This study develops a hydroeconomic input-output (IO) model to evaluate the pressures that economic activities exert on water resources. For a better understanding of the sectoral and total impacts, three innovations are incorporated with respect to previous literature: i) the development of a methodology for disaggregating the extended water demand (blue water plus grey water) by economic sector, ii) the use of the IO side of the model to reclassify water demand by “extracting” and “demanding” sectors, and iii) the proposition of an improved indicator of pressure on water resources based on a “feasible” measure of water supply. Empirically tested in the Tuscany region (Italy), our findings reveal significant changes in the structure of economic pressures when adopting the proposed approach. When assessing direct total water withdrawals, agriculture accounts for 61% and manufacture for 20% of regional pressures. However, when considering only the demand for water resources exposed to scarcity reclassified by demanding sectors, agriculture falls to 5% and manufacture rises to 54%. By incorporating grey water in water demand and a “feasible” measure of supply, the regional water exploitation indicator increases from 0.05 to 0.19, and can even reach 0.30 with dry hydrological conditions, beyond the threshold for moderate scarcity (0.20). The unbalance between water supply and demand worsen even more when considering the balance of surface waters only (1.16). The proposed model can support an in-depth analysis of an economy’s water footprint, allowing impacts to be mapped from specific industries to particular water bodies. This information can support decisions about sustainable water management at the national and regional levels.

Climate change impacts on runoff, coupled with population and production growth, pose significant risks to aquatic ecosystems. These risks are heightened in countries with rigid institutional frameworks that prevent water extraction from adapting to ecological requirements. Central Chile presents a particularly compelling case due to the coexistence of private water rights, challenges in establishing ecological flows, projected reductions in runoff, and the high country’s population share. This study aims to determine current and future ecological flow deficits using two indicators: the accumulated water volume deficit and the frequency of runoff falling below ecological flow thresholds. Given the absence of defined ecological flows in some basins and uncertainties about future water system operations, an original methodology tailored to the Chilean context is proposed. This analysis focuses on the Mapocho Alto system (five basins), which is highly affected by water extraction and outdated ecological flow definitions. Results indicate that annual deficit volumes during the historical period are low across basins and are concentrated between September and November. Under climate change scenarios (three basins), the deficits remain relatively stable in two basins but shift in January–July. However, in the Arrayán en la Montosa basin, climate change significantly increases the deficit volumes and frequencies due to imbalances between the natural water supply and water demand. The conclusions underscore the necessity of addressing institutional constraints, such as static ecological flow definitions, to prevent severe ecosystem issues in basins where runoff is projected to decline while demand remains constant or increases, a concern applicable to other countries with similar institutional frameworks.

This study analyzes the effects of rising water supply variability provoked by climate change on the welfare of a society whose economy heavily depends on water availability. Several studies recommend that communities should impose policies that ensure a minimum level of water allocation for human consumption. We compare two contracts, one where society allocates to the firm a fixed proportion of the annual water-runoff; and the other one, where due to the uncertainties of climate change, the community instead allocates to human consumption a fixed annual amount of water-runoff. We consider a risk-averse community. We show that, unless water supply is absolutely fixed, a higher variability and scarcity of water supply does not necessarily imply that society is better off choosing a contract that assures a minimum water for human consumption. Depending on the characteristics of water supply frequency distribution, particularly the third moment, it is possible that society would not benefit by switching to the fixed allocation contract for human consumption. We illustrate the main analytical results using data and runoff climate change projections from a water basin located in the central region of Chile, showing that in this case the community is better-off sticking to the current contract.