Understanding virtual water flows: A multiregion input‐output case study of Victoria

Abstract

This article explains and interprets virtual water flows from the well‐established perspective of input‐output analysis. Using a case study of the Australian state of Victoria, it demonstrates that input‐output analysis can enumerate virtual water flows without systematic and unknown truncation errors, an issue which has been largely absent from the virtual water literature. Whereas a simplified flow analysis from a producer perspective would portray Victoria as a net virtual water importer, enumerating the water embodiments across the full supply chain using input‐output analysis shows Victoria as a significant net virtual water exporter. This study has succeeded in informing government policy in Australia, which is an encouraging sign that input‐output analysis will be able to contribute much value to other national and international applications.