Discharge Fee Policy Analysis: A Computable General Equilibrium (CGE) Model of Water Resources and Water Environments

Abstract

Abstract:To alleviate increasingly serious water pollution and shortages in developing countries, various kinds of policies have been implemented by local governments. It is vital to quantify and evaluate the performance and potential economic impacts of these policies. This study develops a Computable General Equilibrium (CGE) model to simulate the regional economic and environmental effects of discharge fees. Firstly, water resources and water environment factors are separated from the input and output sources of the National Economic Production Department. Secondly, an extended Social Accounting Matrix (SAM) of Jiangsu province is developed to simulate various scenarios. By changing values of the discharge fees (increased by 50%, 100% and 150%), three scenarios are simulated to examine their influence on the overall economy and each industry. The simulation results show that an increased fee will have a negative impact on Gross Domestic Product (GDP). However, waste water may be effectively controlled. Also, this study demonstrates that along with the economic costs, the increase of the discharge fee will lead to the upgrading of industrial structures from a situation of heavy pollution to one of light pollution which is beneficial to the sustainable development of the economy and the protection of the environment.

Research on CO2 Emission Reduction Mechanism of China’s Iron and Steel Industry under Various Emission Reduction Policies

“…They suggested offering a tax break on energy-intensive, labor-intensive export industries, and implementing a carbon tax return for other industries Yang et al [17] used a CGE model to quantitatively simulate the impact of energy tax scenarios. They found that an energy tax can help to minimize the CO 2 and SO 2 emissions, with increasing marginal emissions reduction costs.…”

Industrial Water Pollution Discharge Taxes in China: A Multi-Sector Dynamic Analysis

“…Before the 2015 reform that replaced resource fees with taxes, the discharge standards consisted of three categories: "Integrated Wastewater Discharge Standard (GB8978-1996)", "Discharge Standard of Pollutants for Municipal Wastewater Treatment Plant (GB18918-2002)", and discharge standards of industrial pollutants [30]. The pollution discharge fee is 0.7 yuan per unit of water pollution [1]. After the new regulations, the "pollutant discharge fee" will be abolished.…”

“…Population growth and rapid economic development in recent decades have dramatically aggravated water pollution and water withdrawal in China, while climate change is resulting in an increasingly uncertain water supply and places additional pressure on constrained freshwater resources [1][2][3]. Thus, a series of policies have been proposed by the Chinese government to address the challenges posed by water shortage and water quality degradation.…”

“…Recent studies of water resource policies have focused on agriculture and used CGE models, for example, allocation of water rights [16], water pricing, water withdrawal limits and agricultural water consumption [17][18][19]. Some other studies used CGE models to assess the impact of industry water policies; Fang, G. demonstrated that an increase in discharge fees would have a negative impact on economic output but lead to a less environmentally damaging industrial structure, contributing to sustainable development [1]. The simulations in Wen Chen of Hunan province indicate that a water pollution tax has a smaller negative effect on GDP in the short term than in long term, and that the manufacturing sector would suffer the most in short term while the wool textile dying industry suffers the most in the long term [20].…”

Water Economics and Policy

“…A water pricing scheme for irrigation water in conditions of unmetered water use is the measure that Lika et al [19] evaluate with a principal-agent model. Fang et al [20] apply a computable general equilibrium model to quantify the performance and potential economic impacts of discharge tariffs, and Ahmad et al [21] study the limits of water pricing in a developing country metropolis. Finally, Montilla-López et al [22] review the worldwide use of water banks as a re-allocation mechanism of water rights.…”