.e. the highest productivity of its use, is obtained, logically enough, by the blocks with the weakest linkages to Agriculture, namely Energy, Water and Mining, Public Sanitation and Construction. By contrast, the highest ratios correspond to Agriculture itself and to Food, a block that is closely linked to Agriculture. However, the table confirms a different pattern of water use in each block. As we can appreciate, Other Services obtains a higher return on the water received from Agriculture than other, less dependent, industries such as those in the Transformation block. In regards to drinking water, we can see that it is the Public Sanitation, Agriculture and Energy, Water and Mining blocks that present the highest total consumption of water per unit of income generated. We can further appreciate that the Construction and Other Services blocks are those that generate the highest productivity in the consumption of this type of water. Finally, in the case of waste water we can observe that the highest volume by unit of income generated can be found in the Energy, Water and Mining, Food and Chemicals, Metals and Electro-
Waste water 0.141 0.041 0.036 0.032 0.022 0.020 0.016 0.014
B2 B3 B5 B4 B1 B8 B6 B7
0.027 0.011 0.010 0.009 0.007 0.007 0.006 0.003
nics blocks, with Public Sanitation, Construction and Other Services now enjoying the highest productivity.
4. Conclusion In this paper, we have analysed the ‘water composition’ of the production of goods and services in the Spanish economy. To that end, we have studied the role of the different productive sectors as direct or indirect users of the resource. Using the concepts of vertically integrated water consumption and direct consumption, we have obtained the internal effect, the mixed effect, the external forward and backward linkages and the induced effects, with our aim being to characterise the behaviour of these sectors. The methodology, derived from the HEM, has allowed us to distinguish between each of these components in a very detailed and precise manner. The significant volume of data made available by the CSA on sectoral direct consumption and quality of water used (irrigation, drinking and waste water) has enabled us to assemble a relatively precise picture of the distribution of the resource over the length of the productive process, as well as of its impact in a given vector of final demands. A first conclusion that can be drawn is that when speaking of the macro-figures of water consumption in Spain, it is essential to focus on the Agriculture block and its associated linkages. The need to reconvert this sector, and even to limit its activities, with the aim of achieving a global saving of water is a point of view that has often
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been advanced. Our results offer some clarification on this point. The analysis of the induced effects shows that the majority of this sector’s direct consumption is produced in obtaining the products that supply other sectors of Spanish industry. Here, we are fundamentally thinking in terms of the Food and Other Services blocks, which include the retail trade, hotels and catering and the rest of the services sector. The significant linkage between these sectors suggests, on the one hand, that all these activities are responsible in the use of the resource and, on the other, that a reduction in agricultural activity, whilst supposing a water saving within the economy would pose a risk for the production of other economically key sectors of the Spanish economy. We cannot ignore the importance that the food industry has in Spain, nor the clear orientation of the national economy towards the retail trade/hotel and catering/other services group. Any hypothetical substitution of agricultural production for imports would convert the current water imbalances from a resource management problem into a balance of payments problem. At the same time, we recognise that whilst agriculture plays an important role as a consumer of large volumes of water, the role played by this sector in relation to drinking water is much more limited (six out of the eight blocks have a higher vertically integrated consumption). However, its direct consumption is around 10% of total direct consumption. Indeed, the quality of drinking water and its correct use is an emerging problem in Spain, but unfortunately it is all too frequent to encounter analyses that place the water problem in an exclusively quantitative context. As we have seen, for the three types of water considered in this paper it is the Other Services, together with the Chemicals, Metals and Electronics blocks (plus Agriculture in the case of irrigation water) that are the main users, with this being the case for both direct and vertically integrated consumption. In terms of external backward linkage, the Construction and the Food blocks are also strong sources of demand for drinking water and waste water from the economy. The high level of direct and indirect use of drinking water in these five blocks, together
with the requirements of continuous flows and the concentration of these activities in urban centres explain the majority of the drinking water deficits that can be found at certain times in different parts of Spain. As a consequence, we are faced with the need to consider water saving measures in these activities based on the reuse of the resource, improvements in the conduction network and, particularly, the proper fit between the quality of water offered by the system and that required for its use. Such measures would undoubtedly relieve the pressure on urban resources and reduce the current cost of supply. In regards to the intensity or productivity of the resource, we should note that whilst it is true that some activities, such as construction, offer good results in terms of water consumed-income generated, it is also the case that these activities are often using a resource which has a much higher quality than that actually required. The installation of separate supply networks for drinking and non-drinking water would probably solve some water quality problems and change the surprising productivity ratios of the drinking water used in economic activities such as those reflected in the Construction block. In the case of the Agriculture block, it is our view that the high values of irrigation used per unit of production are in part due to an incorrect valuation of the resource by the users, who ignore a significant proportion of the supply cost and do not consider water as a scarce resource. In this area there is a significant margin for savings if the agriculture agents in some way or another perceive the cost of the resource they are using. In summary, and on the basis of the main lines that emerge from our results, the problems derived from the ‘scarcity’ of the water resource in Spain should be confronted from two points of view, namely those of quantification and of valuation. First, the resource should be quantified in a differentiated manner by reference to quality levels. The traditional consideration of a homogenous level of quality hides relevant information, which we have set-out to process and demonstrate in this paper. As regards valuation, we believe that a correct internalisation of the costs associated to the resource would allow for improvements in the
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technical efficiency of its use, which implies economic and environmental efficiency. In closing, we offer some final remarks on the methodological properties of the input/output analysis used in this paper. This analysis is based both on the HEMs and the vertically integrated processes, and has been applied to the analysis of water uses. However, the methodology can also be applied, without problems, to other natural resources or pollutions. Thus, it is possible to apply it to CO2, non-drinking water, different types of pollution in waste water or to dioxines, to name but a few examples. In any event, the analysis allows us to classify the productive sectors according to forward and backward linkages in a way that is more precise than is the case with earlier methods.
Acknowledgements The authors would like to express their thanks to J. Roca and to an anonymous referee for their helpful comments on an earlier version of this paper. The usual disclaimer applies. This work has been funded by Project PO17/2000 of the Diputacio´n General de Arago´n.
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