Why Study These Impacts?

The impact of human water uses and economic pressures on freshwater ecosystems is of growing interest for water resource management worldwide. Even in the water abundant Eastern United States, studies over the last few years have shown that water using economic activities can lead to instream flow depletion. The relationship between water, money and economic development is clear. It is essential for sectors like public water, sanitation, power generation, agriculture, manufacturing and transport, and it supports vital ecosystems.

Liberalization of trade policies worldwide has led to increased trade in goods and services between regions, and the movement of goods and services is associated with embedded resources that were direct or indirect inputs in production processes. The term “embedded” or “virtual water” has been used to refer to the water embedded in water intensive commodities. “Virtual water trade” therefore occurs when water intensive goods and services are transported through trade. In contrast to actual transfer of the physical bulky water using containers or water conveyance infrastructure installed in water transfer schemes, virtual water transfer is through trade. It is essentially an economic concept founded in material flow analysis, and similar to flows applied in industrial ecology such as carbon and energy. The primary focus of virtual water is the economic structure of water uses by shifting water intensive economic activities from water scarce regions and replacing them with imports from water abundant regions, or producing goods and services where water imports are lower, therefore conserving water where it is most needed. Closely related to virtual water trade is the concept of “water footprint” or the amount of water required to produce a unit of output.

A Great Lakes Case Study in Virtual Water Trade

One of the major issues associated with virtual water trade is water scarcity management. In this case study for a water-rich watershed in the Great Lakes region, economic pressures on water resources as revealed by virtual water trade balances are linked to the nature of the economic water use and the associated impacts on freshwater ecosystems. The study examines water scarcity, trade of goods and services, and water use efficiency. Although the scarcity of economically accessible freshwater is a global issue, it is the local water users in subwatersheds who feel the consequences of water scarcity the most. Economic growth, growing populations, and increasing incomes are all contributing to a huge demand for goods and services and increased pressure on water resources, highlighting the need for innovative and adaptive solutions in managing water resources. It is therefore essential to analyze natural resource use in assessing environmental and socio-economic impacts of trade on resources such as water and land, even in seemingly water rich regions such the Great Lakes.

This case study (1) quantifies localized virtual water exports and imports in the Kalamazoo watershed, (2) reveals the nature of major economic activities impacting freshwater ecosystems in the Kalamazoo watershed, and (3) demonstrates the linkage between water use for economic activities, virtual water trade, and the resultant impacts on freshwater ecosystems. This case study contributes to an improved understanding of adaptive water management and the science of freshwater ecosystems in order to make better policy decisions, and builds on previous economic-hydrologic-ecologic analyses by incorporating virtual water trade. Such an understanding is essential to ensure that water consumption from economic activities also accounts for flows that protect native species and sustain natural freshwater ecosystems, while concurrently meeting the water needs of current and future human generations.

The Methods

A water accounting framework that combines water consumption data and economic data is used to quantify localized virtual water imports and exports in the Kalamazoo watershed which comprises ten counties (Figure 1). This study uses the impact analysis model IMPLAN to evaluate the economic activities associated with water resources in the Kalamazoo watershed. Monetary input output (IO) tables for counties covering the study area are extracted through modeling and then coupled to water consumption data through IO analysis, a method that uses monetary transactions to quantify how various sectors of a complex economic system are mutually related to each other. Water-using economic activities at the county level are conformed to watershed boundaries through land use-water use relationships.

Figure 1: Kalamazoo River Watershed Location
Figure 1: Kalamazoo River Watershed Location

This case study employed the following methodology:

  • Acquisition of water withdrawal data and application of consumptive use coefficients
  • Acquisition and processing of economic data
  • County level computation of direct and indirect water use intensities, value intensities, and virtual water trade balances using input output analysis
  • Extrapolation of virtual water trade balances to watershed boundaries

Implications (Selected Results)

The overall results show that at local level, there exists considerable water use and value intensity, and virtual water trade balance disparity among the counties and between water use sectors in this watershed. The watershed is a net virtual water importer, with some counties outsourcing nearly half of their water resource impacts, and some outsourcing nearly all water resource impacts.

Table 1. Actual average water consumption in the 10 Kalamazoo Counties (Mm³/year)

County Agriculture sectors, including irrigated water use Thermoelectric power generation Commercial activities Industry County Total
Allegan 20.72 0.01 7.51 3.02 31.26
Barry 0.70 0.00 3.14 0.31 4.15
Calhoun 3.67 0.00 25.12 12.93 41.72
Eaton 0.22 178.29 43.33 0.34 222.18
Hillsdale 0.29 1.73 3.21 2.45 7.68
Jackson 1.74 0.00 19.10 0.69 21.53
Kalamazoo 2.71 0.00 16.45 35.85 55.01
Kent 9.04 0.31 14.61 2.33 26.29
Ottawa 2.62 126.25 124.64 0.89 254.40
Van Buren 1.51 0.00 5.40 1.47 8.38
Sector Total 43.22 306.59 262.51 60.28 672.60

Table 1 shows the actual average water consumption in the 10 counties covering the Kalamazoo watershed. The nature of the largest water consuming economic sector varies between counties. For example, agriculture is the largest water consuming sector for Allegan County, thermoelectric power generation for Eaton and Ottawa counties, while commercial activities are dominant in Barry, Calhoun, Hillsdale, Jackson, Kent and Van Buren counties. When sector total water consumption is considered, agriculture lags behind the other 3 sectors. This is not a surprise in this relatively wet watershed, given that agricultural consumption in this study only considers blue water [i]consumption, and not green water[ii]. Eaton and Ottawa counties contribute the largest water consumption totals, largely accounted for by their respective thermoelectric power generation sectors, although small portions of the respective county areas are within the Kalamazoo watershed.

Figure 2 shows ranked value intensities ($/m³) by total county area, on log scale. The results indicate that the industrial and commercial sectors produce the largest economic output ($) for each m³ of water consumed, and agriculture is third ahead of thermoelectric power generation across the 10 Kalamazoo watershed counties. This result provides a useful insight to water managers in the county in the event of a need to reallocate water between economic sectors under water scarcity conditions.

Figure 2: Ranked value intensities ($/m³) by county (log scale).
Figure 2: Ranked value intensities ($/m³) by county (log scale).

Virtual water imports and exports by sector for each county portion in the Kalamazoo watershed are shown in Figure 3. The largest virtual water imports are associated with agriculture and industry, while the bulk of the exports are associated with agriculture, industry and commercial activities.

Figure 3: Virtual water imports and exports by county and sector.
Figure 3: Virtual water imports and exports by county and sector.

Figure 4 shows total virtual water imports and exports for all major economic sectors in the Kalamazoo Watershed, normalized by area. The results indicate that overall, the Kalamazoo watershed is a net virtual water importer.

Figure 4: Kalamazoo Watershed normalized total virtual water imports and exports (all sectors). Allegan, Eaton and Kalamazoo counties are heavy virtual water importers due to economic structures dominated by large volumes of consumptive water use in agriculture, thermoelectric, and industrial sectors respectively.
Figure 4: Kalamazoo Watershed normalized total virtual water imports and exports (all sectors).
Allegan, Eaton and Kalamazoo counties are heavy virtual water importers due to economic structures dominated by large volumes of consumptive water use in agriculture, thermoelectric, and industrial sectors respectively.

Potential Future Studies

The methodology used in this case study is applicable to various spatial levels ranging from the micro sub-watershed level to the macro level. Current and future work involves upscaling this case study approach to the whole Great Lakes basin covering 209 counties. Water use and value intensities, and virtual water transfer volumes will provide a useful measure of how water and other resources in localized Great Lakes subwatersheds are being converted into goods and services that support production, consumption, and waste generation activities within and outside the producing regions. Besides economic (monetary) value, the approach in this case study can be applied in future studies based on physical and nutritional values to measure efficiency of water use. This will provide stakeholders in the Great Lakes region with a robust range of indicator choices for adaptive management of their water resources, depending on changing future interests and prevailing water scarcity situations.

[i] Blue water is defined as fresh surface and groundwater, in other words, the water in freshwater lakes, rivers and aquifers.

[ii] Green water  is defined as the precipitation on land that does not run off or recharge the groundwater but is stored in the soil or temporarily stays on top of the soil or vegetation. Eventually, this part of precipitation evaporates or transpires through plants. Green water can be made productive for crop growth (although not all green water can be taken up by crops, because there will always be evaporation from the soil and because not all periods of the year or areas are suitable for crop growth).