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[Display omitted] • A factorial energy–water–carbon nexus policy analysis model is developed. • Tax-induced environ-economic impacts are investigated from multiple perspectives. • The factor effects and their interactions are explored under joint tax policies. • The response mechanisms of production sectors in the supply chain are revealed. • This research is dedicated to mitigating carbon emissions and water scarcity. Faced with deteriorating climatic conditions and aquatic environments, a unified framework is required to support joint management policies. In this study, a factorial energy–water–carbon nexus policy analysis model is first developed (i) to explore the complex environ-economic impacts of multiple carbon taxes and wastewater taxes; (ii) to quantify factor interactions and their primary effects; and (iii) to reveal the response mechanisms of supply chains under the cascading effect. A representative coal-dependent and water-scarce region, Shanxi Province, China, is investigated to illustrate the model viability. It is found that the adoption of a carbon tax of 10–40 yuan/ton can reduce carbon emissions by 5%–18% and the simultaneous levying of a wastewater tax of 1.4–14 yuan/ton can alleviate quality-based water scarcity, albeit with some economic contraction. Significant factor interactions imply the superiority of joint taxation strategies, especially for heavy industry. Under cascading effects, the transformation of construction, commercial, and transportation sectors will be promoted. Expanding diversified supply chain channels is also necessary for enhancing regional anti-risk capabilities. This study is intended to provide a new scientific perspective based on joint tax management to mitigate carbon emissions and quality-based water scarcity in regions with similar characteristics around the world. [ABSTRACT FROM AUTHOR]