Dual risk-aversion programming for regional industrial structure adjustment with water-energy nexus: A case study of Tianjin, China.

Abstract

The water-energy nexus (WEN) system is a large-scale complex system that comes with diverse forms of risks owing to many challenges in the process of maintaining economic-resource-environmental sustainability. First, the rapidly increasing demand for water and energy subjects many regions to the high risk of water and energy shortages. Second, decision makers face difficulties in weighing system benefits and loss risks under a series of stricter water-energy policies. To handle the aforementioned dual risks of WEN, in this study we propose copula-based stochastic downside risk-aversion programming (CSDP) for regional water-energy management. CSDP integrates the superiority of the copula analysis method and downside risk-aversion programming into a framework, which can not only reveal the risk interactions between water resources and energy demand by using copula functions under different probability distributions, even previously unknown correlations, but also control economic risk, tackle systemic uncertainties, and provide an effective linkage between system stability and conflicting economic benefits. The proposed model was applied to a water-energy system case study in Tianjin City, China. Optimal solutions for various water resources and energy demand copulas associated with different scenarios and hierarchical risk levels were examined in the CSDP model. The results showed that water resources have a greater influence than energy on industrial structure adjustment in Tianjin, with consequent effects on system benefits, optimal output value schemes, and environmental protection strategies. In addition, the tertiary industry provides a new opportunity for economic growth based on a large amount of water-energy consumption, and its potential resources and water-air pollution risks also deserve extensive attention.