Are we at a watershed? An integrated assessment model for Italy

As global warming intensifies, the availability of water poses an increasing challenge for countries such as Italy. Italy's socioeconomic structure places significant pressure on domestic and international water resources, especially through imports. In 2014, more than half of Italy's total water footprint (WF, 126,453 Mm³) was sourced from abroad. The agricultural sector is the largest contributor, accounting for 78.6% of the WF---70.9% domestically and 83.7% externally. As climate change concerns grow, efficient water management is crucial, yet research often overlooks the complex interactions between socio-economic factors and water resources. To address this gap, we extend the EUROGREEN model by integrating a new hydrological module that explores the water-economy nexus. This module evaluates feedback loops and the effects of policy measures on both water and economic outcomes, providing a comprehensive view of their interdependencies. The model introduces an Extended Water Exploitation Index (EWEI), considering variations in water stress by fully accounting for grey water demand and supply constraints. We present initial results from a base scenario and several alternatives, analyzing the impact on agricultural productivity, industrial output, and regional water scarcity. The base scenario suggests that endogenous growth and climate change could exacerbate water stress, underscoring the need for integrated water management strategies to ensure socioeconomic stability.