Does Water Efficiency Reduce Water Consumption? The Economy-Wide Water Rebound Effect

Governments stimulate efficiency measures to save water resources, particularly in areas with high water stress and those that experience droughts. However, economic theory and some empirical studies tell us that the effects of efficiency improvements of a resource may not lead to a global reduction in the use of that resource. We assess the effects of improving water resources productivity in Spain on the global use of water using a dynamic water-economy computable general equilibrium model. We set an overall annual improvement of water efficiency of 50 percent and find that the economy-wide water rebound effect is 100.47 percent. This means that there are no savings of water after an efficiency improvement, and there is actually a slight global increase in water use.