Quality matters: Pollution exacerbates water scarcity and sectoral output risks in China

Pollution exacerbates a region's water scarcity by making water unfit for different uses and reducing freshwater availability. Local water scarcity may lead to economic output losses, and the risk can be transmitted to downstream sectors through reduced input supplies. Previous studies focus on quantity-based water scarcity assessment. It is still unknown how water quality constraints may amplify economic risks of local water-use sectors and distant economies. Here we introduce an integrated method and assess the impacts of both quantity and quality-based local physical water scarcity risks (LWSR) and virtual water scarcity risks (VWSR) in domestic trade system in China. We find in 2017 quality-based LWSR and VWSR in China are ∼593 and ∼240 billion US$. Inclusion of water pollution constraints almost doubles the risks of economic losses due to insufficient clean water supply. We then identify critical regions and sectors that are highly risky or vulnerable to the supply chains. We find water pollution makes risky VWSR exporters more centralized in a few Northern provinces where available freshwater resources are already limited, e.g. the agriculture sector in Hebei province. VWSR importers span broadly, but water pollution increases concentrations of upstream suppliers that face local water scarcity for most provinces, decreasing overall resilience of China's domestic trade network. Our results underscore the needs to alleviate overall scarcity risks by conserving physical water resources and improving water quality simultaneously.