Keywords

1 Introduction

Climate change and population growth are imposing an increasing strain on natural resources in the Mediterranean region, to a point where they may compromise the sustainable provisioning of water and food. An overestimation of the economic and social benefits of human actions alongside of an underestimation of their negative externalities may lead to ecosystem services (ES) degradation, risking water, and food provisioning (Flörke et al., 2018; FAO, 2020a, b). The UN sustainable development goals (SDGs) highlighted zero hunger and clean water supply within the six most important development goals (United Nations, 2022). The SDGs promote the achievement of food security, sustainable agriculture, and water management along with the urgent action to combat climate change (CC) effects and protect marine and terrestrial ecosystems.

Most of the world’s food production from agriculture is based on nonirrigated croplands. About 70–100% of the croplands are rainfed, and the rest are irrigated croplands using water bodies such as rivers and groundwater aquifers, which also rely heavily on climatic conditions (Koopman et al., 2019; D’Odorico et al., 2020). Hence, agriculture is one of the most climate-sensitive sectors of an economy. It responds to temperature, precipitation, soil radiation, and other attributes that are directly associated with CC risks (Khan et al., 2020). In the decades to come, alternative water sources are expected to be of high importance in water-stressed countries of the Mediterranean region, where further decline of natural freshwater availability is expected due to CC (Rodell et al., 2018; FAO, 2020b; Gerten et al., 2020).

The link between CC and natural water shortage that impacts agriculture and the economy is widely discussed (Britz and Roson, 2019; Cazcarro et al. 2020; Damania, 2020). Several studies address the diversification of alternative water sources (e.g., desalination and reused water) that aim to meet the demand (Baum et al., 2016; D’Odorico et al., 2019; Peng et al., 2020). However, the costs and benefits attached to each of the alternative water sources relate to their direct and indirect (external) effects. The direct costs are mainly energy consumption costs at the desalination and purification plants. The external costs relate to the effect of the process’ wastes on the quality of the ecosystem, greenhouse gases (GHG) emissions, and pollutants that degrade the quality of land and water resources (Kress et al., 2020; Meron et al., 2020; Pistocchi et al., 2020b; Shanafield et al., 2020). Recent articles highlighted an increase in salinity levels near desalination plants due to saline wastes and in wastewater irrigated croplands (Abd Ella, 2020; Kress et al., 2020; Pistocchi et al., 2020b).

Aiming to ensure a better management of linked resources and following the UN SDGs, the UN declared the water–energy–food–ecosystem (WEFE) nexus as a focus area for sustainable development (The European Commission, 2022).

Precise agriculture is a recent approach that examines technological methods to enhance food provisioning by using natural resources efficiently, for example, using drip or precise irrigation instead of crop field’s flooding and irrigation canals (Blonquist et al., 2006; Hedley and Yule, 2009; Paris et al., 2018; Soulis and Elmaloglou, 2018), driving nutrient management and crop rotation plans (Parihar et al., 2017; Jat et al., 2018), and implementing soil-less cultivation in hydroponic and aquaponic plants (Muller et al., 2017; Kaburagi et al., 2020; Lobillo-Equibar et al., 2020). Aquaponics (AP) minimize the use of both land and water constraints in food provisioning, creating a new semi-closed ecosystem in which non-soil hydroponic crops benefit from the fertilizing capabilities of the organic waste of aquaculture, usually growing fish (Ascuito et al., 2019; Lobillo-Equibar et al., 2020). The economic viability of AP in the Mediterranean Sea Basin (MSB) is higher compared to other colder locations, as on top of the reduced costs of water and land, the warm temperatures reduce also the energy consumption costs (Greenfeld et al. 2019; Cornet, 2020; Lobillo-Equibar et al., 2020).

However, economy-wide analyses of the effect of water management on food security rarely focus on alternative water sources, the precise agriculture practices, or the social costs and benefits of water and food provisioning (Wittwer, 2019; Damania, 2020; Müller et al., 2020). Additionally, parameters such as the local physical characteristics of natural resources, national policies, and international relationships can potentially affect the local, regional, and global trade, which in turn affects food security and human well-being (Kahsay et al. 2019; Parrado et al., 2019; Damania, 2020; Delzeit et al., 2020; Müller et al., 2020).

CGE is a macro-modeling approach that takes into consideration the interdependencies between regional and national aspects of trade among multisectoral markets in order to forecast the potential socioeconomic scenarios of human well-being. The linkage (physically or virtually) of the CGE model to micro-level datasets or PE models enables the integration of spatial and temporal parameters into the analysis (Damania, 2020; Delzeit et al., 2020).

The objective of this study was to review recent studies that model the impact of water availability on food security and the related natural capital. The review covers not only global aspects, but also considerations specific to the MSB, detailing (a) economic assessments of water as an important aspect of food provisioning, (b) water ecosystem in the MSB and their role in water quality over time, (c) modeling approaches linking water and food security (PE and CGE models), (d) geographic and demographic aspects of the MSB and their potential effect on the WEFE nexus, and (e) policy implications on water and food security, including extreme events and external shocks such as COVID-19 and CC.

2 Water as a Key Aspect for Food Provisioning

The economic implications of water availability on food provisioning were characterized in recent studies mainly by the impact of adverse rainfall events, such as droughts and floods, on the food availability and the sectors in the society that are water-dependent, such as the agriculture and fishery sectors (Hertel and Liu, 2019; Damania, 2020). For example, when water is scarce in the Netherlands, agricultural production is decreased, as farmers are not allowed to increase the demand for irrigation water (Koopman et al., 2019). Similar conclusions were highlighted by Baum et al. (2016) showing that natural water shortage, if not supplemented by desalination, can lead to a significant decline of Israel’s GDP, where a considerable part of the decline is attributed to the decrease in agricultural outputs.

Water management and irrigation can potentially increase the area and yield of crop fields and the contribution of agriculture to food security (FAO, 2020a). The 2012 records reveal that irrigated agriculture represents 20% of the total cultivated land and contributes 40% of the total food produced worldwide. Irrigation has doubled crop yield per hectare in most areas around the world and even tripled the yield in the East and North Africa. Kahsay et al. (2019) showed that the management of water demand, irrigation, and trade at the three countries located along the Nile River (Egypt, Ethiopia, and Sudan) can potentially lead to a higher crop yield and economic growth for all three countries.

In order to increase water availability, alternative water sources were developed to support food provisioning. Environmental and resource management studies distinguish between three types of water sources: (1) green—i.e., precipitation water directly contributing to the soil water balance in the crops’ root zone in nonirrigated crop fields; (2) blue—i.e., irrigation water withdrawn from aquifers and surface water bodies, such as river basins and lakes; and (3) grey—i.e., the recycled or treated water to dilute pollutants to a concentration that meets the water quality standards, such as in the case of desalinated seawater and purified wastewater (Martínez-Alcalá et al., 2018; D’Odorico et al., 2019). Recent articles argue that desalinated and treated brackish water should be included as part of a water mix with the precipitation water, replacing the blue water category (Fridman et al., 2021). For example, 53% of the water demand in Israel in 2019 was for agricultural use, with 20% being freshwater and the rest 30% being alternative water sources such as treated wastewater and desalinated water (Palatnik, 2019). Alternative water sources have a substantial economic value due to their role in diminishing natural freshwater shortages and sustaining food provisioning.

However, water reuse and alternative water sources may impose negative externalities on the quality of water and agricultural land that can ultimately lead to a decrease in crop yield and ecosystem services (Martínez-Alcalá et al., 2018; D’Odorico et al., 2019). For example, high levels of salinity and pollutants in irrigation water may reduce land quality and crops yield (Osman et al., 2019). Additionally, alternative water sources or groundwater pumping may require higher volumes of energy and may increase the emission of GHG and local pollutants, as compared to rainfed or river water provisioning (Voutchkov, 2018; Hertel and Liu, 2019). Therefore, water management plans should consider the parameters that affect water and land quality to reach a sustainable long-term development, as detailed in the next section.

3 Water Ecosystem in the Mediterranean Sea Basin

The types of ecosystem providing the distinct types of water sources at the MSB vary by the location and climate conditions. The northern part of the MSB (i.e., southern Europe) is dominated by Mediterranean and marine west coast climates, with warm temperature ecosystems. The southern part of the MSB (i.e., North Africa) is dominated by arid climate, with steppe and desert ecosystems (ARCGIS, 2022). Severe water scarcity conditions, especially at the southern parts of MSB, motivate the use of alternative water sources, such as desalinated seawater and purified wastewater (Baum et al., 2016; Palatnik, 2019; Apostolaki et al., 2019; Jorda-Capdevila et al., 2019; Pistocchi et al., 2020a).

Population growth, CC, and technological development alter the concept of water supply and demand, affecting the ecosystem’s health and ability to provide ES over the years (McKinsey, 2020). The regulation of natural water quality and quantity is one type of ES (IPBES, 2018) that is dependent on the biophysical condition of the ecosystem and the ability of the ecosystem to continue and provide the same quality level of natural water along the years (Apostolaki et al., 2019; Jorda-Capdevila et al., 2019; Shanafield et al., 2020). However, about 80% of the world’s wastewater is discharged untreated into biodiversity-rich freshwater or seawater, which is then being used as an alternative water source for irrigation or desalination plants (World Economic Forum, 2020). The change in the ecosystem’s ability to supply food or water may alter the contribution of these ecosystems to human well-being (Costanza et al., 2017; Osman et al., 2019; Pham et al. 2019).

Human actions may affect both water and soil quality, which in turn may risk food security. For example, the reuse of the Nile River’s water includes the domestic use of river water, followed by sewage drainage into irrigation canals for agricultural use and then streaming of water leftovers back to the river for further use along the river’s basin. The drainage of pollutants into the river’s basin leads to contaminated water and soil sediments that affect the irrigated croplands at the Nile’s delta (Badawy et al., 2020). The effect of reused water on the quality of water and soil ecosystems was highlighted also in a study of three river basins in southern Europe (Apostolaki et al., 2019), in a lake in Latvia (Zawiska et al., 2020), and in ponds in southern Australia (Shanafield et al., 2020).

Groundwater quality may degrade due to over-pumping, that may cause the intrusion of high levels of saline seawater into seashore aquifers (Conant et al., 2019; Jahnke et al., 2019; Shanafield et al. 2020; Ding et al., 2020). Furthermore, the use of fertilizers and pesticides in agriculture (He et al., 2019; Wang et al., 2019), along with the effect of CC and water scarcity, may lead to high levels of salt and pollutants in irrigation water, risking soil quality and productivity in croplands (Arto et al., 2019). In this case, the food industry should analyze the ability of the agroecosystem to be resilient to changes in the water quality.

Innovative agricultural technologies and sustainable water management policies can become one of the main drivers to secure food and water provisioning and meet the objectives of the WEFE nexus. This driver must consider the ecosystem’s ability to continue and provide the water and food security and include the costs and benefits associated with each alternative solution. The next section will discuss the main modeling approaches that fit this type of analysis.

4 Methodological Analysis of the Economic Links Between Water and Food Security

There are multiple approaches assessing how water management affects food security and the economy. Economists generally distinguish between PE models that focus on a specific market at a time (e.g., water or agriculture) and CGE models, which consider international trade patterns of all markets and sectors (Palatnik and Roson, 2012; Damania, 2020; Delzeit et al., 2020). General equilibrium, which dates to Leon Walras (1834–1910), recognizes that there are many markets and that they interact in complex ways, so that there are interdependencies among all attributes. CGE models capture nonlinear substitution possibilities and multisectoral supply–demand interactions incorporating macro-variables and mechanisms for achieving balance (equilibrium) among aggregates and in all markets. Thus, the demand for any one good depends on the prices of all other goods and on income. Income, in turn, depends on wages, profits, and rents, which depend on technology, factor supplies, and production, the last of which, in its turn, depends on sales (i.e., demand). Prices depend on wages and profits and vice versa (McKitrick, 1998; Walker, 2006; Walras, 2010).

CGE modeling is a very powerful tool, allowing economists to explore and forecast the effects of future policy changes and analyze feedback effects of policy measures across sectors and regions. They are also used to capture impacts of trends such as population growth, changes in productivity, and preference changes such as those linked to CC (Damania, 2020; Delzeit et al., 2020). CGE models can provide considerable insight into how water-related distortions and departures from a counterfactual equilibrium can influence food provisioning and global economic growth (Hertel and Liu, 2019).

One example of a CGE model is the GTAP, which is a multi-region, multisector model, with perfect competition and constant returns to scale (Hertel, 1997). The GTAP model also gives users a wide range of closure options, including unemployment, tax revenue replacement and fixed trade balance closures, and a selection of partial equilibrium closures, which facilitate comparison of results to studies based on partial equilibrium assumptions (Damania, 2020; Delzeit et al., 2020). The closure, or partition of the variables into endogenous and exogenous components, is not fixed in the theoretical structure, but set by the user for each simulation. Different closures may be used to represent different economic environments, or for different lengths of run. For a short-run simulation, for instance, one might fix the wage rate, while for a long-run simulation, the level of employment might be fixed (Corong et al., 2017).

When the modeling scope is extended to include micro-sectoral, geographic, or regional data, PE models are required (Damania, 2020; Delzeit et al., 2020). For these reasons, CGE modeling adopted different kinds of linking approaches with PE models, to better address the sectoral–regional challenges (Delzeit et al., 2020). The link between PE and CGE may be one-way link, in which the results “receiving” model is either the CGE (bottom-up) or the PE model (top-down), or a two-way linkage, in which both sides benefit from the results. One-way linkage is the most common linking approach, and some models are even linked to multiple sector models to calibrate a global CGE baseline path based on different type of input from each detailed PE model (Palatnik and Roson, 2012; Delzeit et al., 2020). The two-way linkages are based on the iterative or sequential calibration methods that consist of repeatedly interchanging certain variables between models until mutual consistency is achieved. For example, Arto et al. (2019) linked one-way a Delta-CGE DECCMA (Deltas, Vulnerability, and Climate Change: Migration and Adaptation) model with two biophysical PE models. One PE linkage provided attributes of fisheries catch and the change in their productivity level to feed the CGE attributes of fisheries income and annual change in income. The other PE linkage used crop type, cropland area, and yield attributes to feed the CGE croplands baseline and yearly production measures.

A methodological enhancement of the CGE models is the dynamic-recursive models such as Gdyn, G-RDEM, and the recently released GTAP-RD (Aguiar et al., 2019a). Dynamic CGE models analyze second and third levels of effects on the economy along time (Britz and Roson, 2019). The Gdyn model uses a disequilibrium approach for modeling international capital mobility (Ianchovichina and Walmsley, 2012). A disequilibrium approach is necessary in order to reconcile the theory of investment with observed reality. This is the first use of the disequilibrium approach in CGE. In a dynamic model, the CGE-PE linkage and baseline constructions are all recursive–dynamic ones. In this case, a two-way linkage can be integrated into the stepwise solution process over time, where for each simulated time point information is exchanged between the two models in both directions (Delzeit et al., 2020).

Table 4.1 exemplifies different CGE models that were used in recent articles that relate to the WEFE linkage. Osman et al. (2019) used a single-country CGE model STAGE2, calibrated to a SAM for year 2008/09, that was extended with detailed accounts for the Egyptian agricultural and irrigation systems (Table 4.1#10, i.e., item number 10 in Table 4.1). Kahsay et al. (2019) assessed how the changes in water demand affect the different sectors at the countries using the water at Nile River’s basin. The analysis uses a CGE-PE linkage between GTAP9 and GTAP-W models that distinguished between rainfed and irrigated crops and implemented water as a factor of production in the production process of irrigated agriculture (Haqiqi et al., 2016). The recursive analysis asses first the direct effect of CC on crop yield, then the resulted change effect on the demand for water, and then on the irrigation production sector and the trade between the involved countries.

Table 4.1 Linkage between water–food–ecosystem in recent articles using CGE models
Full size table

The standard GTAP model contains only one representative household, which limits its ability to incorporate multiple household types and evaluate the flow of income and expenditure within the economy. The MyGTAP model (Minor and Walmsley, 2013) can resolve this by differentiating between a private household and government and by providing the option to include multiple types of household and factors (Table 4.1#4) to explain comprehensive interlinkages within the economy (Khan et al., 2020).

The water–food–ecosystem interdependencies in CGE articles usually use one central CGE model linking to multiple PE and physical noneconomic models that detail the water and agricultural attributes. Most of the articles use scenarios analysis to assess the micro-level, ecosystem-specific attributes that affect the macro-level CGE. Parrado et al. (2019) used at the microeconomic scale a multifactor, nonlinear multi-attribute utility model calibrated for representative agricultural water users, which was linked to a macroeconomic regionally calibrated CGE model named MAGRAMA (2015). The micro-level data were sliced by the European regions and linked to a local irrigation model, using Positive Multi-Attribute Utility Programming (PMAUP) irrigation model, and enabling the agricultural water management scenarios as defined by the type of crop, the water resource used, and the sectors affected by these in a regional scope in Spain (Table 4.1#12).

In another example (Table 4.1#14), Costantini et al. (2018) used Gdyn model and GTAP9 in a dynamic long-term climate economy CGE model (GdynEP) that monetary evaluated the regional damages associated with climate change. The ecosystem’s ability to provide the services was included in the model assumptions and integrated as sensitivity and risk analyses. Thus, the GHG concentration and the emission path were exogenously provided by a physical model and interacted with economic mechanisms via a monetary damage function. The GTAP9 starting period (year 2011) was joined to a 4-year period up to 2015, followed by seven 5-year periods up to 2050. The data settings for the following seven 5-year periods were based on assumptions related to multiple experts’ reports such as the future conditions per the IPCC reports, GDP values per the OECD long-view economic outlook (OECD, 2022) and the GTAP macro-projections, and population projections per the UN statistics (UNSD, 2022). The results (in 2015 values) provided the estimated change (%) in GDP due to CC effects, by internalizing CC costs and as compared to the business-as-usual scenario.

5 Geographic and Demographic Effects on the Water–Food–Ecosystem Nexus

The effects of water availability and quality on agricultural yields usually involve additional effects on public health, civil conflicts, trade, and people’s migration within and between countries, which in turn have their own effect on the water–food–ecosystem linkage (Hertel and Liu, 2019; Damania, 2020). Geographic and demographic wise, and as seen in the CGE-PE connections, water availability and prices have a direct effect on agricultural land use and food production, which in turn affect households’ income and human migrations, which recursively link back to the demographic parameters (Parrado et al., 2019). Arto et al. (2019) use the dynamic delta-CGE (DECCMA) model to address water availability and population migration challenges within three deltas in Asia and Africa (the Ganges, Volta, and Mahanadi deltas). The delta-CGE model interacts at several stages with the biophysical models and acts as an interface between the climate and biophysical models and the integrated model of migration, in the sense that it translates the biophysical impacts of CC (e.g., reduction in crop productivity) into key socioeconomic drivers of migration (e.g., changes in wages).

A spatial water management action among several regions extends the common single-region modeling approach by exploring the impacts obtained from alternative water allocation scenarios. The scenarios at Cazcarro et al. (2020) increase the production of water-intensive crops in regions with more abundant water resources and the development of more sustainable food supply chains between farms and the agrifood industry (Table 4.1#1). The findings can then point to a series of policy options that could be applied to ensure successful outcomes in each scenario. A similar water management approach was researched by Peng et al. (2020), which used a GEMPACK CGE model (Table 4.1#6) to assess the potential change in employment and income by the percentage of water diversion—from non-use areas to water-lacking areas.

The integrated geographic and demographic aspects were highlighted recently in a research assessing the spatial water migrations due to international trade. Virtual water trade (D’Odorico et al., 2019) happens when goods and water resources physically used in the area of agricultural production are virtually transferred to the consumption region. This transfer generates a virtual water flux that links production to consumption and enables a potential framework to assess the global value of water, or the “water footprint of trade.”

In another non-CGE article, Katz and Shafran (2019) add to the global water trade assessment by focusing on the external costs of desalinated seawater processes at the water “production” country. In this case, the demographic and geographic benefits related to a peace agreement between neighboring countries are beyond the basic quantification of their monetary value.

6 Policy Implications and Research Challenges

Policy implications that relate to water–food–ecosystem linkage in CGE modeling mainly focus on the effects of CC on water scarcity and agriculture.

6.1 Extreme Events and External Effects on Water Sources

Khan et al. (2020) highlighted the potential induced loss of agricultural production due to CC in a case that no policy was involved. Using MyGTAP modeling (Table 4.1#4), they found that water availability may lead to an increase in commodity prices and a notable decrease in domestic private consumption, followed by a multiplier effect on the industrial and business sectors. Koopman et al. (2019) explored the adaptation possibilities to water scarcity due to CC by assessing the economy-wide changes in several periods of water scarcity and weighing them against policy initiatives. Using GTAP water model, they analyzed the changes in the value of water in rainfed agriculture vs irrigated agriculture that is based on groundwater and surface water sources. They found that when assessing the economic impacts of CC as an external shock, it is important to look at the larger economy-wide effects including the sectors that are not directly linked to the aspect of CC under examination.

In support of the economy-wide assessment in MSB, Touitou et al. (2020) showed that when Algeria was facing water deficits, policy initiatives increased irrigated crops and horticulture to secure food production. Modeling the policy actions in a CGE showed an effect on many sectors, including the irrigation production sector, that stimulated economic activity and influenced the rate of unemployment.

Global climate policy is another example of an external shock implication on the water–food linkage and economy. Using GTAP-BIO modeling (Haqiqi et al. 2016) for forest carbon sequestration values, Peña-Lévano et al. (2019) highlighted the potential cost for society when providing global climate incentives to grow forest land use. These policy initiatives can become a threat for food security because it increases the competition for land between forestry and agriculture and may significantly boost crop prices and land rent.

Looking at water management from the biophysical angle, policy involvement becomes crucial when extensive use of water at natural areas affects the ecosystems and their ability to supply freshwater and agrifood along time (more details regarding the effect on the ecosystems in a river’s basin, seawater for desalination, and groundwater aquifers are available in Sect. 2). However, although researched in many biophysical articles, only a scarce number of CGE articles focus on the policy implications that relate to the ecosystem’s ability to supply the required quality and quantity level of water and crops yield along the years. Zhang et al. (2020) draw the potential policy implications of water management decreasing the pumping from rivers and lakes and allowing wetland ecosystems to preserve their ability to provide ES along time. Using CGE modeling (input–output tables), water was a primary resource for all ES supply, including crops yield provisioning. However, their analysis did not focus purely on the effect of policy on the regulation of water quality and quantity along time, but on food provisioning costs and benefits, based on the trade-offs between economic and ecological water demands. Using STAGE2 model (Table 4.1#10), Osman et al. (2019) also assessed the implication of water and land quality management on crop yield and related costs in Egypt. Once again, there was no focus on the ecosystem’s ability to continue and provide freshwater (Nile River or groundwater) along time, but on the human actions affecting water and land quality (salinity level) and on the additional water and land quality costs, that were required to enable the crops yield production. Similar approach and results were found in Arto et al. (2019) and Costantini et al. (2018), that used Delta-CGE and Gdyn to assess CC as the external shock on water quality and crop yield, and in turn on their effect on GDP.

Three articles were found assessing the ecosystem’s biophysical condition as part of CGE modeling parameters and vulnerability attributes—Palatnik and Nunes (2015), Costantini et al. (2018), and Sartori et al. (2019). Palatnik and Nunes (2015) compared a baseline scenario produced by GTAP for 2050 with CC-induced temperature and precipitations, taking into account biodiversity impacts on land productivity for crops in different Mediterranean regions. Costantini et al. (2018) used Gdyn (Table 4.1#14) to measure the effect of CC damage on agriculture and other sectors, as characterized by a set of vulnerability indicators that are based on the change in precipitation, temperature, crops yield, land use, sea-level rise, wildfires, and energy availability. Sartori et al. (2019) used a MAGNET (Table 4.1#13) model that focused on the effect of water on land quality (soil erosion) and the ability of croplands to provide crop yield along time despite these effects. The results show that soil erosion is unambiguously detrimental to global food production, resulting in a nontrivial decline in agricultural and food production and causing an increase in food prices.

However, none of the articles included in their analysis the effect of alternative water sources (e.g., treated, desalinated) that help managing water shortages, or the precise agricultural practices such as hydroponics that minimize the use of water and land as resources for food production. We found no CGE article assessing the effect of these innovative technologies on the linkage between water, food, and the ability of the ecosystems to provide water and food along time.

And finally, COVID-19 is the most recent external shock to human well-being and the economy (Elliott et al., 2020). COVID-19 policy recommendations had already been assessed in CGE models aiming to decrease the implications on the economy due to variations in workforce availability (Lahcen et al., 2020) and GHG taxes (Maxim and Zander, 2020). Another study employed PE modeling of the agricultural sector for assessing the potential effects of COVID-19 on GHG emissions in the agriculture sector (Elleby et al., 2020). However, to the best of our knowledge no CGE-based policy analysis of water–ecosystems–food provision following COVID-19 implications has been published.

6.2 Water tariff and investments in the MSB

Water scarcity and CC effects draw the main CGE themes in most policy implication articles dealing with the MSB. For example, Parrado et al. (2019) analyzed the effect of water charges policy on agricultural land use and the economy, based on three types of water sources—desalinated water, water of a river’s basin, and groundwater. Using GTAP8, the CGE modeling showed that a policy using different water charges for agricultural use (as compared to other sectors) can lead to a more efficient and resilient economy. In another example, Touitou et al. (2020) showed that the very negative effects on the economy of water shortages could be counteracted by the introduction of a marginal cost demand management policy. This approach drives a better management of the scarcity of water resources. In fact, the model showed that when Algeria was facing water deficits, the marginal cost tariff policy reversed the trends of an economy that would maintain a tariff policy at average cost. Total investment increased, and total welfare deteriorated less. The drop in the price of water (input and final good), altered by the transition from an average cost pricing to a marginal cost pricing, generated an expansion of many sectors, and stimulated economic activity that reduced the rate of unemployment.

At the Nile delta, Kahsay et al. (2019) used the GTAP-W model that distinguished between rainfed and irrigated agriculture and implemented water as a factor of production, directly substitutable to precipitation, in the production process of irrigated agriculture. In this case, the CC effects enhanced the use of irrigation and by implementing a policy of trade liberalization (removal of import tariffs) and facilitation (reducing non-tariff barriers) it can potentially enhance economic growth and welfare in the Nile Basin. In this case, the most beneficiary sectors were those that did not have irrigation network in place, such as in Sudan, as compared to the Nile Delta in Egypt, where most areas used irrigation. Osman et al. (2019) was also focusing on Egypt and used a single-country CGE (stage 2) to analyze the impacts of the huge investments needed in the Egyptian agricultural and irrigation systems to raise water quality and enhance crops yield and food security along the Nile River’s basin. They found that following the change in water quality income increased by 4% and induced an increase in the production of high-value crops; i.e., fruits (almost triple), seasonal vegetables (30–37%), and rice by (13%) with a 64% increase in rice exports.

In a similar approach, Baum et al. (2016) and Palatnik (2019) employed the Israeli CGE model (IGEM) to estimate the benefit gained by the addition of alternative water sources to limit water shortages. The results clearly demonstrated that an investment in seawater desalination can decrease natural freshwater shortages and has a substantial economic value. Although not discussing the effects of the desalination processes on the ecosystem (externalities), the analysis demonstrated that the economic value of services provided by oceans and seas might be underestimated if evaluated only based on their cost or market price.

7 Conclusions

Following the objective of the UN SDGs and the WEFE nexus to ensure a sustainable development through better management of linked resources, the focus of this literature review was to learn about the economic modeling of the water–food–ecosystem linkage in the MSB. A variety of modeling approaches were identified. A vast literature on water modeling using the CGE framework is available (Wittwer, 2019), with CGE-based studies that are linked to PE models in order to incorporate water and crops specific attributes (as detailed in Sect. 4). However, only a scarce number of studies incorporate into the economic analyses the external effects on the ecosystem and the ecosystem’s ability to continue and provide water and food along time (Sects. 2, 4 and 6).

The linkage between the micro-level ecosystem’s attributes and the macro-level economy-wide water–food analysis is especially challenging when the national accounts reflect water provisioning as one sector and rarely consider alternative water sources as part of the CGE analysis (Delzeit et al., 2020; Müller et al. 2020). For example, the GTAP database includes “water” as a general sector and input to other sectors, not considering the different attributes of river and groundwater as compared to desalinated seawater and treated wastewater. This change is a crucial step to enable ecosystem’s linkage to water–food modeling, and it requires the collection of all missing data to feed the SAM (the database for any CGE model), and to align with the existing framework to ensure a general equilibrium in a new baseline scenario (Delzeit et al., 2020). This challenge is even greater in the southern part of the MSB area, where on the one hand countries already suffer from severe water scarcity (FAO, 2020a), and on the other hand, geographic and economic data are not available at the required detail.

In the decades to come, alternative water sources are expected to be of high importance in water-stressed countries of the Mediterranean region, where further decline of natural freshwater availability is expected due to climate change. Options for producing more food with less water, land, and energy will be key to balance the three dimensions of the water–ecosystem–food nexus and promote UN SDGs for zero hunger, better water management, and ecosystems’ protection. The Mediterranean constitutes a natural capital that provides important services whose economic impacts are often unrecognized or underestimated. Despite the analytical challenges, a consistent analysis of the sustainable use of natural resources, ensuring long-term security of water, food, and ecosystems, is required and feasible.