An Extended Input–Output Model to Analyze Links Between Manufacturing and Water Pollution in Nepal

Nepal’s efforts to reduce manufacturing-related water pollution have faltered because they rely on traditional methods and regulation. We employed an environmentally extended input–output model to establish direct and indirect relations between water pollution and production in 19 Nepalese manufacturing sectors. We identify which are chief emitters of biochemical oxygen demand and total suspended solids. We categorize three sectors as pollution abatement industries (heavy polluters that portend relatively low clean-up costs) and three as pollution prevention industries (polluters responsible for accelerating pollution by inducing the release of pollutants from other linked sectors). We then draw upon statistical analysis to recommend appropriate pollution-reducing incentives or penalties for both categories. We find that incentives to meet discharge standards are effective for pollution abatement industries and that penalties (e.g., polluter pay) are effective in pollution prevention industries because they underpin Nepal’s economy. If these policies do not succeed as desired, emission control policies are warranted.