Water peaking with a three‐pillar analysis in China: Exploring the interplay of resource utilization and industrial structure

Abstract

This study introduces the innovative concept of water‐peaking theory, drawing inspiration from the theories of “peak oil” and “carbon peaking.” Employing the Environmental Kuznets Curve, Tapio's decoupling theory, and Logarithmic Mean Divisia Index decomposition, we analyze data spanning from 2006 to 2020, yielding significant findings. First, China's three industries exhibit an imbalanced structure in the utilization of water resources, necessitating the reallocation of water from the primary industry to the secondary and tertiary industries. Second, although China has not yet attained absolute water peaking, it confronts a predicament in sustainable development. Third, the primary and secondary industries demonstrate favorable decoupling of water consumption from economic growth, while the tertiary industry faces challenges in achieving historical water peaking. Fourth, drivers on the production side (technological effects, structural effects, output effects) substantially reduce water consumption across all industries, contributing to progress toward water peaking. Conversely, factors on the consumer side (population effects) play a minor role with untapped potential. This research provides valuable insights for nations worldwide in identifying historical inflection points in water resource management, pursuing sustainable pathways for industrial water usage and economic growth, and achieving environmental quality and sustainable economic development objectives. China's experiences serve as a guiding exemplar in this endeavor.