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Abstract
This paper presents a generic and flexible modelling approach combining a water focused computable general equilibrium model (STAGE_W) with a non-linear mathematical programming model for the water sector (MYWAS). The advantage of this setup is that it allows to consider economy-wide effects of changes in the water sector, while considering topography and infrastructural limitations of water supply which affect regional provision costs. Further our approach considers a flexible set of different water qualities. The two models are linked by exchanging changes of result variable vectors in an iterative process. We apply our approach to study the case of the water-energy-food nexus in Israel. A large share of the potable water consumption in Israel stems from desalination and wastewater recycling. Although both activities are considered as viable means to reduce pressure on the already overused aquifers, they are highly energy intensive and thus expansive. Recently, three large gas fields have been discovered in the Mediterranean Sea close to the Israeli coast. Their exploitation is expected to considerably decrease domestic energy prices. This in turn will make the production of energy-intensive commodities including desalinated and recycled water cheaper. The economy wide effects of this shock are analyzed in this paper.