Linking local and global: Assessing water scarcity risk through nested trade networks

Abstract

As water scarcity escalates globally, there is a growing focus on assessing its economic impact, both locally and through trade networks, defined as water scarcity risk (WSR). Given China's pivotal role as a top importer and exporter, coupled with significant spatial disparities in water scarcity across its provinces, understanding the spread of water scarcity risks within China and their interplay with global water dynamics is imperative yet relatively unexplored. This study constructs a nested Multi‐Regional Input‐Output (MRIO) model to evaluate water scarcity risk, connecting Chinese provinces with global counterparts. Notably, we integrate the spatial heterogeneity of environmental flow requirement as a vital criterion for long‐term sustainable water management in our assessment. Our findings reveal substantial economic impacts caused by water scarcity, with a global WSR valued at $11.1 trillion, of which $6.2 trillion is attributed to trade. Critical regions, sectors, and region‐sectors are identified, offering valuable insights for targeted interventions. This study presents a unique perspective on global water scarcity risk assessment at a higher resolution scale, laying the groundwork for the formulation of effective water scarcity risk mitigation strategies aligned with sustainable development goals, particularly SDG 6 and 8.