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Higher water tariffs for less river pollution—evidence from Min River and Fuzhou City, People’s Republic of China

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  • Jiang, Yi
  • Jin, Leshan
  • Lin, Tun
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Abstract

Upstream nonpoint source pollution has become a significant threat to urban drinking water safety in the People’s Republic of China. Payment for environmental services (PES) is seen as a promising mechanism to deal with the situation. In designing a sound PES, it is crucial to determine the willingness to pay (WTP) of urban beneficiaries for upstream water pollution controls. An analysis of household data from a contingent valuation survey conducted in Fuzhou in 2009 reveals that household income is the most important factor in determining respondents’ positions on water tariff increases as well as WTP under a PES scheme. Mean WTP varies from Yuan (CNY) –0.45 per cubic meter to CNY0.86 for different income groups. The overall mean WTP is estimated to be CNY0.21, which is equivalent to a 10% increase in the current tariff, with the 95% confidence interval at (CNY0.12, CNY0.31). The point estimate implies a total annual WTP of Fuzhou City equal to CNY22 million, which is 27% less than the contribution of Fuzhou to an ongoing government-financed PES. However, with continuous water tariff increases, affordability among low-income households might arise as an issue. This calls for subsidies targeting low-income households to be incorporated in water tariff reform.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24992.

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Date of creation: May 2010
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Handle: RePEc:pra:mprapa:24992

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Keywords: water tariff; river pollution; upstream nonpoint source pollution; payment for environmental services; willingness to pay; Min River; Fuzhou City; China;

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  1. Erwin Bulte & Shelby Gerking & John List & Aart de Zeeuw, 2004. "The effect of varying the causes of environmental problems on stated wtp values: Evidence from a field study," Framed Field Experiments, The Field Experiments Website 00134, The Field Experiments Website.
  2. Engel, Stefanie & Pagiola, Stefano & Wunder, Sven, 2008. "Designing payments for environmental services in theory and practice: An overview of the issues," Ecological Economics, Elsevier, Elsevier, vol. 65(4), pages 663-674, May.
  3. Wang, Hua & Xie, Jian & Li, Honglin, 2010. "Water pricing with household surveys: A study of acceptability and willingness to pay in Chongqing, China," China Economic Review, Elsevier, Elsevier, vol. 21(1), pages 136-149, March.
  4. W. Viscusi & Joel Huber & Jason Bell, 2008. "The Economic Value of Water Quality," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 41(2), pages 169-187, October.
  5. Ojeda, Monica Ilija & Mayer, Alex S. & Solomon, Barry D., 2008. "Economic valuation of environmental services sustained by water flows in the Yaqui River Delta," Ecological Economics, Elsevier, Elsevier, vol. 65(1), pages 155-166, March.
  6. Bulte, E.H. & Gerking, S.D. & List, J.A. & Zeeuw, A.J. de, 2005. "The effect of varying the causes of environmental problems on stated values: Evidence from a field study," Open Access publications from Tilburg University urn:nbn:nl:ui:12-167602, Tilburg University.
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