Revealing the impact of a water-economy nexus-based joint tax management policy on the environ-economic system: An advanced exploration of double dividend strategies and multi-scale response mechanisms

Abstract

Economic growth is constrained by water scarcity, and a unified policy analysis framework is required to enhance the coordinated development of the environ-economic system from the perspective of wastewater management. Thus, a multi-scale water-economic double dividend mechanism model (MWED) is first developed to (i) derive strategies for simultaneously achieving water scarcity mitigation and economic increase through compounding wastewater tax (WT) policies and reduced value-added tax (RVT) policies; (ii) explore the internal response mechanisms at the sectoral scale in the central region; and (iii) reveal the responses of economic output and multiple water resources in external regions under the cascading effects. This integrated approach of a computable general equilibrium model, an ecological network analysis, and a multi-regional input-output analysis is applied to Shanxi Province, China, a representative water-scarce region. The double dividend strategies of WT_6 yuan/ton*RVT_2%, WT_8 yuan/ton*RVT_2.5%, and WT_10 yuan/ton*RVT_3% were conducive to alleviating water scarcity and stimulating economic growth by adjusting the production structures or upgrading treatment technologies to reduce wastewater discharge, reducing the use of water-intensive energy sources to condense direct water consumption, and enhancing the connection between low water consumption sectors and advantageous economic sectors to optimize the virtual water network structure. Based on complex inter-regional relationships, these cascading effects can stimulate the economic output of other provinces and alleviate prevailing water scarcities by increasing virtual water inflows in economically developed regions and decreasing direct water consumption in economically undeveloped regions. The ability of water-rich regions to reconcile differences in water resource endowments can be further strengthened.