Cumulative effects of energy and water economic policies: Framework development and a case study in China

Abstract

Due to the existence of an energy–water nexus, energy–related economic policies (such as carbon taxes) can influence the consumption of water resources, and water–related policies (such as fees for water use) can influence the consumption of energy. Previous research focused on the direct effects of energy and water policies (i.e., an energy policy's effects on energy conservation, and a water policy's effects on water resource conservation) and on the indirect effects (i.e., an energy policy's effects on water resource conservation, and a water policy's effects on energy conservation). However, they neglected the cumulative effects (i.e., the effects under simultaneous implementation of the two policies, which differs from the sum of the effects under separate implementation of the two policies). This is an important omission given that both economic policies are implemented simultaneously, and exhibit interactions that produce cumulative effects. In the present study, we developed a framework to analyze the cumulative effects of water and energy policies. In this framework, we developed a computable general equilibrium model and a model to assess their cumulative effect. The cumulative effects were analyzed from both the environment and macroeconomy perspectives. China was adopted as a case study. We found that the cumulative effects on energy conservation, water conservation, and carbon emission reduction were greater than the effects of only one kind of policy, but that antagonistic effects also occurred, with their strength increasing with increasing intensity of the policy.