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Pricing or Quota? A Solution to Water Scarcity in Oasis Regions in China: A Case Study in the Heihe River Basin

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  • Minjun Shi

    (School of Management, University of Chinese Academy of Sciences, Beijing 100190, China
    Research Centre on Fictitious Economy & Data Science, Chinese Academy of Sciences, Beijing 100190, China)

  • Xiaojun Wang

    (School of Management, University of Chinese Academy of Sciences, Beijing 100190, China
    Research Centre on Fictitious Economy & Data Science, Chinese Academy of Sciences, Beijing 100190, China)

  • Hong Yang

    (Swiss Federal institute for Aquatic Science and Technology (Eawag), Ueberlandstrasse 133, Duebendorf 8600, Switzerland)

  • Tao Wang

    (Cold and Arid Regions Environmental and Engineering Research Institute, Chinese Academy of Sciences, Lanzhou 730000, China)

Abstract

The conflict between increasing water demand and limited water resources has become a serious threat to oasis regions in China. Solutions to water scarcity have to curb overall water demands, especially reducing agricultural water use. Price control and quantitative control are the two most commonly applied policy instruments for water demand management. This paper used a bio-economic model (BEM) to examine the shadow price of water resources and to investigate farmers’ response to water demand management policies in water scarce regions based on a study in the Heihe River Basin in northwest China. The results indicate that farmers are not very responsive to changes in water price, because it is currently far below the shadow price of water resources in most irrigation zones. A reduction of agricultural water demand could occur only with a large rise in the water price. In comparison, a quantitative control measure is more effective at reducing water use. Concerning the effects on farm income, a price control will cost much more than a quantitative control to save the same volume of water. Hence, a water quota is a more suitable choice for the purpose of reducing agricultural water use, while minimizing farm income loss in the region of this case study.

Suggested Citation

  • Minjun Shi & Xiaojun Wang & Hong Yang & Tao Wang, 2014. "Pricing or Quota? A Solution to Water Scarcity in Oasis Regions in China: A Case Study in the Heihe River Basin," Sustainability, MDPI, vol. 6(11), pages 1-20, October.
    • Handle: RePEc:gam:jsusta:v:6:y:2014:i:11:p:7601-7620:d:41769
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