Incorporating Hydrological Variability into a Hydro-economic Input-Output Model. An application to Tuscany

The recent work of Rocchi and Sturla (2021) estimates the economic pressure on water resources in Tuscany using an input-output (IO) model with an average hydrology. The present work considers the inter-annual hydrologic variability, which has an effect on both the supply and demand of water and, therefore, on the extended water exploitation index (EWEI). A multivariate hydrological model is built to generate synthetical annul series of precipitation, evapotranspiration, runoff and groundwater recharge. The interaction between hydrology and the economy generates two endogenous effects in the model: i) changes in water withdrawals and discharges coefficients in the agricultural industry due to variations in precipitation and evapotranspiration, and ii) changes in water requirements for dilution coefficients in all discharging industries due to variations in runoff and groundwater recharge. Based on Monte Carlo simulations, the inter-annual variability of the extended demand and the feasible supply of water are calculated for the Tuscan economy. The cumulative probability distribution of the EWEI indicator is confronted to the scarcity thresholds proposed in the literature. A methodology to incorporate the intra-annual variation of both the extended demand and the feasible supply is also proposed, obtaining the probability distribution of the EWEI for the critical month, as a more accurate indicator of water scarcity.