Water Scarcity and Virtual Water Trade in the Mediterranean

by Roberto Roson and Martina Sartori

Virtual water trade refers to the implicit content of water in the production of goods and services. When trade is undertaken, there is an implicit exchange of water. Furthermore, when water gets scarce, water intensive goods become more expensive to produce and the economy compensates through higher water imports.
This paper is about applying the concept of virtual water to the problem of future water scarcity in the Mediterranean area, also induced by the climate change. The aim is assessing to what extent water trade is a viable adaptation option to the problem of water scarcity. To this end, a computable general equilibrium model is extended with satellite data on sectoral water consumption, and used to assess future scenarios of water availability.
It is found that virtual trade may curb the negative effect of water scarcity, yet the consequences in terms of income and welfare remain quite significant, especially for some regions.