Development of a factorial water policy simulation approach from production and consumption perspectives

•A factorial water policy simulation model is developed.•Water-intensity industries are identified through structural path analysis.•Production- and consumption-based industrial water-management policies are analyzed.•The composite effects from multidimensional interactive water-management policies are explored.•Water production and supply industry is examined comprehensively. Industrial water-management policies are prevalent around the world to alleviate global water scarcity. It is indispensable to simulate the effects of different water-management policies on various industries in the socioeconomic system to explore the most effective water consumption reduction pathways. In this study, a factorial water policy simulation model is developed to investigate the composite effects of multidimensional interactive water-management policies from both production and consumption perspectives. Structural path analysis and factorial analysis are introduced simultaneously to help support policy formulation according to local reality and further examine the impacts of the main factors and their interactions respectively. The developed model has been applied to the Municipality of Chongqing, China to demonstrate the applicability and superiority of the factorial water policy simulation model. It was found that the impacts of industrial technology upgrade policies on different industries vary significantly. The consumption-orientation policies have a similar performance on direct water consumption reductions. In the Municipality of Chongqing, industrial technology upgrade policies applied to the primary industry will generate larger reductions of water consumption (i.e., 10.1 units reduction of total water consumption) in the system since the primary industry can influence other industries through intermediate utilization. The contribution of interactions for the reductions of direct water consumption was 10.38%, where policies implemented on the primary industry and construction industry have the most significant interaction. In addition, the industry of production and supply of water is closely related to most of the industries since its technical improved can reduce the indirect water consumption of the majority of industries. The results provide bases for supporting the Municipality's efforts in formulating desired water-management policies. [Display omitted]