ABSTRACT
In recent decades, globalization has led to trade volumes of goods expanding at a faster rate than GDP. The trade volume of ‘virtual water’ (water embedded in traded goods) has also increased; in some regions globalization may be exacerbating water shortages.
In this chapter we explore the most recent data on the issue. We find that China’s water trade surplus expanded between 1995 and 2009, while the water trade deficit in the US and EU widened sharply. It could therefore be said that the EU and the US have contributed to water shortages in China.
To improve the sustainability of water use, this chapter uses the E3ME model to assess the effects of a tax on water consumption. We apply a 40% tax on water consumption from the public supply, which is levied on all industrial sectors that use water. The water tax is imposed for eight years starting in 2020. We find that water demand could be reduced by about 10%, with minimal economic loss.
