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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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Listed:
  • Jiang, Yi

    (Asian Development Bank)

  • Jin, Leshan

    (China Agricultural University)

  • Lin, Tun

    (Asian Development Bank)

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.

Suggested Citation

  • Jiang, Yi & Jin, Leshan & Lin, Tun, 2010. "Higher Water Tariffs for Less River Pollution—Evidence from Min River and Fuzhou City, People’s Republic of China," ADB Economics Working Paper Series 201, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0201
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    References listed on IDEAS

    as
    1. W. Viscusi & Joel Huber & Jason Bell, 2008. "The Economic Value of Water Quality," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 41(2), pages 169-187, October.
    2. Bulte, Erwin & Gerking, Shelby & List, John A. & de Zeeuw, Aart, 2005. "The effect of varying the causes of environmental problems on stated WTP values: evidence from a field study," Journal of Environmental Economics and Management, Elsevier, vol. 49(2), pages 330-342, March.
    3. Engel, Stefanie & Pagiola, Stefano & Wunder, Sven, 2008. "Designing payments for environmental services in theory and practice: An overview of the issues," Ecological Economics, Elsevier, vol. 65(4), pages 663-674, May.
    4. 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, vol. 65(1), pages 155-166, March.
    5. 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, vol. 21(1), pages 136-149, March.
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    Keywords

    nonpoint source pollution; payment for environmental services (PES); urban water;

    JEL classification:

    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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