Sectoral‐Driven Framework for Dynamic Water Stress Assessment and Management

ABSTRACT Water scarcity is a growing challenge for sustainable development, especially in regions with limited renewable water resources. Accurate assessment of water stress is fundamental to achieving sustainable resource management, especially in regions with limited water availability and growing competition among agricultural, industrial, and services sectors. This paper introduces a novel dynamic sectoral‐driven water stress index (DWS) that integrates economic productivity, water use efficiency, and climate‐adjusted water availability. Drawing on a modified Cobb–Douglas production function, the potential gross value added (GVA) is estimated in agriculture, industry, and services, capturing distinct capital, labor, and specific resource inputs (e.g., cultivated land for agriculture, intermediate inputs for industry, and human capital for services). Sectoral water demands are then calculated by applying sector‐specific water‐use efficiency (WUE) coefficients in accordance with SDG 6.4.1 context. To account for climate variability, the model dynamically adjusts exploitable renewable water availability (WA) based on projected precipitation changes and hydroclimatic conditions. By comparing the sum of sectoral water demands against this evolving water availability, DWS provides a single, economy‐wide indicator of water stress that reflects both current conditions and future scenarios under defined assumptions and policy pathways. The application of the DWS framework to Lebanon reveals a significant increase in national water stress, from 88.5% in 2019 (high stress) to a projected 113.6% by 2035 (critical stress), indicating a critical future scenario. Results show that industrial water demand has already overtaken agriculture, emphasizing the need to improve water‐use efficiency in both sectors. The findings highlight Lebanon's water stress under evolving economic and climatic conditions and identify actionable opportunities to address water stress challenges. The framework allows for the simulation of various policy options, providing actionable insights for balancing economic growth with water resource sustainability.