Food, energy, and water (FEW) are interconnected pillars that underpin the security of people’s livelihoods. In this paper, we propose a decision-support model to better understand and aid management of regional FEW nexus systems under uncertainty. We apply the model to a case study focusing on fluctuations in water supply, which significantly affect production in the agriculture and energy sectors in Shanxi Province, China. We use a two-stage, stochastic, chance-constrained programming approach to the proposed spatially detailed cost-minimizing FEW nexus model under demand and natural resource (land and water) constraints. This approach translates the target reliability level (i.e., the probability that the devised solution can satisfy all constraints) into a penalty that has to be paid in the case of their non-fulfillment. On this basis, robust decisions (i.e., production options suitable for a broad variation in certainty of water supply) are derived. Using this approach, we estimate the penalties required to achieve given levels of reliability by incentivizing the deployment of water-saving technologies. For example, our model predicts that water storage would become cost-effective if the penalty for exceeding the available water supply were 2.5 times higher than the current price for industrial water; this would enable at least 40% reliability compared to 18% if the penalty were at the current water price level. Taking advantage of the differences in water intensity of crops in different sites, our model optimizes the reservoir location, which allows water withdrawal by agriculture to be reduced by 1.23%. We also evaluate the benefits of incorporating uncertainty and missed opportunity due to a lack of perfect information. In the case study, we show that the benefits of including uncertainty in the form of the two-stage stochastic programming approach appear to be quite significant, reaching 4% of the total solution costs. Water-importing costs, taxes, and subsidies are instruments that translate into the penalty in this model; the modeling approach presented here can thus be used to inform cost-effective and robust management of the FEW nexus in Shanxi Province, China, and other water-scarce regions around the world.

Proper management of water in the food industry will depend, to a large extent, on economic incentives regulated by legislation. The influence of water cost and wastewater discharge taxes is analyzed, as factors that encourage the implementation of water recycling systems and wastewater treatments within the food industry. Two Spanish taxation models are taken into account: at the national level, the Waste Control Tax; and at the local level, the autonomous Sanitary Tax. The cost reduction obtained in the Waste Control Tax by investing 68,305€ in minimizing water consumption from 193,200m³/year to 142,417m³/year is negligible since it is not a quantitatively elevated tax (from 2262€/year to 1407€/year). With regard to the Sanitary Tax, diversity affects the tax quantity and, consequently, the pressure exerted on the effluent quality in each case. In the Region of Murcia, the sanitary tax reduction was 8885€/year; and in La Rioja, the saving is greater (38,642€/year) given that this tax is considerably higher. Designing more stringent environmental regulation will markedly enhance the development of new technologies for improving wastewater treatment towards the goal of environmentally acceptable discharging and water reuse.