Water in computable general equilibrium models: review, synthesis and avenues for future research

Water-extended Computable General Equilibrium (CGE) models are a class of economy-wide models widely used as tools to address research and policy questions for various water-related topics. This systematic review analyses 100 applications of water-CGE models, categorising them into key areas based on their structure and aims, including agricultural, industrial, combination of agricultural and industrial, energy, and combination of energy and agriculture, to examine the methodological approaches of incorporating water into CGE models, and to explore the various themes of the applications. Findings suggest that improvements in incorporating water in CGE models require improvements in the quality and detail of water data, explicitly specifying water as a factor of production, constructing models at smaller spatial scales, accounting for water seasonality, and improving transparency of calibration and validation methods. Addressing these challenges will enhance the representation of water in CGE models that can provide critical insights in addressing water-economy interconnections.