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Water pollution abatement by Chinese industry: cost estimates and policy implications

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  • Susmita Dasgupta
  • Mainul Huq
  • David Wheeler
  • Chonghua Zhang

Abstract

Factory-level data are used to estimate water pollution abatement costs for Chinese industry. Joint abatement cost functions are utilized which relate total costs to treatment volume and the simultaneous effect of reductions in suspended solids, chemical oxygen demand, biological oxygen demand and other pollutants. Tests of alternative functional forms suggest that a very simple (constant elasticity) model fits the data as well as a complex (translog) model, permitting sophisticated policy experiments with relatively simple calculations. From the results, the cost-effectiveness of current pollution control policy in China is analysed. Basic conclusions are (1) The benefits of stricter discharge standards should be weighed carefully against the costs. For the sample of 260 factories, a shift across the existing range of standards entails a present-value difference of US$330 million in abatement costs. (2) Emissions charges as low as US$1.00/ton would be sufficient to induce 80% abatement of suspended solids for cost-minimizing factories. Charges of US$3, US$15 and US$30 per ton would be sufficient to induce 90% abatement of TSS, COD and BOD. (3) The current regulatory system provides an economic incentive to abate by charging a levy on pollution in excess of the standard. However, the results suggest that changing to a full emissions charge system would greatly reduce overall abatement costs. For the 260 factories in the sample, the current overall abatement rate could be attained under a charge system at a reduced annual cost whose present value is US$344 million.

Suggested Citation

  • Susmita Dasgupta & Mainul Huq & David Wheeler & Chonghua Zhang, 2001. "Water pollution abatement by Chinese industry: cost estimates and policy implications," Applied Economics, Taylor & Francis Journals, vol. 33(4), pages 547-557.
  • Handle: RePEc:taf:applec:v:33:y:2001:i:4:p:547-557
    DOI: 10.1080/00036840122068
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    References listed on IDEAS

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    1. Wayne B Gray & Ronald J Shadbegian, 1993. "Environmental Regulation And Manufacturing Productivity At The Plant Level," Working Papers 93-6, Center for Economic Studies, U.S. Census Bureau.
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