Resources Science ›› 2016, Vol. 38 ›› Issue (10): 1901-1913.doi: 10.18402/resci.2016.10.08

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The impact of Zhangye’s water price reform on the economy and water saving using Water-Land CGE model

LIU Yu1, WANG Yu2, ZHOU Meifang3, DENG Xiangzheng4   

  1. 1. Institute of Policy and Management,Chinese Academy of Sciences,Beijing 100190,China;
    2. School of Economics & Management,China Agricultural University,Beijing 100083,China;
    3. School of Management and Economics,Beijing Institute of Technology,Beijing 100081,China;
    4. Institute of Geographic Sciences and Natural Resources Research,Chinese Academy of Sciences,Beijing 100101,China
  • Received:2016-05-25 Revised:2016-08-15 Online:2016-10-25 Published:2016-10-25

Abstract: Increasing the water resource use price of agriculture sectors has been an important policy instrument in improving the sustainable use of water resources of the Heihe River basin. Zhangye city is the main consumer of Heihe River basin’s water resources. Taking Zhangye as an example,we explored the impact of agricultural water price reform on Zhangye’s economy and water-savings using a water-land integrated computable general equilibrium model (CGE). The model adopted a highly disaggregated agricultural sector profile and highlights three types of water resources in the production structure. These two features allowed us to better characterize the output change in different agricultural crops in the face of a water price shock,and to explore in detail how an agriculture planting structure adjustment and different types of water resource price adjustment can be conducted to generate minor negative economic impacts but obvious water-savings. Simulation results show that the reform only has minor negative impacts on the economy,with 0.091% loss for Zhangye’s GDP;the benefit from water-saving is obvious with a 9.568% decrease for total water use and 9.384% decrease for water consumption per million GDP. Agriculture sectors were found to be the only contributor to water-savings,with underground water being the main conservation water resource type. Water and land resources are expected to move from agriculture sectors to non-agriculture sectors. Only agriculture sectors experienced a negative shock,with outputs decreasing 4.1% on average. The negative performance of agriculture sectors is due to high water consumption coefficient and increasing water use cost. Our analysis enriches our understanding of the impact of price leverages on water conservation and emphasizes that government should pay attention to the initial negative impact on agriculture and price substitution effect among different water resources.

Key words: benefit from water-saving, CGE model, economic impact, water price reform, water-land reallocation, Zhangye City