11

Water Markets as Countermeasures to Water Markets as Countermeasures to China’s Water Shortage Crisis China’s Water Shortage Crisis A Study Proposal Cased by the Yellow RiverA Study Proposal Cased by the Yellow River

Yahua Wang Ph. D. Yahua Wang Ph. D. Center for China StudiesCenter for China Studies

School of Public policy and ManagementSchool of Public policy and ManagementTsinghua University, ChinaTsinghua University, China

33

China’s Multiple Water IssuesChina’s Multiple Water Issues

Water ShortageWater Shortage Water PollutionWater Pollution Water Ecosystem DeteriorationWater Ecosystem Deterioration Drought-flood DisastersDrought-flood Disasters

44

China’s Water Shortage CrisisChina’s Water Shortage Crisis With 7% of the world’s total freshwater , China With 7% of the world’s total freshwater , China

has to support more than 21% of the world’s has to support more than 21% of the world’s population.population.

The spatial and temporal distribution is extremely The spatial and temporal distribution is extremely uneven. 42% farmland but only 8% runoff in uneven. 42% farmland but only 8% runoff in Northern China. Northern China.

The Yellow River did not reach the ocean (cutoffs) The Yellow River did not reach the ocean (cutoffs) 226 days in 1997. 226 days in 1997.

2/3 of the nation’s cities suffer water shortage. 2/3 of the nation’s cities suffer water shortage. Water shortage results in more than 200 billion Water shortage results in more than 200 billion

RMB economic losses in industrial production RMB economic losses in industrial production every year. every year.

55

Renewable fresh water per capitaRenewable fresh water per capita

cubic meters728

2183

3380

3386

4513

9621

13,233

17,848Myanmar

U.S.

Thailand

China

North China

Japan

Vietnam

Indonesia

66

Low efficiency of water use in ChinaLow efficiency of water use in China

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Brazil China France Germany India Japan Russia UK USA

Cubic meter per $ GNI

Cubic meter per $ PPP GNI

Cubic meter

77

Groundwater gets rapidly depleted and pollutedGroundwater gets rapidly depleted and polluted

The sum of groundwater depletion and polluted water supply (in 100 million cubic meters)0 - 1010 - 2020 - 3030 - 50>50

N

EW

S

88

The YellowThe Yellow RiverRiver

Upper Basin

Lower Basin

Middle Basin

99

2%

98%15%

85%

12%

88%

Water in YR

Irrigatio

n

Population

Su

pp

ort S

up

por

tYR Water allocation situation in China 9%

91%

City

!

1010

Water Shortage in the Water Shortage in the YRYR

1111

Latest water resources assessment for the riverLatest water resources assessment for the river （（ 100 million cubic meters100 million cubic meters ））

PeriodSurface

Water

Ground WaterTotal AmountTotal

Not Repeated

1956－ 1959 608.6 372.8 69.4

678.0

1960－ 1969 650.2 383.0 89.7

739.9

1970－ 1979 569.8 396.5 112.0

681.7

1980－ 1989 614.0 395.8 109.9

723.9

1990－ 2000 524.9 393.7 122.8

647.7

1956－ 1979 609.4 386.9 96.2

705.6

1980－ 2000 567.1 394.7 116.8

683.9

1956－ 2000

548.7 404.2 127.7 676.4

Source: IWHR.Source: IWHR.

1212

A drying riverA drying river

1313

Consumptiom of Water in the YRB(2005)

14.70%74.30%

11%

Agri cul ture Insdustry Househol d

1414

The divergence of water use and The divergence of water use and irrigation efficiency along the YRirrigation efficiency along the YR

黄河各区段灌溉用水比较

0100200300400500600700800900

1000

-河源 龙羊峡 -龙羊峡 兰州 -兰州 河口镇 -河口镇 龙门 -龙门 三门峡 -三门峡 花园口 -花园口 河口

区段

相当于流域平均水平

（%）

地表亩均灌水量 井灌亩均取水量

沿黄各省灌溉面积效率比较

0

0.2

0.4

0.6

0.8

1

1.2

1.4

青海 甘肃 宁夏 内蒙 陕西 山西 河南 山东

灌溉面积产出效率系数

1515

We propose water rights reform and quasi-We propose water rights reform and quasi-market introduction (Hu and Wang, 2000)market introduction (Hu and Wang, 2000)

The paper has drawn The paper has drawn strong attentions of strong attentions of policy-makers policy-makers

Several policy Several policy suggestions has been suggestions has been adopted by the MWRadopted by the MWR

A proposed term of A proposed term of ‘Quasi-market’ has ‘Quasi-market’ has entered into official entered into official documentdocument

Promote the practice of Promote the practice of water right and water water right and water market in the YRBmarket in the YRB

1616

Water market has become a new approach Water market has become a new approach accepted by the Governmentaccepted by the Government

Wang Shucheng (2002)Wang Shucheng (2002): transition from engineering-b: transition from engineering-based to resources management ased to resources management

Philosophy: harmonize human and naturePhilosophy: harmonize human and nature

Regime: integrated water managementRegime: integrated water management

Instruments: water rights and water marketInstruments: water rights and water market

1717

Water rights reform in the YRBWater rights reform in the YRB Draw more detailed water allocation schemeDraw more detailed water allocation scheme Implement total amount control strictly Implement total amount control strictly Carry out Integrated water diversion by the YRCC Carry out Integrated water diversion by the YRCC

((Development of Digital Water Diversion SystemDevelopment of Digital Water Diversion System) ) Stimulate riparian provinces water saving activity Stimulate riparian provinces water saving activity

As one of the results, water market as one As one of the results, water market as one instrument to promote water efficiency has instrument to promote water efficiency has transformed from theory to practice. In Ningxia transformed from theory to practice. In Ningxia and Inner Mongolia, water right transfer from and Inner Mongolia, water right transfer from irrigation to industry happened in the past irrigation to industry happened in the past several years.several years.

1818

Changes of water uses after institutional Changes of water uses after institutional reform (1999-2003)reform (1999-2003)

-10 -8 -6 -4 -2 0 2 4

青海

甘肃

宁夏

内蒙古

陕西

山西

河南

山东

河北天津

( m3)亿

Agri cul ture I ndustry Ci ty

1919

Percentage of water overused by Yellow Percentage of water overused by Yellow

River riparian provinces (1988-2003)River riparian provinces (1988-2003)

2020

Contrast between Runoff and Cut-off of Contrast between Runoff and Cut-off of Yellow River (1991-2003)Yellow River (1991-2003)

16

83

6074

122136

226

142

42

0 0 0 0

398

526 536

453

404

465

356

448 452

350323

300

575

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Cutoff Days Ri ver Runoff (Bi l l i on Cubi c Meter）

2121

Estimations of the reform benefits based on Estimations of the reform benefits based on “Marco Hydro-Eco Model of YRB”“Marco Hydro-Eco Model of YRB”

Year GDP(%) Agr. GDP(%) GrainProduction (%)

Surface Water use (%)

1999 1.31 6.86 6.79 -9.38

2000 2.81 11.99 13.10 -6.79

2001 4.75 14.39 15.64 -4.25

2002 2.57 15.10 15.53 -2.82

2003 1.58 10.73 11.84 -7.31

Average 2.58 11.84 12.56 -6.16

2222

The situation has The situation has stimulated the stimulated the government a government a policy passion to policy passion to promote water promote water market!market!

274 332 412 499 525 610 768525

692984 1121 1160

1285

1000

1940

3716 3546

3764

38223920 3860

3580

418

2545

5633563055665305

1030

2050

2744

4408 4403

4868

0

1000

2000

3000

4000

5000

6000

1949 1959 1965 1980 1985 1990 1995 1997 2000 2005 年份

用水量（亿m3）

生活 工业 农业

243 285 340 387 547 612 641 678 610

10641534

19072432

29983385

35233005 3107 3027

22101230

1520

1520

1658

19342073

1893 1893 1851

1980

468435

1796

4800

555656415510

6143

2537

3339

3767

4477

5229

5787

0

1000

2000

3000

4000

5000

6000

7000

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 年份

(用水量 亿m3)

生活 工业 农业

ChinaChina

USAUSA

2323

But very limited research existing upon water But very limited research existing upon water market in China hithertomarket in China hitherto

2424

According to the international experiences, the operation According to the international experiences, the operation of water right market is very complex, while big gap of water right market is very complex, while big gap between policy demand and scientific understanding upon between policy demand and scientific understanding upon water market in Chinawater market in China

The practice of water right market is underway, but the The practice of water right market is underway, but the research in this domain still seldom. Many questions research in this domain still seldom. Many questions should be answered in theory, such as: should be answered in theory, such as:

What potential does the water market have, like What potential does the water market have, like scale , quantity and welfare gains?scale , quantity and welfare gains?

How to price the trading water rights?How to price the trading water rights? How to design the regulations on water market?How to design the regulations on water market?

2525

Anna Heaney et. al. (2006) estimate the Anna Heaney et. al. (2006) estimate the benefits of water reallocation between benefits of water reallocation between irrigation districts in the Yellow River Basin. irrigation districts in the Yellow River Basin.

Increasing academic interests on China’s water Increasing academic interests on China’s water market issues in academiamarket issues in academia

2626

A proposal of simulation on Water Right A proposal of simulation on Water Right Market in YRB. The objectives are following:Market in YRB. The objectives are following:

Develop mathematical model and computer Develop mathematical model and computer numerical modeling to simulate water market numerical modeling to simulate water market based on existing hydro models as analysis based on existing hydro models as analysis instruments to understand water market in instruments to understand water market in the real world subject to the real world subject to Transaction Costs, Transaction Costs, Risk and Uncertainty, Withdrawal and Third-party Risk and Uncertainty, Withdrawal and Third-party Impact, and Market PowerImpact, and Market Power..

In order to evaluate the real potential of water In order to evaluate the real potential of water market in YRB, develop pricing method of market in YRB, develop pricing method of water rights, and raise institutional designs water rights, and raise institutional designs and policy suggestions to policymakers. and policy suggestions to policymakers.

2727

A tentative roadmap for the proposed A tentative roadmap for the proposed researchresearch

2828

Some other hot topics of water Some other hot topics of water governance for China todaygovernance for China today

Guaranteeing Drinking Water SafetyGuaranteeing Drinking Water Safety

Building a Water-Saving SocietyBuilding a Water-Saving Society

Promoting Healthy Life of RiversPromoting Healthy Life of Rivers

Regarding Ecological Issues with Water ProjectsRegarding Ecological Issues with Water Projects

2929

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