Study on Water Tariff Reform and Income Impacts in China’s … · 2016-07-11 · 1 Study on Water...
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1 Study on Water Tariff Reform and Income Impacts in China’s Metropolitan Areas: The Case of Beijing Submitted to The World Bank By Zhang Shiqiu, Deng Liangchun, Yue Peng, Cui Huishan College of Environmental Sciences and Engineering Peking University July 2007 46920 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript of Study on Water Tariff Reform and Income Impacts in China’s … · 2016-07-11 · 1 Study on Water...
1
Study on Water Tariff Reform and Income
Impacts in China’s Metropolitan Areas: The Case of Beijing
Submitted to
The World Bank
By
Zhang Shiqiu, Deng Liangchun, Yue Peng, Cui Huishan
College of Environmental Sciences and Engineering
Peking University
July 2007
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CHAPTER 1 BEIJING’S WATER RESOURCES STATUS AND MANAGEMENT..........................1
1.1 OVERVIEW OF WATER RESOURCES STATUS ........................................................................1 1.1.1 The precipitation is 585mm annually and is uneven in distribution.............1 1.1.2 With 300m3 water resources per capita, Beijing is a severe water shortage
city ...........................................................................................................................................2 1.1.3 Serious water resources situation in Beijing....................................................2
1.2 PROBLEMS IDENTIFIED REGARDING THE WATER SUPPLY AND IT’S UTILIZATION IN BEIJING .5 1.2.1 Problems ...............................................................................................................5 1.2.2 Main reasons ........................................................................................................6
CHAPTER 2 WATER PRICING POLICY REFORM IN BEIJING..................................................8
2.1 GENERAL SITUATION AND TREND OF RESIDENTIAL WATER USE IN BEIJING .........................8 2.1.1 General situation of residential water use .......................................................8 2.1.2 Future trend of residential water use ...............................................................9
2.2 BEIJING’S RESIDENTIAL WATER PRICING POLICY................................................................9 2.2.1 Historical changes of residential water pricing policy ....................................9 2.2.2 Other demand side management......................................................................2 2.2.3 Institutional arrangement for residential water charges ...............................3
CHAPTER 3 THE ANALYSIS OF BEHAVIOR REACTION TO PRICE POLICY OF BEIJING RESIDENTS ......................................................................................................................................5
3.1 REVIEW OF THE REACTIONS OF THE RESIDENTS TO THE WATER PRICING POLICY REFORM...5 3.1.1 Short-run reaction to water price increase ......................................................6 3.1.2 The long-term reactions to the water price increase .....................................8
3.2 THE ANALYSIS OF SURVEYS CONDUCTED FOR 200 HOUSEHOLDS........................................9 3.2.1 Residents care more about water quality ........................................................9 3.2.2 The attitude toward water price reform is closely related to the income .10 3.2.3 Water price reform improves the resident’s awareness and behaviors
regarding uses of water......................................................................................................11 3.2.4 Residents started to use water saving facilities and instruments...............16 3.2.5 Attitude toward water price policy: most residents support the blocked
pricing policy other than uniform pricing policy ..............................................................19 3.2.6 Other observation: residents support the reform that increases the levy on
the water resources fee and the sewage treatment cost ..............................................22 3.2.7 Media played an important role on improving water saving awareness ...22
3.3 OTHER FACTORS AFFECT THE BEHAVIORS OF RESIDENTS .................................................23 3.3.1 Continued growth of income............................................................................23 3.3.2 Availability of water saving facilities and policies..........................................24 3.3.3 The problems related to the use of revenues generated from the water
pricing policy ........................................................................................................................25
CHAPTER 4 ECONOMETRIC ANALYSIS FOR THE DOMESTIC WATER DEMAND ...............26
4.1 THEORY AND METHODOLOGY .........................................................................................26 4.1.1 The Almost Ideal Demand System (AIDS) AIDS Model ...............................26 4.1.2 Policy Simulation and Welfare Analysis ..........................................................29
i
4.2 DATA SOURCES AND DATA PROCESSING..........................................................................33 4.3 ESTIMATION AND RESULTS .............................................................................................37
4.3.1 Engel Curves for water .....................................................................................37 4.3.2 Household incomes impose a significant impact on water demand, the PED,
and the IED ..........................................................................................................................39 4.3.3 Welfare Effects of Introducing Increasing Block Tariff (IBT).......................40 4.3.4 Burden of Water Saving and Cost Recovery ..................................................45
CHAPTER 5 FINDINGS AND POLICY RECOMMENDATIONS ..............................................47
5.1 KEY FINDINGS OF THE STUDY ........................................................................................47 5.1.1 Problems identified for Beijing’s Water Pricing Reform ...............................47 5.1.2 Reaction of Beijing Residents on Pricing Policy.............................................48 5.1.3 Household income imposes significant impacts on water demand, the PED,
and the IED ..........................................................................................................................50 5.1.4 Increasing Block Tariff system will help the conservation of water and
improve the welfare and cost burden sharing.................................................................51 5.2 POLICY RECOMMENDATIONS...........................................................................................56
ANNEX 1: SUMMARY OF THE CITIES INTRODUCING THE IBT SYSTEM IN CHINA ...........62
REFERENCES： .............................................................................................................................64
ii
1
Chapter 1 Beijing’s water resources status and management
1.1 Overview of water resources status
As a capital in the world, Beijing has been suffering from a water shortage. The total
amount of water resources is 3.629 billion m3. The per-capita water resource is only 300
m3, which is 1/8 of China’s average level and 1/32 of the world’s, which is far below the
average 3000m3 /person, and even lower than the severe water shortage standards of 1000
m3 /person.
Precipitation: Beijing is one of the areas in Northern China that has a large amount of
rainfall. The average annual rainfall is about 585mm and the extreme values are 1406mm
and 272mm respectively. From June to September about 85% of the total rain falls, and
sometimes 70% of the annual total falls during the last ten days of July and the first ten
days of August. This combination of uneven distribution over time and space makes the
water situation in Beijing even worse; sometimes it results in extreme water shortage.
Surface water: About 90% of Beijing’s surface water is rooted in outer areas. The total
average amount of surface water resources is 2.178 m3. Eighty-five reservoirs and other
irrigation works have been built since the 1950s-1960s, of which, Guanting reservoir and
Miyun reservoir are the most important resources of surface water for Beijing.
Ground water: Beijing is one of the cities which mostly depends on a ground water
supply; about 60% of the total water supply is from ground water. The total amount of
ground water resources is 2.521 m3. There are seven major large water plants exploiting
the ground water in Beijing.
1.1.1 The precipitation is 585mm annually and is uneven in distribution
The average annual precipitation is 585mml. The precipitation in Beijing distributes
unevenly across space and time. First, about 85% of the annual precipitation is highly
centralized from June to September. Second, as shown in Fig1, there are great varieties
from year to year. The minimal precipitation per year is 370.4mm and the maximal is
724mm from the year 1988 to 2003. Third, the abundant and low water periods are
interlaced across time.
590
480
667 655
491423
724
596656
410
686
373438
472.6
370.4
486539
468
0
100
200
300
400
500
600
700
800
19881989
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005（year）
mm
precipitation average
Data sources：Yearly <Beijing water resource report>
Fig 1. Annual precipitation comparing in Beijing
1.1.2 With 300m3 water resources per capita, Beijing is a severe water shortage city
From Fig 2, the per capita water amount is about 300 m3, which is 1/8 of China’s and 1/32
of the world’s, which is far below the average 3000m3 /person, and even lower than the
severe water shortage standards of 1000 m3 /person.
36.86
42.29
22.4419.67
45.42
30.34
45.87
22.25
37.7
14.2216.8617.83 19.2 18.4
21.3 23.18
05
101520253035404550
100
mill
ion
cubi
c me
ters
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
wat er r esour ces avai l abl e mul t i pl e year aver age
Data sources：Yearly <Beijing water resource report>
Fig 2. 1990-2005 Total water resource available
1.1.3 Serious water resources situation in Beijing
1.1.3.1 Water supply and utilization
Beijing’s water is mainly supplied for agriculture, industry, and domestic uses. Table 1
shows the uses of each category of users. Agriculture is the largest user, which accounts
2
3
Table 1
for 44.6% in 2002, while it was 50.6% in 1993. In the summer of 1997, Beijing banned
the use of water from resevoirs for irrigation.
Industry uses about 21.8% of water. Amongst industrial users, the chemical industry
accounts for 25%, the steel and iron industry accounts for 18.8%, the building materials
and mining industry accounts for 6.7%, the textile industry accounts for 6.5%, and the
food processing industry is 6.1%.
Municipal water users include organizations, businesses, and residents. Residential water
is mainly supplied by tap waterfrom 11 tap water plants in Beijing with a capacity of three
million m3.
Agricultural water usage is declining, while industry usage is almost unchanged; and,
there is slow growth for both domestic and municipal use.
Water usage by sector in Beijing, 2002 Agriculture 1545 millions m3（44.6%） Industry 754 millions m3（21.8%） Municipal and residents 1083 millions m3（31.3%）
Total supply
3.462 billions m3
Environment water (ecological water) 80 millions m3（2.3%）
Data sources： <Beijing water resource report> 2002
Table 2 Water usage by sector in Beijing, 2005 Agriculture 1322 millions m3（38%） Industry 680 millions m3（20%） Municipal and residents 1338 millions m3（39%）
Total supply 3.450 billions m3
Environment 80 millions m3（3%）
Data sources： <Beijing water resource report> 2005
1.1.3.2 Total water usage has been decreasing in recent 10 years
Fig. 3 shows the trend of water usage in recent years. Total water usage increased from 41.12
billion m3 in 1990 to 46.43 billion m3 in 1992 and then declined after 1992. It has declined fast
since 1999.
41.1242.0346.4345.2245.8744.88
40.9440.2640.4741.7140.438.934.62 35 34.5534.5
0
10
20
30
40
50
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
100 million cubic meters
total water usage trends of total water usage
Data sources：Yearly <Beijing water resource report>
Fig 3. 1990-2005 water uses trend in Beijing
1.1.3.3 Domestic and municipal water use has been increasing in the most recent 10
years
Domestic and municipal water usage has been consistently increasing. As shown in Fig. 4,
it increased from 704 million m3 3 in 1990 to 13.39 hundred million m in 2000. We can
conclude from Fig. 3 and 4, that the proportion of municipal and domestic usage
increased from 17.12% in 1990 to 39.00% in 2005.
7.047.43
10.989.5910.37
11.77
9.311.1411.9712.713.39
12.410.83
12.4312.913.38
0
2
4
6
8
10
12
14
16
1990199119921993199419951996199719981999200020012002200320042005
100 million cubic meters
domestic water usage
trends of domestic water usage
Data sources：Yearly <Beijing water resource report>
Trend of increasing water usage in Beijing Fig 4.
1.1.3.4 The serious water resources situation faced by Beijing in the future
With social and economic development, the conflict between the supply and demand of
water has become appreciatingly more serious and the availability of water is becoming a
4
5
Table 3
bottleneck in the development in Beijing.
It was projected that by 2010, the water demand in Beijing will be between 5.698 billions
m3 and 5.703 billions m3, while the surface and underground water can only supply 4.088
billions m3 per year as an average, and the lowest and lower water available a year will be
around 3.754 billions m3 and 3.399 millions m3. So the deficit will be between 1.615
billions m3 and 2.299 billions m3.
Primary water resource supply, demand and balance table for Beijing1
Unit：100 million m3
Year 2005 Year 2010 Area Item
50% 75% 95% 50% 75% 95%
Supply 41.33 37.79 34.09 40.88 37.54 33.99 Demand 49.27 50.59 50.59 57.03 56.98 56.98
Whole city
Balance result -7.94 -12.80 -16.50 -16.15 -19.44 -22.99 Supply 18.45 15.95 13.10 18.00 15.70 13.00 Demand 20.52 20.65 20.65 24.75 24.86 24.86
Urban area
Balance result -2.07 -4.70 -7.55 -6.75 -9.16 -11.86
1.2 Problems identified regarding the water supply and it’s utilization in Beijing
1.2.1 Problems
(1) Water availability is low：
There is no large river across Beijing and the water supply mainly depends on
underground water and natural precipitation. The underground water greatly decreases and
the water table declines too, due to over-exploring. There were five drought years since
1999 in Beijing, and the average annual precipitation from 1999 to 2003 was only 425mm.
(2) Over exploration of underground water
The over-exploration of underground water caused serious ecological and environmental
problems, of which the declining of water table is the most serious. Comparing 1960, the
underground water table decreases 12.17m in 2000, and decreased 8.12m comparing with
1 Beijing Municipal Government. Ministry of Water Resources. 2001. The Sustainable Uses of Water Resources Plan for the Year of 2001~2005. Beijing. China Water Resources and Electricity Press.
late 1980s.
（3）Serious pollution of surface water
Fig. 5 shows that about 2.4 million m3
6
39.8% of the total length of the rivers being monitored.
source report> Fig 5. Sewage drainage and treatment in Beijing
1.2.2 Main reasons
d above are mainly caused by the growth of population and by
te of water charges and low price of water
1991, while it increased
e
ernment did not fully realize the shortage of water, and
of wastewater is being discharged daily, while the
treatment rate is quite low. According to the “2005 Environmental Quality Report in
Beijing,” only 19 sections of 71 sections of rivers being monitored can reach the water
quality requirement. The water quality in 588.27km of 1464.64 km of rivers being
monitored were in the fourth and fifth grade or worse than fifth, which accounts for
Data sources：Yearly <Beijing water re
0
100
200
300
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
年
10,0
00 c
ubic
mete
rs
020406080
%
dai l y di schar ge of domest i c sewagedai l y t r eat ment of muni ci pal wast er wat er pl antt r eat ment r at e of ur ban sewage
The problems identifie
agriculture and industrial activities. In addition, more regulatory problems can be
summarized:
（1） Low ra
The price of water in Beijing was only 0.12 RMB from 1981–
0.30 RMB in 1996and, 1.6 RMB in 1999. The price of water has increased largely sinc
2000 and it has reached 3.7 RMB since 2004. This low price of water resulted in waste.
（2） Awareness about water
For a long time, the public and gov
did not have the concept of full cost pricing. Beijing introduced the sewage treatment
charge in 1997 and the water resources fee in 2002.
7
er treatment
0.2 billion tons of
By the year of 2008, water recycling would reach 50%, but that is still much lower than
（3） Inefficient use of water behaviors and low
About 22% of municipal water was being treated in 2004,and about
sewage was being directly discharged into rivers.
（4） Lower recycling rate
the 80% of the industrialized countries.
8
Chapter 2
Table 4
Water Pricing Policy Reform in Beijing
2.1 General situation and trend of residential water use in Beijing
2.1.1 General situation of residential water use
Domestic residential water use is a major part of municipal water utilization. According to
the research of industrial countries (Howe and Linaweaver’s research in U.S., 1976;
Grima’s research in Canada, 1971; Hanker and Smart’s research in Australia, 1979),
residential water use can exceed more than half of the total of municipal water uses. Since
the 1980’s, residential wateruse increased. In 2003, 552.01 millions m3 of tap water was
sold in which 245.91 million m3 was for residential use and accounted for 44.55%,
according to the Beijing Waterworks Group’s news2.
Based on the investigation by the Beijing Water Saving Office and Beijing Economic
Information Center in 2003, the residential water use in Beijing is about 104.14 L/person
day; but it is still lower than that in developed countries.
Residential household water use in some EU countries（2001a.）
（Unit：L/Person/Day）
Country Household water use per person per day
Country Household water use per person per day
Switzerland 260 Holland 173 Austria 215 Norway
167
Italy 214 French 161 Sweden 195 Britain 161 Norway 183 Finland 150 Spain 181 Germany 135
Denmark 176 Belgium 116
Data sources：IWSA World Water Using Statistics.
From the date revealed during the investigation of Beijing’s household water usewe find
how it is specifically used (see Table 5). It is seen that it is mainly used for meeting the
basic needs of the residents, e.g., drinking water, cleaning, bathing, washing, and toilets.
The result is similar to the investigation data of Hebei’s 12 cities. However, the residential
2 http://www.bjwatergroup.com/htm/supportwater/cost.htm
9
Table 5
household water use proportion is lower than the 12 cities in the Hebei Provinces, which
may reflect the fact that the social services conditionsin Beijing are better than those cities,
maybe beecause they have less time to cook and eat at home.
Beijing’s resident water use structure
Use types Current volume
（L/Person·dDay）Current proportion
Past volume （L/Person·dDay）
Past proprtion
Drinking water 2.25 2.16 Cooking and cleaning dishes 5.43 5.21
48 32
Cleaning bathroom 27.00 25.93 House cleaning（floor, furniture, yard, etc.）
4.25 4.08 43.95 29.3
Self cleaning（washing face、brushing tooth、bathing etc.）
42.51 40.82 40.05 26.7
Washing clothes 22.53 21.63 18 12 Watering flowers and
growing fishes 0.17 0.16
-- --
Total 104.14 100.00 150.0 100.00
Data sources：The investigation report of Beijing’s resident water uses condition
Notes：* The past proportion of the total volume comes from Herry Zhang’s research, 2003.
2.1.2 Future trend of residential water use
As Beijing builds more, the coverage of tap water increases, so the use of residential water
increases also. According to the projections of the water supply plan of Beijing, water use
will increase by 3.42% while the population increases by only 1%. In addition, the
immigrant population will also increase the demand for water in Beijing.
According to the “General situation and trend of resident water uses research,” the
residential water use will increase at an annual rate of 2.7% by 2010. According to the
Beijing Waterworks Group’s data, although the total amount of water sold decreased by
5% annually, the residential water use increased by 3% annually. The major contribution
to this trend is the increased use of water forbathing, washing, and toilet, which closely
relates to the changes in living conditions.
2.2 Beijing’s residential water pricing policy
2.2.1 Historical changes of residential water pricing policy
By introducing demand side management, pricing policy has been reformed to regulate
10
water resources use in Beijing since the 1990s.
Beijing started to charge the water for residential uses since 1952, and since then, the price
of water has been adjusted 12 times. The historical changes of the water price can be
summarized as following.
（1） Low and steady price （1952～1991）
The water has priced since 1952, and there was nnot any adjustment during 1952～1966.
During the “cultural revolution,” water price was fixed at 0.12 RMB/m3 in 1967, and that
continued to the early 1990s. (The State Council development research center, 19903).
（2） Water price being frequently adjusted（1991～ ）
Since 1990s, the water price in Beijing has been adjusted frequently. The current water
price for domestic uses is based on the volume consumed by households, by a uniform
price for each unit consumed. During the years 1991 to 2004, the government had adjusted
the water price 9 times in 14 years and the price in normative term had increased for 22.33
times. After 1997, the price of water had been adjusted almost every year, and the major
changes were that in 1997 and 2002, sewage charges and water resources fee were being
charged as a component of the water price respectively. In 2006, Beijing’s residential
water price4 reached the level of 3.7 RMB/ m3, the highest level in China. A “three-tier
water price structure” was therefore formed, including pricing related to the tap water
supply, water resource, and sewage treatment cost.
In the view of the residential water price and its components, the future pricing system
will tend to recover the supply cost, including the water resources exploration and
production, as well as the environmental cost, which is reflected in the sewage treatment
cost. In order to more fully reflect the cost of water, the government began levying and
increasing the the price on water resources and sewage treatment.
3 State Council’s Research Center. Water price: Beijing Running Water Pricing. China’s Price. 1990 (8, 9, 10). 4 Beijing Development and Reform Commission，Information about water price adjusting（NO. BDRC [2004]1517）
1
Table 6
Residential water price in Beijing（unit：RMB/ m3）
1981.1～1991.12
1992.1～1996.3
1996.4～1997.11
1997.12～1998.8
1998.9～1999.10
1999.11～2000.10
2000.11～2002.1
2002.2～2003.1
2003.1～2004.7
2004.8～ current
2006’s proposal
Tap water supply
0.12 0.30 0.50 0.70 1.00 1.30 1.60 1.70 1.70 1.70
sewage treatment cost
--- ---
--- 0.10 0.10 0.30 0.40 0.50 0.60 0.90
water resource fee
--- ---
--- --- --- --- --- 0.30 0.60 1.10
Residential use water price
0.12 0.30
0.50 0.80 1.10 1.60 2.00 2.50 2.90 3.70 4.50
Data sources：Beijing Waterworks Group’s information5 and yearly information about water price adjusting6
According to the “Capital’s water resource sustainable development and utilization plan in
early 21st Century” approved by State Council7 and the information about water price
adjustments from the Beijing Development and Reform Commission (in 2005), it was
expected that the integrated water price would reach to 6RMB/m3 and residential water
water price would be 4.5 RMB/m3. That would be mainly due to the increase of the water
resources fee and sewage treatment cost (however, this proposal was not approved).
In addition to the pricing policy adjustment and reform, the Beijing government has been
seeking other policies to improve the conservation of water, for example, water supply
planning and utilization quota management, etc. There was a proposal in 2004 regarding
implementing the Increasing Block Tariff (IBT) pricing policy in Beijing, in addition to
the requirements of the water quota on major sectors in Beijing.
According to the primary policy proposal, the proposed IBT system will have 3 blocks,
with the ratio of the price level at 1:3:5. The first block was set up for 12t/month per
household to meet the basic need, the second block was set up as12–16t/month per
household for improving the quality of life, and over 16t/month as the third block to
satisfy special consuming demand. The proposed IBT water pricing system for residential
water can be summarized as the following figure:
5 http://www.bjwatergroup.com/htm/law/18_2.htm6 Beijing Development and Reform Commission，Information about water price adjusting（NO. BDRC [2004]1517） 7 State Council. NO. 2001(53), reply to the The Sustainable Uses of Water Resources Plan for the Year of 2001~2005.
1st 2nd 3rd
IBT water price
system
P
2
Fig 6.
Data sources：Beijing Development and Reform Commission，Information about water price adjusting（NO. BDRC
[2004]1517）
Proposed IBT pricing policy
2.2.2 Other demand side management
In addition to the efforts to use pricing policy, demand side management has been widely
employed by the Beijing government.
In 1981, the Beijing Municipal Government Water Saving Office had been established
(which restructured as the Beijing Water Saving Management Center in 2004), the focus
of urban water savings wasfocused on the water plan and quota management for the big
users in Beijing, and to promote the awareness amongst the residents.
In 1999, Beijing published 26 policy items regarding water savings, which covered water
resources exploration, utilization, savings, protection and management. This policy
package can be treated as a comprehensive measure to meet the demands of the water
shortage problems facing by Beijing.
On 1st Dec. 2000, “Beijing water saving regulations” were published and implemented. It
clearly stated that Beijing was going to implement water use by plan, and establish water
use allowances(a quota) that would be decided by water saving offices at various levels,
and an increased price would be charged for those exceeding the quota issued.
In 2002, the State Council officially approved the “Capital water sustainable utilization
plan in early 21st Century”, which proposed that the principles for water use in Beijing
should be focused on both development and conservation, and where
Current price 3.7 RMB∕y
LRMC 7 RMB∕t
1 = 4.5 RMB∕t
Using quantity （t）
Price (RM
B/m
3)
5
3
possible,conservation should be the first priority.
In order to improve water savings at the household level, Beijing twice published named
lists of water saving products and instruments in 1999. Itrequired the phase out of products
and instruments which could not meet the requirements for “household domestic water
saving products and instruments” (CJ164－2002), including tap, toilet, and showering,
etc.
Since the 1990s, the government also launched many campaigns promoting water saving
facilities. In 2005, the urban areas started to implement the “one meter for one household”
innovation, and to expand the coverage of the tap water meters, and to promote the
volume based water use.
2.2.3 Institutional arrangement for residential water charges
Currently, the charge for water divides into 2 parts, one is called the engineering water
charges, or the water supply cost, which also includes the resource water fee, and the other
part is the sewage treatment fee.
2.2.3.1 The management of engineering water charges (water supply cost) and its
institution
The “Urban water supply price management” issued by State Planning Commission and
Ministry of Construction regulates the collection of the engineering water costs, and they
are collected by the water company.
Beijing residents can pay the charges to banks or to a real estate company assigned by
Beijing Waterworks Group’s (BWG) or they can be paid directly to the branches of the
group.
Res
iden
ts
Real estate
Bank BWG supply and its branches
Beijing Waterworks Group
Fig 7. Beijing resident water charges handing process
2.2.3.2 Charge of sewage treatment fee and its institution
Currently, are collected by BWG, and BWG will deliver those charges to sewage treatment
company or other treatment plants, through certain financial arrangements or through the
financing sector of the government. .
4
Chapter 3 The analysis of behavior reaction to price policy of Beijing residents
3.1 Review of the reactions of the residents to the water pricing policy reform
The impact on behavior changes of residents by water pricing policy would mainly be
through the level of price and the increase of the expenditures. The impacts on the
behavior and preference of the residents will be different according to the share of
water expenditure in total expenditure. According to a research conducted by Ministry
of Construction, “the study on urban and rural water shortage problems”, and Shi
Xican (2002), if water expenditure accounts for less than 1%, there would not be an
impact, if it accounts for 2%, residents started to be concerned about the water
consumed, while behaviors would be changed if it reached to 5%. Yu Fan (2006) also
stated that once it reached to 3%, it would imply that the water expenditure is too
large to exceed the affordability of household.
The following figure shows the proportion of changes of water expenditure in total
expenditure in Beijing, and it shows that currently the water expenditure is still low;
for most of the income groups, it is lower than 1% (the overall proportion for all
residents is 0.7%).
In Beijing there was a continuing upward adjustment of water pricing, and water
prices increased faster than income, there was a slow upward trend in the proportion
of expenditure. Although for most income groups, the proportion is lower than 1%, it
can be projected that certain impacts on behavior changes would happen due to the
frequent adjustments.
The budget ratios of water payout all increase slowly in different income-level-groups.
Although they have not yet affected the water use mentality level, which is 1%, the
5
result shows water payout gradually takes up a more important place than before. A
public opinion investigation of Beijing residentsshowed that the price adjusted too
frequently in these years and had an indirectly had an affect on the morale endurance
to change water behavior.
0
0. 002
0. 004
0. 006
0. 008
0. 01
0. 012
1999 2000 2001 2002 2003 2004year
Ing 1
Ing 2
Ing 3
Ing 4
Ing 5
Aver
Water Payout
Data sources: Beijing Stat. Yearbook 2000～2005
The water payout ratio of each income-level-group in recent years Fig 8.
3.1.1 Short-run reaction to water price increase
In short term, the residents’ behavior changes mainly referred saving water under the
existing situation with no consideration to buy or install water saving facilities or
instruments. The following table summary is based on the survey conducted by the
Beijing Water Saving Management Center in 1999, which focused on residents’
awareness and behaviors.
6
Table 7 The water using behavior of residents whether care about saving water Water use items No Yes
Brushing teeth
Let water run constantly, use 6L water in 30 seconds With cup, use water 0.2L each time
Use paper to clean oil and, dirt; wash in hot water first, then in cool water; wash disconnecting and control quantity of water used
Wash for a long time; Use clean water to wash vegetables and fruits directly
Cooking
Put bottles in water case to reduce capability, reuse the washing water or shower water for toilet
Cleaning toilet
Common bowl with huge capability water case which is above 9L
Continuing the process watering and draining while washing, use 165L of water each time; too high water level and too much scour being used
Add dehydrating step and use 110L each time; reasonable water and scour level, concentrate to wash; reuse water
Washing clothes
Running water discontinued and turn off the faucet when it is not necessary; with 1/3 or 1/4 water in the tube
Bathe for a long time with the faucet open; with full water in tub Bath
Washing face and
hands
Wash for a long time and keep the water running
Turn off when it is not necessary, and use basin
Data sources: Beijing Water-saving Management Center
According to the Beijing Water Saving Management Center’s survey conducted in
May and June of 1999, about 80% of the residents surveyed understood the situation
of the water shortage in Beijing, and 91% noticed the campaign conducted. However,
because the price of water was still low, and accounted for only a small proportion of
total expenditure, only 64% of household knew the unit price of water.
The situation had changed by 2005, as the price of water increased and awareness
improved. By the end of 2005, almost all the residents understood the water shortage
situation (about 99.1% of of3000 households), and about 95.5% of the residents
clearly knew the price of water was 3.7 RMB/t. At the same time, about 90.9% of the
residents would reuse water after washing clothes and vegetables, andfrom showering,
for flowers, and for cleaning the floor. It clearly showed that the water reuse was a
daily behavoir.
7
3.1.2 The long-term reactions to the water price increase
In the long run, the residents would buy and use water saving facilities or
instruments.
Table 8 Options for residents to buy and use water saving facilities and instruments
instruments water saving options in the long run
Use water saving tap instead of the older ones Tap Instead all-round tap with 1/4 round tap Using shower; Bath Instruments Use water saving shower tap
Washer Use water saving washer Use 6L water case instead of 9L; Toilet case Use 3/6 two water case
Toilet washing system Recycling water being used for residential areas
Data sources: Beijing Water-saving Management Center
We used the data collected by the survey conducted by the Status and Trend of
Residential Water Uses in Beijing, in the year of 2003, and the survey conducted by
Beijing Statistic Bureau in 2005. It found that about 91.6% of households used the
water saving tap, and 25.4% used water saving toilet facilities. While the survey
conducted by Beijing Statistic Bureau in 2005 showed that it reached 93.2% and
66.8% respectively.
8
0. 0%10. 0%20. 0%30. 0%40. 0%50. 0%60. 0%70. 0%80. 0%90. 0%
100. 0%
wat er savi ngt ap
wat er savi ngt oi l et
20032005
Data sources: Status and Tread of Residential Water Uses in Beijing (2003); Investigation of water using
instruments among Beijing residents by Beijing Statistic Bureau (2005)
Fig 9. water saving instruments being used
3.2 The analysis of surveys conducted for 200 households
According to the survey conducted for the 200 households regarding their behaviors
on using water, we can summarize the following results.
3.2.1 Residents care more about water quality
In the following table 9, when asked the following question: “What do you care about
water most, its quality, price, quantity, or pressure?” 90% were concerned about water
quality. This implies that as the price increased, residents cared whether the quality of
water improved, which may also refer to their concern about whether services were
improved while the price went up.
9
10
3.2.2 The attitude toward water price reform is closely related to the income
3.2.2.1 Low-income level group cares more about water price than the
high-income level group
Also, in the summary table 9, it was clearly shown that about 50% of the lower
income households, income lower than 1000 RMB/month/person, cared about price,
and as income increased, the proportion decreased. For those with highest income
level, above 5000 RMB, the proportion was 26.9%. This may imply that the water
expenditure accounted for a larger proportion of income for the low-income family,
and they cared more about price and the way charges were collected.
Table 9 Answers to the question “What do you care most about water?” Income of respondents（￥） less than 1000
1000~ 2000
2000~ 3000
3000~ 5000
Above 5000
Total
Respondents numbers 36 56 54 28 26 200
number 30 50 50 27 23 180 Quality Percentage 83.3% 89.3% 92.6% 96.4% 88.5% 90% number 2 2 4 1 2 11 Quantity Percentage 5.6% 3.6% 7.4% 3.7% 7.7% 5.5% number 18 24 17 10 7 76 Price Percentage 50.0% 42.9% 31.5% 35.7% 26.9% 38.0% number 2 1 1 0 0 4 Pressure Percentage 5.6% 1.8% 1.9% 0 0 2%
50. 0%
42. 9%31. 5% 35. 7%
26. 9%
0.0%10.0%20.0%30.0%40.0%50.0%60.0%
belo
w 1
000
1000～
2000
2000～
3000
3000～
5000
abov
e 50
00
RMB
Fig 10. Degrees of different income-level groups caring about water price
3.2.2.2 High-income group agrees more about water price than the low-income
group
With regard to the question about whether water price reform is reasonable or not, an
average of 51% answered “yes.” The high-income group agreed more about water
price than low-income level group, in general.
In Fig. 11, among the respondents, 35.9% with the income lower than 2000 RMB
agreed with the water price reform; 59.3% with income between 2000 and 3000 RMB
agreed with the water price reform, while about 68.5% with income above 3000 RMB
agreed with the water price reform. This may also be another indication of the
financial constraints on low-income households.
Fig 11. opinions regarding the water price reform (agree)
3.2.3 Water price r behaviors
regarding uses of water
The results of Table 10 show that by introducing price reform, a positive impact is
generated in households and residents.
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
lower 1000 1000～2000 2000～3000 3000～5000 above 5000
income level (RMB)
eform improves the resident’s awareness and
11
Table 10 The awareness regarding water resources and water uses NO. Questions Answer getting highest
percentage 4 b If you think that it’s necessary to save water, what’s The price of water is very
the reason: high 5（3） If you think the price of water is reasonable, what’s the
reason: Increasing the price of water encourages saving water
5（5） ing water? After the price increased several times
When did you start to care about sav
5（4）a
After severayou recognized the ser the water shortage?
l adjustments to the price of water, have Yes iousness of
After several adjustments to the price of water, have Yes 5（4）b you recognized the necessity to save water?
Are you certain that your improved awareness of saving water is the result of water price reform?
Yes 5 7a （ ）
3.2.3.1 e household believe it is
r
1 k it’s necessary ave water,
th ith income lower than 1000
RMB, between 1000~2000 RMB, and above 5000 RMB, respectively, answered that
water use behavior. Meanwhile, we found that in
Fig 12. The ratio of the answers to the high price of water implies it is necessary to save water
The increase of water price encourage th
necessa y to save water
In Fig. 2, in the answer to the question 4b, “If you thin to s
what’s e reason?” about 37.5%, 29.1%, and 7.7% w
the price of water is higher. This further confirms that the price of water is a major
factor influencing the residents’
lower income households there were larger reactions than in higher income groups.
37.5%
29.1%24.5%
17.9%
7.7%10.0%
20.0%
30.0%
40.0%
0.0%lower 1000 1000～2000 2000～3000 3000～5000 above 5000
12
3.2.3.2 The residents believe price reform is reasonable as it also promotes
water saving
In the answer to the question 5(3),“If you think that water price reform is reasonable,
what’s the reason?” 86.3% think that is reasonable because it encourages residents to
save water and improves the residents’ awareness of water resources availability and
the desire to save water. The residents would accept the price increase because it can
help save water resources.
Table 11 Answers to the impact on saving water by increase of the price of water of Lower 1000～ 2000～
00 3000～ Above Total of Lower 1000～ 2000～
00 3000～ Above Total Income
respondents than 1000 2000 30 5000 5000 e
respondents than 1000 2000 30 5000 5000 （￥） （￥）
(1) 36 56 54 28 26 200
(2) 14 19 32 22 15 102 (3) 14 19 25 18 12 88
(3)/(2) 100.0% 100.0% 78.1% 81.8% 80.0% 86.3%
Notes: (1) Total number of respondents; (2) Number of people who think that water price reform i
3.2.3.3 Water price refor
s
reasonable; (3) Number of people who think the reform can encourage people to save water in (3)/(2).
m improves the awareness of saving water
In responding to the questions regarding when they realized and started to think about
rage o said oved ajo adju
002, and 2 03. 53.1% and 15.4% of the households with income lower than
1000 RMB and higher than 5000 RMB answered yes, respectively plies not
only that the increase of price improves awareness on one hand, but also further
co the d reac d att o the f wa pric .
saving water,
2000, 2
an ave f 28.3% it impr after m r price stments in
0
. This im
nfirms ifferent tions an itudes t price o ter and e reform
13
53.1%
27.3% 24.5% 21.4%15.4%20.0%
40.0%50.0%60.0%
0.0%10.0%
30.0%
lower 1000 1000～2000 2000～3000 3000～5000 above 5000
income level (RMB)
Fig 13. answers to the question regarding whether the awareness of saving waimproved after the price adjustment
3.2.3.4 Water price reform promotes awareness regarding the situation of the
shortage of water resources in Beijing
In answer to the question, “After several adjustments of water price, have you
ter was
have recognized the problem after several adjustments. This shows that awareness
was impr
awareness is the firststep necessary to save water.
wers that after the price reform, the water being realized
Total
recognized the seriousness of water shortage?” On average, 90.5% think that they
oved, and it indicated that price reform would help save water; as the
Table 12 Number and proportion of ansshortage problems
Income of respondents（￥）
lower than 1000
1000～2000
2000～3000
3000～5000
Above 5000
（1） 36 56 54 28 26 200
（2） 32 54 51 25 19 181
（2）/（1） 88.9% 96.4% 94.4% 89.3% 73.1% 90.5%
Notes: (1) Total number of respondents; (2) Number of people who think that water shortage is serious.
14
3.2.3.5 Water price reform prompted the residents to conserve water
id arbitrary conclu s, we also make it clear on the stionnaire that "p
improves the wat ving awareness of residents," 8 an ave of 53
gher willin o save is c elate ater fo
while it is no surprise that lower income groups have a higher proportion (58.3%).
sely
To avo sion que rice
reform er-sa and rage %
think their hi gness t water losely r d to w price re rm,
58.3% 57.1%
42.3%
0.0%
50.0%
70.0%
lower 1000 1000～2000 2000～3000 3000～5000 above 5000
income level (RMB)
53.6% 51.9%60.0%
10.0%20.0%30.0%40.0%
Fig 14. The proportion of answers to the question of whether water saving is clorelated to a price increase
Among those respondents who think that the water price reform has no direct
relationship with the awareness improvement, an average of 57% of the residents
think that although it is not that closely related, price reform can affect awareness to a
certain degree.
8 5（7）a Would you make sure that your improvement of awareness of water saving is the result of water price reform?
15
Table 13 Proportions that think price reform can affect the awareness to a certain although they do not think it is closely related
Income of respondents（￥）
lower than 1000
1000～2000
2000～3000
3000～5000
Above 5000
Tota
degree,
l
17 25 25 13 13 93 （1）
（2） 10 10 17 10 6 53
(2)/(1) 58.9% 40.0% 68.0% 76.9% 46.2% 57.0%
Notes: (1) Number of residents who think that higher awareness of water has no direct relationship with price
reform; (2) Number of people who think still the price reform would affect the awareness
3.2.4 Residents started to use water saving facilities and instruments
3.2.4.1 Residents begin using water saving instruments
As Fig.15 shows, on average, 55% of the respondents have installed water-saving
toilets, 69.3% of respondents have installed water-saving taps, and 32.5% have
purchased water-saving washing machines. This shows that the price reform of water
resources did promote awareness of the residents and further encouraged the
installation of water-saving facilities and instruments.
16
Fig 15. the changes of the water saving facilities and instruments
As Fig. 16 shows, on average, 79.1% of the respondents reused water if possible,
44% have minimized the use of washing machines, and 29.3% changed their tub to a
shower. This shows that the residents adopted water-saving ways where possible.
This also implies that water price reform has played a key role in the change of the
water use behavior.
3.2.4.2 Increase the reuse of water
0.0%
10.0%
lower 1000 1000～2000 2000～3000 3000～5000 above 5000
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
100.0%
income level (RMB)
80.0%
90.0% witsavt
h waing
oilet
ter
wisa
th wateving ta
rp
purchasingwatersavingwashingmach.
17
0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%90.0%
lower
1000
1000～
2000
2000～
3000
3000～
5000
above
5000
frombath toshower
reducingthe useofwashingmach.re usewater
18
ss
closely
related to residents’ income
The increased income of a family provides for the possibility of residents to buy and
install water-saving devices. As income increases, it becomes feasible to buy
see that when income reaches a critical point, per capita monthly income of 5,000
oportion of income and total expenditure
of that group. Although the low-income group has a higher preference to buy and use
water saving facilities, they may be constrained by their financial situation.
3.2.4.4 The water saving actions produce effect
In the 200 respondents, 171 answered the question, "How much water consumption
can be reduced by introducing water-saving instruments and actions monthly?” the
remaining respondents indicated, "Haven’t taken that into account." Fig. 17 shows
that 95 respondents think that the adoption of water-saving measures can save about
one ton of clean water, 56 respondents think that can save two tons of clean water,
Fig 16. The change of water use after the improvement of water saving consciousne
3.2.4.3 The installation of water-saving devices, and reuse of water is
relatively more expensive water-saving devices. However, from the figure, we can
RMB or above), this percentage will decline. This may imply that the water
expenditure does not account for a large pr
and 20 respondents think that it will save more than three tons of clean water. If we
consider the current monthly use of water, around 10 tons a month, the water-saving
effect is very significant.
locked
n’t
e increase in a uniform way Income of Lower Above Total
95
56
2040
60
80
100
2 ton above 3
sample
20
01 ton
Fig 17. Water Saving Effect
3.2.5 Attitude toward water price policy: most residents support the
pricing policy other than uniform pricing policy
3.2.5.1 Many residents believe that the current water price reform has
considered the different affordability between rich and poor families
For the residents who answered the reason why they think the current price reform is
not reasonable, an average of 92.1% indicated that the existing water price reform has
not considered the different affordability between rich and poor families.
b
Table 14 The attitude of support for water pric
respondents（￥）
than 1000
1000～2000
2000～3000
3000～5000 5000
（1） 36 56 54 28 26 200 （2） 17 23 16 1 6 63 （ ） 15 23 15 1 3 58 3 (3)/(2) 88.2% 100.0% 93.8% 100.0% 50.0% 92.1%
Notes: (1) Total number of respondents; (2) Number of people who think that water price reform
19
is unreasonable; (3) Number of people who think that the reform ignores the income gap betwee
families.
n
3.2.5.2 Most residents do not support increase a water price in a uniform way in
the future
In Fig. 18, with the attitude toward "if the price increases to 4 RMB / t", 36% of those
surveyed residents answered "reasonable, but it can not be afforded”, 27.5% answered
"unreasonable”, and only 27.5% "reasonable, because it can be afforded”, and the
remaining 9% respondents answered " do not care ." In fact, the former two
categories of respondents accounted 63.5% in total. Therefore, if the price increased
in a uniform way, most residents would be against it, and, only a small portion
(27.5%) would support it.
In general, residents’ answers to this issue are closely related with their income level.
In Fig.19, the proportion that answer " reasonable, because it is affordable" increases
as the household income increases; the proporti
sehold income increases;
on that answer “reasonable, but it can
not be afforded " increases as the household income decreases; the proportion of that
answer "unreasonable" for other reasons decreases as the hou
and the proportion of that answer "do not care" increases as the household income
increases.
20
Fig 18. Attitude toward uniformed pricing reform
Notes: (1) reasonable, because it is affordable; (2) "reasonable, but it can not be afforded; (3) Unreasonable; (4) Do not care.
Fig 19. Different attitudes toward uniformed pricing in the future by income groups
3.2.5.3 Most residents support the IBT price system reform
As shown in Table 15, 91% of respondents support IBT pricing policy, some people
even wrote, "we should implement the IBT price system," as they disagree reason
with the uniform pricing policy.
0.0%10.0%20.0%30.0%40.0%
60.0%
1000以以
1000～
2000
200
50.0%
70.0%
03
～00
3
0
000～
5000
5000以以
（ ）1
（ 2）（ 3）
（ 4）
reasonable,can afford
27.5%
27.5%
9.0%reasonable,but can notafford
un reasonable
36.0% do not care
RMB
21
Table 15 Residents attitude toward IBT water pricing policy Income of respondents（￥）
lower than 1000
1000～2000
2000～3000
3000～5000
Above 5000
Total
（1） 36 56 54 28 26 200 （2） 30 51 51 28 22 182 （2）/（1） 83.3% 91.1% 94.4% 100% 84.6% 91%
Notes: (1) Total number of respondents; (2) Number of residents who support the IBT
3.2.6 Other observation: residents support the reform that increases the levy
on the water resources fee and the sewage treatment cost
In the process of completing the questionnaire, many respondents took a closer look
at the changes of the compo ter fees and
sewage treatment fee increases, and believe they are reasonable; and they doubt that
the water supply cost increases. This shows that if a transparent process were to be
used, for example, and an effective public hearing were to be held, those would
improve the acceptability of price reform. It is very necessary to provide detailed
financial information to the publicand especially the water supply cost to the water
company.
3.2.7 Media played an important role on improving water saving awareness
Survey results showed that the water saving publicity of media affects the awareness
of w
improved their water saving awareness by getting information from media. This
shows that in the future the government should continue its efforts to promote the
nation of infor
nents of price. They would support the wa
ater conservation. In Fig. 20, an average of 50% of the residents thought that they
dissemi mation and public awareness via media.
22
37.5% 38.2%
62.371.4%
%
42.3%40.0%50.0%
l 1 2 3 abov
e 5
60.0%70.0%80.0%
0.0%10.0%20.0%30.0%
ower
1000
000～
2000
000～
3000
000～
5000 00
0
Fig 20. The proportion of residents who believe the media improved their awarenes
3.3 Other factors affect the behaviors of residents
3.3.1 Continued growth of income
by their income. In recent years, the income of households increased, although the
s
As mentioned above, in addition to water price, residents’ behavior will be affected
annual growth rate declined.
As shown in Figure 21, the per capita income of urban residents increased from 1,787
d
ards imply the
further growth of water demand in the future.
RMB in 1990 to 17,653 in 2005. As income grew, households would buy and install
more water using facilities which used to be only a luxury consumer goods, such as
washing machines, dishwashers, toilets, baths, and so on. As Fig. 22 shows, the
numbers of water related devices and facilities owned by 100 households increase
largely since early the 1990s, for example the hot shower facilities increased from 17
in 1992 to 78.1 in 2001. The increase of income and living stand
23
02000400060008000
1000012000140001600018000
RMB
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Data sources: yearly <Beijing Stat. Yearbook>
Fig 21. Income per capita in Beijing
3.3.2 Availability of water saving facilities and policies
With the implementation of water pricing policy and the policies regarding water
saving facilities, more and more water saving facilitiesare being marketed and made
available to residents.
Data sources: yearly <Beijing Stat. Yearbook>
Fig 22. The hot water shower per 100 households in end of year
1723. 2
38. 845. 4
5258. 4
65. 4 67. 174. 478. 1
83. 585. 494. 1 97
80
100
0
20
40
60number
1992 1994 1996 1998 2000 2002 2004
24
3.3.3 The problems related to the use of revenues generated from the water
pricing policy
Currently, as there is no an effective transparent process for the use of the water
related charges, and residents also have doubt about whether the “engineering costs”
(supply costs) are being used to improve the services provided by water company. In
addition, although there are some regulations regarding the use of the wastewater
treatment cost, however, the residents think that it is not transparent either, and such a
situation may affect the introduction of pricing reform.
Residents care much about how the charges being used, sometimes, it will affect the
residents to pay the charges on time. As the reform and frequent adjustment of water
rice, more and more residents concern about the uses of the charges. In the following
table, that about 81% of the residents surveyed clearly stated that they do concern
about the uses of the water charges, while about 58.5% of the residents would be
affected about their payment for the charges.
Table 16 Residents’ concern the use of sewage treatment charges Income of respondents（￥）
Lower than 1000
1000～2000
2000～3000
3000～5000
Above 5000
Total
p
（1） 36 56 54 28 26 200 （2） 33 46 44 26 13 162
（2）/(1) 91.7% 82.1% 81.5% 92.9% 50.0% 81.0%
Notes: (1) Total number of respondents; (2) Number of people who concerns about the way of use the sewage
eatment charges
Table 17 the payment will be affected by the way of use of the sewage treatment charges Income of respondents（￥）
Lower than 1000
10 Above 5000
Total
tr
00～2000
2000～3000
3000～5000
(1) 36 56 54 28 26 200 (2) 26 35 32 14 10 117
(2)/(1) 72.2% 62.5% 59.3% 50.0% 38.5% 58.5%
Notes: (1) Total number of respondents; (2) Number of residents who’s payment will be affected by the way of use
sewage charges
25
Chapter 4 Econometric Analysis for the Domestic Water
the welfare of residents, we conducted an empirical study of how
on
ber
The AIDS model gives an
arbitrary second-ord
f e represen of preferences. Deaton and Muellbauer (1980)
sh t it satis the axio hoice, aggregates over consum without a need
to parallel Engel curves, and has a functional form
household budget data10. The QUAIDS model is the extension of AIDS and the
of integrable quadratic logarithmic expenditure share systems. The
Demand
In order to study
demand played a role on the price of Beijing domestic water uses. By controlling
demand to different income groups with price changes, we looked at the effects on the
different groups, especially by income distribution. The study uses Beijing statistics
related to domestic household water uses and analyzes the various factors’ impacts
water uses and demand by establishing the econometric models.
4.1 Theory and Methodology 9
4.1.1 The Almost Ideal Demand System (AIDS) AIDS Model
The Almost Ideal Demand System (AIDS) (Deaton and Muellbauer 1980) and its
successor the Quadratic Almost Ideal Demand System (QUAIDS) (Banks, Blundell
and Lewbel 1997) are used in this study. They have also been used by a large num
of authors interested in consumption analysis to establish consumer responses to price
changes for nondurable goods such as food and clothes.
er approximation to any demand system and provides a
reasonably lexibl tation
ow tha fies ms of c ers
assume consistent with known
complete class
QUAID
S model became necessary after it was observed that the empirical Engel
This study continues to use the methodology being ap by the CCICED study, Zhang Shiqiu, Tim Swanson,
et al. 2006, which was mainly conduct Ben Groom. In this study, w am the pr s study, an ne more data (2004) to simulate
el Engel curves (expenditur a func were implicitly assumed in the fore the AIDS system, the linear expenditure system or LES.
9 plieded by e re-ex eviou d use o
year10 Parall e share as tion of income) runner to
26
curves for certain goods exhibited curvature in the log of income, contrary to the
restriction implied by the simpler AIDS model. In short, the QUAIDS model allows
the expenditure share to be quadratic in the log of income rather than linear. This
conforms to intuition by allowing goods in the demand system to be luxuries at some
income levels and necessities at others.
These models of demand are derived as follows. They assume the following form for
indirect utility, where is household income and p is a vector of commodity
prices:11
hy
11 −−⎧ ⎫ (1)
The functions , and
ln ( )ln ( )( )
hy a pV pb p
λ⎡ ⎤−⎪ ⎪= +⎨ ⎬⎢ ⎥⎣ ⎦⎪ ⎪⎩ ⎭
( )pa ( )pb ( )pλ are all functions of the vector of prices and
capture in a general way the nature of the response to price changes. In order to
maintain flexibility in the estimated response these functions are usually represented
in a flexible functional form. Deaton and Muellbauer (1980) characterize these
responses as follows:
01 1 1
1( ) ln ln ln2i i ij i
i i ja p p p pα α γ
= = =
= + +∑ ∑∑
n n n
j (2) n
1
( ) ii
ib p pβ
=
= ∏ (3)
n
, where 1
( ) lni ii
p pλ λ=
=∑ 0ii
λ =∑ (4)
where is commonly interpreted as the subsistence level of expenditure (Banks, et
al 1997) and
0a
iii γβα ,, iλ and are the parameters to be estimated. It is easy to show
that (1)-(4) yield Marshallian demands in budget shares form:
11 The indirect utility function represents individual utility as a function of income and prices and is derived from the utility maximization. The direct utility function, on the other hand, represents utility in terms of quantities of the commodities that affect individual welfare.
27
2ln [ln ( )] [ln ( )]i
ij i h h
i
p y a p y a ppβ
λβ+ − + −∏
ih i ijjw a γ= +∑ (5)
In theory, if the consumers’ utility are maximized then the following parameter
restrictions will hold: 1iia =∑ , 0i ii i
β λ= =∑ ∑ and 0ijiγ =∑ for adding-u
i.e. all expenditures add up to disposable income; 0ijjγ =
p,
∑ for homogeneity, i.e.
the consumers choice will not change if, for example, both prices and income double;
and ij jiγ γ= for symmetry, i.e. the cross price responses are symmetric. Some of
lly.
e quadratic
r
ih
of indicator variables drawn from the aggregated data . Other goods are represented
ible
to obtain expressions for the price and income elasticity of demand for water (PED
these properties can be tested empirica
The AIDS consists of (2) (3) and (5), with iλ =0, that is, without th
expenditure term. Koundouri et al (2002) used QUAIDS to model residential wate
demand function in Cyprus. They then went on to compare the welfare outcomes
arising from the movement of the system from one of the IBTs to a uniform marginal
cost tariff. Here we use the AIDS model, the system of demand equations for which
takes the following form for good i and household h:
( )[ ]∑ −++=j
i paypaw lnln βγ (6)
We follow Koundouri et al (2002) and estimate one equation for water in the form
shown in (6) above. Individual household characteristics are represented by a number 12
as a Hicksian composite good, which allows estimation of (6) as a single equation.
Given the functional form of water demand that emerges from the AIDS, it is poss
ihijij
and IED). We will compare these to previous estimates in the literature and, of course,
12 In the following section, we describe the data availability and the extent to which we have data on household characteristics.
28
they are crucial for the welfare analysis undertaken in the policy simulation. The
expression for PED and IED are respectively13:
( )[ ] 1ln1 −+−= paw
PEDht
γβγ (7) ggg
1+ht
g
wβ
=IED (8)
In addition to this important elasticity, estimation of the parameters in (6) allows us to
tility f
n the pricing policy for any of the goods considered in the demand system.
In our case, we are interested in estimating the welf
income groups of changes in the price of water and the schedule of tariffs that
consumers of water are faced with. The policy simulation that we undertake is
.
4.1.2 Policy Simulation and Welfare Analysis
r in
proposed by Beijing in 2004 regarding implementing the
Increasing Block Tariff, IBT pricing policy in Beijing. According to this policy
prop will have 3 blocks, with the ratio of t
at 1:
12t/m eet the basic needs, 12-16t/month
consuming demand. The proposed IBT water pricing system for residential water can
represent the indirect u unction shown in equation (1) and hence to assess
changes i
are impacts among different
described below
Our policy simulation compares a number of proposed pricing policies for wate
Beijing. A policy was
osal, the proposed IBT system he price level
3:5, with the first block price at 4.5 RMB/ton. The first block was set up for
onth per household to m per household for
improving the life quality and over 16t/month as the third block to satisfy special
be summarized as the following figure:
13 For a complete discussion see Banks et al (1997) for the QUAIDS Deaton and Muellbauer (1980) for the AIDS.
29
1st 2nd 3rd
IBT water price system P = 4.5 RMB∕t
3 = 22.5 元∕吨
1
P2 = 13.5 元∕吨 P
Data sources：Beijing Development and Re sion，Information about wateradjusting（NO. BDRC [2004]1517）
Fig 23. Proposed IBT pricing policy
We conducted the policy simulation for the following:
Impact of full cost uniform pricing: We assess the welfare impact ondifferent income groups of charging water at the current full cost uniform
volumetric tariff of 7 RMB/ 3m . The 7 RMB/ 3m is based on the informatio
from the National Development and Reform Commission which is based on
form Commis price
n
the cost of the water transfer project from the Ya In 2007, the Ministry of Water Resources further con
the
person family IBT tariff schedule described in Section 2.1 above.
Relative impact of 3 Family or lifeline IBT: We compare both of the above d
above.
the single equation case, if we represent the baseline tariff structure as and the
ngtze river to Beijing. firms this..
Relative impact of 4 family IBT: We compare the welfare impact of uniform full cost pricing policy to that caused by the introduction of the 4
pricing policies to the introduction of the 3 person family IBT describe
Once we have obtained our estimates from the AIDS estimation we can define
welfare measures to assess the impact of moving from one tariff system to another. In
2P
Current price 3.7 RMB∕y
LRMC 7 B∕t RM
Using quantity （t）
Price (R)
MB
/m3
5
30
proposed tariff structure as 1P we can define 2 separate measures of welfare cha
Firstly, we define the Compensating Variation (C
nges.
V) and secondly we define the
Deadweight Loss (DW).
The CV can be defined as an expenditure index t e
that an individual household would be willing to pay (WTA) (or willing to accept
have
ty at
From (1), Setting utility equal under each pricing policy we get:
hat measures the amount of incom
14(WTA)) in order to keep the original tariff structure/level, 2P . This measure makes
an implicit assumption about the consumers’ rights to the status quo: consumers
no rights to the status quo. This reflects the fact that water in Beijing is priced far
below the cost to society on the one hand, and the nature of recent pricing legisla
on the other. The CV measure gives the change in income required to keep utili
the same level as under the reference prices, measured at the reference prices.
tion
( ) ( ) ( )( )
( )( )21 PbPb
where hx1 is the expenditure or income level required by household h facing prices
1P in order to maintain utility at the level achieved under the reference price 2P
we normalize 1=P and rearrange we get the expenditure index:
22211
ln,, PaxPxVPxV hhh
−== (9)
. If
11ln Pax h −⇒2
2
( ) ( )[ ]( )1
111
2
1lnlnPbx
Xh
hh =⎟⎟
⎠
⎞⎜⎜⎝
⎛= (10)
Notice that for a price rise it is the case that xxx hh Δ+= 21 . In fact, xΔ represent
ln1 xPbPax −+
s
the equivalent variation (EV). The CV m y . Figure 24
provides a graphic description of this measure. We measure this expenditure index at
Xlneasure is reflected b h
14 Note that when we come to measure the relative effects of uniform pricing versus the IBT schedules,
e consumers will be better off under the IBT than under uniform pricing and hence will only be willing to somaccept compensation to avoid the change in the price schedule.
31
the subsistence utility level, i.e., setting . Using the equations above, and the
fact that the expenditure sh the reference prices can be
written as aw h
12 =hx
are at subsistence level under
2ln Pγ02 += sure for CV can be written as: , the mea
( ) 222 lnln5.ln PPwX hh γ−= (11)
The DW measure is defined as the monetary value of the change in log utility
resulting from a change in the price regime when income remains at the baseline level.
That is:
( ) ( )( ) ( )1
1
2
2 lnlnlnPb
PaxPb
PaxW hhh
−−−= (12)
Using the functional form
mea e
prices f ol
s for the functions of price described above gives us a
sur of the DW index in terms of the parameters of the utility function and the
aced by the individual househ ds:
( )β
γp
pWhln5.ln −= (13)
ectively reflects the substitution effect caused by changes in rela
2
This eff tive prices,
wit e
preferen
welfare m
increase
below. tion between goods,
is measured by ),, PxVPx − .
h th denominator adjusting this effect to account for the heterogeneity of
ces and it should not deviate from unity. Again, a graphic description of this
easure is shown in Figure 25 below. The Equivalent Variation of a price
from 2P to 1P is defined by ( ) ( )2212 ,, PxVPEVxV hh =+ in the diagram
The deadweight loss, which measures the effect of substitu
( ) ( 15V 1222 hh
15 This diagram also shows how the indirect utility function represents the value of utility at the points of utility
32
Fig 24. Graphical Representation of the Estimated Exact We
Th
cross sectional and time series qualities. The household level data provides total
commodities for this 24 month period for a sample of 1000 households (while it was
2000 households in 2004)16. The aggregated data provides similar characteristics but
at the level of the income quintile for a 16 year period. In short, we are presented with
lfare Measures
4.2 D ta Sources and Data Processing
e household data for 2002-2004 and the aggregated data of 1987-2004 have both
monthly expenditure and monthly expenditures on utilities, water and non-food
a
two panel datasets.
maxim ( ) ( )
, the remainder being resampled.
ization and not the indifference curves 1I and 2I themselves. 16 As described in Section 2.4 below, there is a certain amount of attrition of households over this period. Ultimately, only 600 households appear for the entire 24 months
Water
( ), PxV
Hicks
ian
( )22 , PxV h
12h( ), PEVxV − 22h
C
E( ), PCVxV + 12h
33
The data is coming from the Beijing Stat ata, and the Beijing Urban Household
Income and Expenditure Survey (BIES), the collection of which is undertaken by the
State Statistical Bureau of Beijing. The survey requires respondents to keep a daily
istic D
expenditure diary for a full 12-month period. As with other surveys of household
expenditures, the expenditure categories are numerous and detailed and include
ls
rded. Theoretically, the data is vetted for quality by an enumerator who visits
each household once or twice a month.
The preliminary analysis was undertaken using annual published
period 1986-2004 which gave average expenditures and average household
characteristics for income quintiles. Those aggregated data includes income,
In addition, the monthly household level data for 2002-2004 were used in order to
undertake the welfare analysis in the most comprehens
each
n Beijing. As not all the changes in the price of water happened at the
beginning of the year, we use the months of the prices changes to average the price of
that year. We further readjust the entire water price to the year 2000 level by using
household durables as well as consumption items, incomes and numerous detai
concerning family members and characteristics of accommodation. Quantities are
also reco
statistics over the
expenditure, household size, number of water consumption facilities (washing
machines and showers), and expenditure on water, electricity, and other fuels.
ive manner possible. It
contains data from 9 districts for the years 2002 to 2004, and includes monthly data
from 2839 households. The data provides the information about the district of
household; the household’s total expenditure and non-food expenditure in each month;
as well as the utility expenditure, water quantity and water expenditure for each
billing period.
In order to analyze the water demand, this study also collects the real price of
domestic water i
34
（Consumer Price Index, CPI）, shown in the following table.
Table 18 The nominal and real water tariff, Beijing 1986-2004 (RMB/ ) year Data of the
new price applied
Price 1 (before
changes)
Price 2 (after
changes)
Average annual price
CPI Real ariff (2000 Prices)
3mT
2004 Aug 1 2.90 3.70 3.233 102.46 3.155 2003 Jan 20 2.50 2.90 2.878 101.44 2.837 2002 Feb 1 2.00 2.50 2.458 101.24 2.428 2001 2.00 2.000 103.10 1.940 2000 Nov 1 1.60 2.00 1.667 100.00 1.667 1999 Nov 1 1.10 1.60 1.183 96.62 1.224 1998 Sep 1 0.80 1.10 0.900 96.04 0.937 1997 Dec 1 0.50 0.80 0.525 93.79 0.560 1996 April 1 0.30 0.50 0.450 89.07 0.505 1995 0.30 0.300 79.81 0.376 1994 0.30 0.300 68.04 0.441 1993 0.30 0.300 54.48 0.551 1992 Jan 1 0.30 0.300 45.78 0.655 1991 0.12 0.120 41.65 0.288 1990 0.12 0.120 37.22 0.322 1989 0.12 0.120 35.32 0.340 1988 0.12 0.120 30.13 0.398 1987 0.12 0.120 25.03 0.479 1986 0.12 0.120 23.05 0.521
The analysis of panel data has naturally received much attention in the literature (see
e.g. Hsiao 2004 and Baltagi 2001). Panel data allows us to estimate the parameter
interest allowing for the likelihood that observations from particular households
income groups are likely to be similar in some way. Furthermore, panel data allows
dynamic models to be estimated, and hypotheses to be tested, while allowing an
assessment of the importance of unobserved individual or group heterogeneity in
explaining observed
s of
or
behavior17. In our estimation procedure we exploit the panel
nature of the data and employ panel data techniques in order to better explain the data
hich dat ls, income groups etc. This
make
17 The heterogeneity refers to the groups for w one has a, e.g. individuadepends upon the nature of the data and, for aggregated data such as ours, the assumptions one is willing toregarding the nature of the groups.
35
generating process and obtain better estimates of the demand for water. We use the
following econometric model in order to estimate the AIDS model described above
on the household level data:
( )[ ] hthtgthgtgtghgtht uppaxpw εγβγγα ++−−+++= 2ln5.lnlnln
where hgtw is the expenditure share for the household in the income group
at time t, which in this case denotes the month. Notice that price only varies throug
time and not across households or income groups, while the parameters
0
h
thgthh
γ and β
are deemed to vary across income groups, i.e., the model allows price responses and
d to be
terms
capture the unobserved determinants of water demand. Unobserved individual
heterogeneity is captured by the term , which is assumed to remain constant over
st Squares is no longer an unbiased and consistent estimator for the
parameters of interest since the explanatory variables are endogenous18. Happily,
empirical testing can determine whether this is the case and the Fixed Effects
income responses differ across income groups.
The error structure in this model is assumed to consist of two components an
additively separable. It is represented by the terms u and e . In sum, theseh ht
hu
time and yet be unique to the household. The term hte represents the purely random
unobserved components that vary across time, such as macro economic shocks. It is
important from the perspective of obtaining unbiased and consistent estimates of the
parameters of the demand function to determine whether or not the time invariant
individual specific effect is correlated with the observables. If this is so, then
Generalized Lea
18 GLS is used in the analysis of panel data described by this model in order to account for the autocorrelationintroduced by the time invariant term This estimator is commonly referred to as the Random Effects
estimator. hu .
36
estimator can be used in order to over come this problem. We follow the following
procedure when estimating the AIDS system using the household level data:
W the m E RE under assump ere is no correlation between the household specific time invarian he
repress X
We est a Effe FE) m unde ssumption that the individu fect orrelated with the explanatory ables:
¦ uXE
We undertake a Hausman in o o test ull hyp that
il to reject to th we u we ass e RE
model is mo ap iate tha the FE
This procedure is common in the analysis of pa ta (see reene 20 siao
2004).
4.3
F by way of a elim y analy s, we es a sim arshallian nd
the Engel curve is linear, and this suggests that the AIDS is enough to model domestic
e estimate Rando ffects ( ) model the tion that tht effect and t
[ ] 0ors: E ¦ =hu
imate Fixed cts ( odel r the a is cal specific ef vari
[ ] 0≠h
test rder t the n othesis
[ ] 0¦ =huXE . If we fa e null se then ume th
re propr n .
nel da e.g. G 03, H
Estimation and Results
irstly, pr inar si timate ple M dema
curve using the data aggregated by income quintiles for the period 1987-2004. This
allows us to assess the potential impact of recent policy reforms as well as obtaining
preliminary estimates for price and income elasticity. We then move on to the
estimation of the AIDS model, the policy simulation, and the exact welfare
measurements derived from these estimates.
4.3.1 Engel Curves for water
One important restriction associated with the AIDS model is that, conditional upon
the constant term, the expenditure share for goods is linear in the log of expenditure if
water demand pattern in Beijing. In order to test this nature of the Engel curve for
37
water we used the semi-parametric techniques to run a kernel regression of the budg
share Engel curve, with price variables as parameters
et
below.
A downward slope of the Engel curve means the expenditure share of water
ptio
suggesting domestic water falls into the category of necessity. This makes intuitive
sense in Beijing where most of domestic water consumption is indoors rather than
ng Information Center in 2003.
Log Expenditure
19. It shows quite a good linear
shape, as shown in Figure 25
consum n decreases with an increasing log of total expenditure, therefore
outdoors. Tap water use is mainly restricted to drinking, cooking, bathing, washing
clothes, and similar purposes, as concluded by the survey conducted by Beijing
Municipal Water Conservation Offices and Beiji
Kernel regression, bw = __00000F, k = 6
Grid points5.29577
Fig 25. Semi-Parametric Engel Curve for Domestic Water Expenditure Shares
12.0986
.000438
.038095
38
4.3.2 Household incomes impose a significant impact on water demand, t
PED, and the IED
he
Thi s
and Inc
reduce d ater.
The em
income elasticity of demand lies between zero and 1; hence, it is likely that the
negative impact of increasing water prices is likely to fall disproportionately upon the
poo
negative but significa
other w arding water demand. It suggests that
creases increase. The extent to which water consumption increases with
me richer, reflecting the fact that there are
physical limitations on the extent to which water use can be increased with income
once prudence with regarding water consumption becomes less of an issue. That the
IED for high-income groups is negative could reflect the facts that the higher income
group is busier, has less time at home, and cooks less as they choose to have food
outside. Such facts may introduce more substitute water use behaviors. In addition,
the richer groups of Beijing do not have much luxury goods such as swimming pools
and irrigated gardens, therefore the water demand for luxury uses is not significant.
PED is significant at the 1% level. The negative value of PED further addresses the
s re earch conducts empirical studies about the Price Elasticity of Demand (PED)
ome Elasticity of Demand (IED). The study shows that the pricing policy can
emand of w
pirical finding throughout the world is that water is a necessary good, i.e. the
r. IED are all small and positive except for the top 20% of households, which have
nt budget elasticity. These results are largely in accordance with
ater demand studies and our intuition reg
low-income households will tend to increase their consumption of water per capita as
income in
income declines as households beco
feature of water as a necessity good and would showthat it would be effective to
introduce demand side management. In addition, the value of the PED for the first 4
groups is between 0～-1shows the rigidity of PED. On one hand, all income groups
will respond to the changes of price, and on the hand, the higher value of the highest
39
income groups means that they have more opportunity to respond to the price changes
as they may have more opportunity to reduce their luxury use of water, and to swiftly
install water conservation facilities.
Table 19 IED and PED of income groups Income groups
0-20% (lowest) 20%-40% 40%-60% 60%-80% 80%-100% (highest)
IED .4289904 .2346334 .1205664 .0620632 -.3194785** ** ** ** **
PED -.6617562** -.862384** -.7691349** -.7701065** -1.351054**
** means significant at 1% level.
4.3.3 Welfare Effects of Introducing Increasing Block Tariff (IBT)
We use the monthly water consumption data to conduct the analysis, while taking
2004 as the base year for future price reform.
4.3.3.1 Consumption Blocks chosen by consumers in the short-run
In the short run, the demand response is significant with the majority of households
consuming within the first block of IBT. About 85% of first 3 groups will be end up at
first block, while the number decreases from 81% to 77% for the 4th and 5th group.
Table 20 Consumption Blocks chosen by consumers in the short-run under the 4 Family IBT
Income groups
of hhs in B1 of hhs in B2 of hhs in B3 Total B1(%) B2(%) B3(%)
lowest 20%, i.e., 0-20%
245 18 24 287 85.365854 6.271777 8.3623693
20%-40% 277 32 15 324 85.493827 9.8765432 4.6153846 40%-60% 266 20 24 310 85.806452 6.4516129 7.7419355
60%-80% 258 33 27 318 81.132075 10.377358 8.490566 highest 20%,
i.e., 80%-100
223 39 28 290 76.896552 13.448276 9.6551724
%
40
4.3.3.2 Consumption Blocks chosen by consumers in the long-run
Considering t
Table 21 Consumption Blocks chosen by consumers in the long-run under the 4 Family IBT ) B3(%)
the long-run response of the household to price, the estimates show tha20all of them will end up in the first block .
Income groups of hhs in B1 of hhs in B2 of hhs in B3 Total B1(%) B2(%
lowest 20%, ie, 0-20% 287 0 0 287 100 0 0
20%-40% 324 0 0 324 100 0 0
40%-60% 310 0 0 310 100 0 0
4 60%-80%
318 0 0 318 100 0 0
highest 20%, ie, 80%-100% 290 0 0 290 100 0 0
4.3.3.3 Impacts by Introducing LRMC pricing
The ratio of water expenditure in total expenditure of household will increase largely
after introducing uniform pricing on long-run marginal cost (LRMC). In which, the
short and long run. As the household will respond to the changes of prices in the end,
the ratio will decrease. It should also noted that in the short run, the ratio is close
threshhold level of 3% (Yu Fan 2006), while the ratio for higher income
decrease more in a long run. This implies that the uniform pricing on LRMC w
impose more burdens on the lower income groups and impose more impact on thei
welfare.
Table 22 Changes of Ratio of Water Expenditure in total expenditure (W) %
ratio of the lowest group changes largely. Table 22 shows the ratio changes in both the
the
groups
ill
r
Income group Income group
0-20% 20%-40% 40%-60% 60%-80% 80%-100%
w .0146003 .0105505 .0089374 .0078833 .0049443
w（short run） .02762219 .01996041 .01690859 .01491435 .00935408
w（long run） .02426619 .01685999 .0145453 .01282735 .00718037
20 Although there are some inconsistences with our previous studies (CCICED 2005), it has no significant differences. This may be resulted by that we further include the data in 2004.
41
4.3.3.4 The welfare impacts of the 4 family IBT
The analysis on the welfare impact of the 4 family IBT shows that, in the short run,
only the income increases, and the households can sustain their utility level, although
the value is small compared with the income effects of theuniform pricing of the IBT.
The main reason for this is that in a short run, some households still consume
water in the 2nd and 3rd blocks, a n the first block, so
that is the reason the compensating all.
e lo ho il o the changes of the price, and almost
e water in the first block. Under such situation, it
means that all the households are subsidized, and the CV is negative, which means
that the welfare of all the groups is improved. In addition, although CV is not that
e because
er,
family IBT.
distortion that the IBT introduces. It can be seen from Figure 26 that the welfare
effect of the price d
giv e n o r ho s, it ppe
wou ue a cash bsidy intro ed by m th
t inco ntiles.
paring Figures 26 and 27, it is cle t allo f o
lthough most of them consume i
variation is sm
In th ng run, the useholds w l respond t
all the households will consum
significant, the lower income groups have a higher CV value. This may b
the ratio of water expenditure of total expenditure for lower income groups is high
and they may get more subsides.
Figures 26 and 27 also show the deadweight losses associated with the 4
The deadweight loss measures the extent to which the individual households would
be willing to swap the subsidy that is available for water consumption for a straight
cash subsidy. In effect it is a measure of the welfare loss associated with the price
istortion is highest at each extreme of the income distribution. In
short, en all the oth r demands o the income f poo usehold would a ar
that they ld val su duc the 4 family IBT ore than e
adjacen me qui
In com ar tha wing or the heter geneity
42
between seasons21 gives us quite a different welfare effect by income. The inclusion
with regard to estimating the welfare impacts. Doing so shows that the seasonal
difference of water demand is larger for the rich residents rather than for the poor. In
this case, it seems that the forthcoming pricing of increasing block tariffs is
progress
poor.
Compen ariati CV) of the mily IBT (Income gro
of the seasonal demand response is the more realistic of the two policy simulations
ive and will reach the expected purpose of cross-subsidy from the rich to the
Table 23 sating V on ( 4 fa short run) ups
0-20% 20%-40% 40%-60% 60%-80 -10 % 80% 0%
CV（sr） .0048513 .0018215 .0028511 .00416 61 94 .004 57
Table 24 Compensating Variation (CV) of the 4 family IBT (long run) Income groups
0-20% 20%-40% 40%-60% 60%-80% 80%-100%
CV（lr） -.0074108 -.0051578 -.0043631 -.0036893 -.001694
Table 25 Dead Weight Loss of the 4 family IBT Income group
0-20% 20%-40% 40%-60% 60%-80% 80%-100%
DWL .000433 .0005095 .0004376 .0005446 .0009593
21 IBTs e been impl both cou C e Udevelopi countries su ibia a frica om and erwe 19Koundouri 2002, Billings and Agthe 1980). The common feature of these sites is that their climate is arid or semi-arid; they are subject to sporadic water shortages and widely fluctuating seasonal demands. The monthly data enables us to detect whether or not water demand is seasonal. We do
nths
havng
emented inch as Nam
developednd South A
ntries such as (e.g. Gro
yprus and thvan de M
.S., and 99,
this by including the dummy variable SUMMER for water which takes the value one for moJune to September and zero otherwise.
43
month level (4-family)
50
40
-20
-10
0
10
20
30
0-20% 20-40% 40-60% 60-80% 80-100%
IE(SR) IE(monthly level)
Fig 26. The welfare impacts of the 4 family IBT with seasonal variation by incomquintile (RMB/Month)
e
come households would require in order to
Fig 27. The Welfare Effects of the 4 family IBT without seasonal variation by incomequintile
In summary, (1) in the short run, the in
DWL(monthly level)
四人家庭批量累进制水价对五个收入集团的福利影响
0.4
0.6
-0.8
-0.6
-0.4
-0.2
0
0.2
收入集团
1 2 3 4 5
百分比 cv(sr)
cv(lr)
dwl
44
have the same level of welfare under the IBT is the same as under the uniform tarif
The black blocks represent the short-run impact upon the consumers and it can easily
be seen that all income groups will suffer a welfare loss in the short-run since this
expenditure index is positive for all income groups, however, the absolute value
such income effect is not that large if we compare the uniform pricing and IBT. The
main reason for this is that in the short run, some of the households will cont
use water in the 2
f.
of
inue to
rge. (2) In the long run, as most of the households will respond to the pricing
policy, almost all the households will stop using water in the first block. In fact, it
means that all the households are being subsidized and the CV value is negative,
which means th e inco are Mean an b
that low-incom are g e com n. Thi y bec
water expenditure accounts for a larger share in the total expenditure and it is getting
more subsidies. (3) In addition, in the long is all positive for all income
groups. This is under the condition that the h is res the
changes, and the welfare of a rou impr trodu
As DWL measures the substitution effects, the DWL of higher income group is
relatively larger, as the price elasticity of h roups is larger in the long
run.
4.3.4 Saving and Cost Recovery
s the water bill accounts for a larger share in the total expenditure for the poor
groups, their response to price changes is larger, which shows that the uniform pricing
e
nd and 3rd block, therefore, the CV value of introducing IBT is not
that la
at all th me groups better off. while, it c e observed
e groups etting mor pensatio s is mainl ause the
run, the DWL
ousehold ponding to price
ll income g ps is being oved by in cing IBT.
igher income g
Burden of Water
A
policy will constrain the water consumption of the poor groups more than the rich
groups. According to our estimation, in the long run, the pricing policy will generat
both substitution effects and income effects for households. By introducing LRMC (7
RMB/m3), the water demand will decrease by 12%-20%. Meanwhile, the medium and
45
lower income groups will reduce more; up to 50% compared with the higher income
groups. That is, the first 3 lower groups will reduce their water demand more.
If an IBT pricing policy is to be introduced, which will follow the proposed 4 family
member IBT, then almost all the income groups will use water in the 1st block as the
average household size does not vary significantly across income groups in Beijing.
With per capita consumption increasing with income this suggests that an IBT
schedule will be a suitable instrument for ameliorating the impact of water pricing on
low-income households. Indeed the current proposal for the IBT schedule for Beijing
is the so-called ‘4 person family model’. It has been estimated that 91% of
households in Beijing had 4 or less members, and 77% of households had 3 or less
members. Therefore, the IBT based on 4 family members (12 m3 /month for the first
block) is enough and almost all t l stop water demand in the 1
block. That is, under 4 family member IBT, all income groups are subsidized. A 3
family member IBT will improve the situation by shifting the burden from poor
income groups to higher income groups, and only the highest group will use water
that exceeds the 1st block, and the 2 highest income groups will take about 2-4 times
of the water saving burden than that of the poor groups.
he income groups wil st
46
Chapter 5 Findings and Policy Recommendations
5.1 Key Findings of the Study
5.1.1 Problems identified for Beijing’s Water Pricing Reform
reform since the 1990s, especially since it started to focus on the pricing policy based
but also the environmental cost and resources depletion cost.
However, some problems existed which should be given attention.
(1) The current price for residential water is still low compared with the long-ru
marginal opportunity cost of water in Beijing, which is about 52% of marginal
opportunity cost (MOC). In addition, the price components of water resources
charges (refers to the water depletion cost) are too low to reflect the water depletion
and scarcity of water. Although the wastewater charges are almost equal to the
wastewater treatment cost, they only reflect parts of the environmental cost of water
uses. Such price structure constrains the acceptability of household acceptance of
price reform and can not improve the awareness of water scarcity and environmental
pollution, which impacts the full role played by pricing policy in regulating the
household water use behaviors and supporting more efficient uses of water resources
while
Beijing and other cities in China have made great progress regarding water price
on long run marginal opportunity cost, and reflecting not only the water supply cost,
n
,
protecting the environment.
ull attention to the differences (2) The existing uniform pricing policy does not give f
of the cost burden on lower and higher income groups, which constrains the
introduction and implementation of water pricing policy.
(3) The uses of fees related to water is not very transparent, and that affects the
household’s acceptation. The residents are concerned and worry about whether the
fees being collected by the water supply company are being used to improve the
47
water supply capacity, sewage collection and sewage treatment facilities, and how the
water resources fees are being allocated. This opaque process impacts the households’
understanding and acception of the reasons for increases in the price of water and
ality
acilities,
(1) The residents are very concerned about water pricing reform
nal, however, those with
higher income give responses that are more positive. Most of the people being
interviewed show their concern about the components of price; they would accept that
the increase of water price is rational only if it implies that there is andincrease in
water resources charges and waste water treatment charges. They would question it if
the increase of water price meant there was an increase in water supply charges.
About 92.1% think that the current price system does not give concern to the cost
burden on different income groups, and about 91% showed their positive support to
IBT.
sometimes, may even affect how they will pay the water bills.
(4) The availability of water conservation technologies and equipment is low, and the
quality of that equipment should be effectively regulated.. The current market supply
of water conservation equipment can not meet the demand of households by qu
and type, which leaves few options for residents. Therefore, household water use
behavior is not as optimal as possible. (5) The rate of recycling water is very low in
Beijing residential areas; only a few residential areas have water-recycling f
which affect the full use of water resources.
5.1.2 Reaction of Beijing Residents on Pricing Policy
The attitudes are affected by the continuing reform of water pricing policy and
income level of the households. About 38% show their concern about water price
reform, in which, the low-income groups give more concern than the high-income
groups. About 51% think that the water price reform is ratio
48
(2) Water pricing polic
agement Center
me
al price against total
nt andwith more
water awareness promotion, the households gave more concern to domestic water
it showed that about 99% of the households understood the shortage of water
.
tion lavatory, 32.5% of the households
estic
in the
y reform improves the resident’s awareness about water
resources and water conservation
The investigation of the Beijing Municipal Water Conservation Man
in May and June of 1999 showed that about 80% of the people interviewed had so
understanding about the water scarcity in Beijing, while only 64% of the households
knew the price on water.
With the more frequent increase of water price, the proportion
expenditure increased. In additionwith education that is more freque
uses. By the end of 2005, the same investigation surveyed about 3000 households and
resources in Beijing and about 95.5% knew what they paid for the price of water
According to our survey, over 53% think that their awareness is closely related to
water price reform.
(3) Water price reform improves the use of water conservation facilities and
conservation behaviors
The reuse water and the use of water conservation facilities identify the changes in
household water conservation behavior. Based on households surveyed, about 55%
installed a water-conserving conserva
purchased a water-economical washing machine. About 79.1% of households would
reuse water.
Even though the population growth rate decreased in Beijing the use of dom
water increased. Studies showed that income growth is the major driving factor
growth of total water consumption, while the policy reform on pricing is the driving
49
factor in reducing the growth rate.
5.1.3 Household income imposes significant impacts on water demand, the
PED, and the IED
This research conducted empirical studies about the Price Elasticity of Demand (PED)
Table 26 IED and PED of income groups
and Income Elasticity of Demand (IED). The study shows that the pricing policy can
reduce demand of water.
Income groups
0-20% (lowest) 20%-40% 40%-60% 60%-80% 80%-1(highe
00% st)
IED .4289904** .2346334** .1205664** .0620632** -.3194785**
PED -.6617562** -.862384** -.7691349** -.7701065** -1.351054**
** means significant at 1% level.
The empirical finding throughout the world is that water is a necessary good, i.e. the
income elasticity of demand lies between zero and 1, hence it is likely that the
negative impact of increasing water prices is likely to fall disproportionately upon the
poor. IED’s are all small and positive except those for the top 20% of households,
which have negative but significant budget elasticity. These results are largely in
accordance with other water demand studies and our intuition with regard to water
demand. It suggests that low-income households will tend to increase their
consumption of water per capita as incomes increase. The extent to which water
consumption increases with income declines as households become richer reflecting
the fact that there are physical limitations on the extent to which water use can be
increased with income once prudence with regard to water consumption becomes less
of an issue. That the IED for high-income groups is negative could reflect the fact that
the higher income group is busier and has less time at home, and cooks less as they
50
choose to have their food outside the home. Such facts may introduce greater ch
in water use behaviors. In addition
anges
, the richer groups of Beijing do not have many
it would be effective to
e
d to
nd
improve the welfare and cost burden sharing
(1) In the short run, the demand response is significant with the majority of
ber decreases from 81% to 77% for the 4th and 5th
Table 27 Consumption Blocks chosen by consumers in the short-run under the 4 Family
B3(%)
luxury goods such as swimming pools and irrigated gardens; therefore, the water
demand for luxury use is not significant.
PED is significant at the 1% level. The negative value of PED further addresses the
fact that water is a necessary good; it also shows that
introduce demand side management. In addition, the value of the PED for the first 4
groups is between 0～-showing the rigidity of PED. On one hand, all income groups
will respond to the changes of price, while on the other hand, the higher value of th
highest income groups means that they have more opportunity to respond to the price
changes as they may have more opportunity to reduce the luxury use of water, an
swiftly deploy water conservation facilities.
5.1.4 Increasing Block Tariff system will help the conservation of water a
households consuming within the first block of IBT. About 85% of first 3 groups will
end up in first block, while the num
group (table 27).
IBT Income groups of hhs in B1 of hhs in B2 of hhs in B3 Total B1(%) B2(%)
1 245 18 24 287 85.365854 6.271777 8.36236932 277 32 15 324 85.493827 9.8765432 4.61538463 266 20 24 310 85.806452 6.4516129 7.74193554 258 33 27 318 81.132075 10.377358 8.490566 5 223 39 28 290 76.896552 13.448276 9.6551724
（2）Considering the household’s long run response to price, the estimates
51
show that all of them will end up in the first block22.
IBT in B1 of hhs in B2 of hhs in B3 Total B1(%) B2(%) B3(%)
Table 28 Consumption Blocks chosen by consumers in the long run under the 4 Family
Income groups of hhs 1 287 0 0 287 100 0 0 2 324 0 0 324 100 0 0 3 310 0 0 310 100 0 0 4 318 0 0 318 100 0 0 5 290 0 0 290 100 0 0
（ ）The ratio of water expenditure as par hold expenditure will largely
increas ing u icing on long-run margin MC),
the ratio of the lowest group changes most. Table 29 shows the ratio changes in
short and long run. In the long run, the ratio will decrease as the household responds
to the changes of price. It should also be noted that in the short run, the ratio is close
to the n 2006), while the ratio for higher income groups
eir
3 t of total house
e after introduc niform pr al cost (LR and
both
threshold level of 3% (Yu Fa
decreases more in a long run. This implies that uniform pricing on LRMC will
impose more burdens on the lower income groups and will have more impact on th
welfare.
Table 29 Changes of Ratio of Water Expenditure in total expenditure % Income groups
0-20% 20%-40% 40%-60% 60%-80% 80%-100%
Before .0146003 .0105505 .0089374 .0078833 .0049443
Short run .02762219 .01996041 .01690859 .01491435 .00935408
Long run .02426619 .01685999 .0145453 .01282735 .00718037
（4）The analysis on the welfare impact of the 4 family IBT shows that, in the sho
run, only the income increase, and the households can sustain their utility level,
rt
22 Although there are some inconsistences with our previous studies (CCICED 2005), it has no significan
differences. This may be resulted by that we further include the data in 2004. t
52
although the value is small when compared with the income effects of uniform
pricing of the IBT. The main reason for this is that in the short run, some household
still consume water in the 2
s
ng variation is small.
means
associated with the 4 family IBT. The
consumption for a straight cash
other demands on the income of poor households, it would appear
that they would value the cash subsidy introduced by the 4 family IBT more than the
adjacent income quintiles.
In com aring Figures 28 and 29 it is clear that allowing for the heterogeneity between
seasons gives us quite different welfare effects by incom
seasonal demand response is the more realistic e tw n
regard
of water demand is more for the rich residents than for the poor. In this case, it seems
nd rd and 3 blocks, although most of them are in the first
block, and this is the reason the compensati
In the long run, a household will respond to the changes price, and almost all the
households will consume water in the first block. Under such a situation, this
that all households are subsidized, and the CV is negative, which means that the
welfare of all the groups is improved. In addition, although CV is not that significant,
the lower income groups have a higher CV value. This might happen because the
ratio of water expenditure as a portion of total expenditure for lower income groups is
higher, and they may get more subsides.
Figures 28 and 29 show the deadweight losses
deadweight loss measures the extent to which the individual household would be
willing to swap the subsidy available through water
subsidy. In effect it is a measure of the welfare loss associated with the price
distortion that the IBT introduces. It can be seen from Figure 28 that the welfare
effect of the price distortion is highest at each extreme of the income distribution. In
short, given all the
p
e. The inclusion of the
of th o policy simulatio s with
to estimating the welfare impacts. Doing so shows that the seasonal difference
53
t progressive and this will
reach the expected purpose of cross-subsidy from the rich to the poor.
e f I rcome groups
hat the forthcoming pricing of increasing block tariffs is
Tabl 30 Compensating Variation (CV) of the 4 amily BT (sho t run) In
%-40% %-60% 80% 0% 0-20% 20 40 60%-80% -10
CV（sr） 13 018215 028511 .004 57 .00485 .0 .0 .0041694 61
Table 31 Compensating Variation (CV) of the 4 family IBT (long run) Income groups
0-20% 20%-40% 40%-60% 60%-80% 80%-100%
CV（lr） -.0074108 -.0051578 -.0043631 -.0036893 -.001694
Table 32 Dead Weight Loss of the 4 family IBT Income group
0-20% 20%-40% 40%-60% 60%-80% 80%-100%
DWL .000433 .0005095 .0004376 .0005446 .0009593
54
month level (4-family)
40
30
50
-20
-10
0
10
20
0-20% 20-40% 40-60% 60-80% 80-100%
IE(SR)
Fig 28. The welfare impacts of the 4 family IBT with seasonal variation by income quintile (RMB/Month)
Fig 29. The Welfare Effects of the 4 family IBT without seasonal variation by income quintile
IE(monthly level) DWL(monthly level)
四人家庭批量累进制水价对五个收入集团的福利影响
-0.2
0
0.6
1 2 3 4 5
百分比
-0.6
-0.4
0.2
0.4
cv(sr)
cv(lr)
dwl
-0.8
收入集团
55
5.2 Policy Recommendations
The fast growth of China’s economy imposes pressures on natural resources. Water
shortage is a critic e of
resources is closely related to the failure of pricing policy.
P icy lot of and m rt is given: 1) to refor
pricing policy in order to provide the right price signals, and 2) to regulating water
use behaviors, and
improving the efficient use of water resources and 5) to also reflect the environmental
cost.
Beijing is a typical city of Northern China suffering from water shortage and water
pollution. The annual average water resour is 3.63 billion m3.
The per capita water resource is on
of China and 1/32 of the world average. The recently released report by Be
shows that 56 rivers of total 78 did not meet water quality standards, mainly because
of the accelerated discharge of wastewater and the lack of water to recharge them due
to the dry climate of recent years. In addition, by end of 2004 about 0.2 billion m3 of
wastewater has to discharge to the river directly, yielding a wastewater treatment rate
of only 22%.,.
Beijing has been practicing urban water pricing which can provide experiences and
lessons to other urban areas. Since the late 1970s, water has been priced
volumetrically in Beijing. Before 1997 the pricing policy in Beijing did not embrace
the concept of full cost recovery, i.e. recovery of capital, operations and maintenance
costs (O&M) and wastewater treatment. However, since 1997, the real price of water
has increased sharply in Beijing. Furthermore, in 1998, an additional volumetric tariff
for wastewater treatment was added. In addition to covering the cost of supply, the
al issue in China. Many studies demonstrate that the overus
ricing pol attracts a attention uch effo ming
3) to reflect the scarcity of the water resources, and 4) to
ce available for Beijing
available ly 300 m , which is about 1/8 the average 3
ijing EPB
56
water laws, policies and regulations are very much concerned with water saving and
conservation methods and the protection of water resources. In this sense, pricing has
also been promoted as a Water Demand Management (WDM) instrument.
Following the recent price hike on August 1, 2004, the current residential water tariff
in Beijing is RMB 3.7/m3. The water price in Beijing reflects a number of different
cost items. For example, in the latter part of 2003, the tariff was 2.9RMB/m3. This
consisted of a water resource fee (for both surface and groundwater) of 0.6 RMB/m3,
a sewage treatment fee of 0.6 RMB/m3, a tap water fee of 1.7 RMB/m3 to cover the
fixed and variable (capital and O&M) costs of the water supply company, and a tax of
0.33 RMB/m3 paid to the Beijing municipality. This breakdown reflects the structure
stipulated in China’s Price Law and the National Guidelines on Water tariffs. At
present, the water price level t
price adjustments on the residential sector have focused their attention upon the
sewage treatment fee and the water resource charge, rather than the tap water tariff.
Although the price is increased, it is still subsidized.
About 20 cities in have introduced increased block tariff systems for water, and there
are some proposals for introducing IBT to Beijing.
The following policy recommendation is provided based on the research findings of
this project.
（1）Water pricing policy reform can be regarded as a macro level economic reform
instrument. It can improve water use efficiency and help to prevent water pollution,
which is regarded as a win-win solution for water resources. The current price level
of water in Beijing is still very low compared with the long-run marginal cost.
Therefore, it is quite necessary to increase the price.
(2) Enviro
in Beijing is the highest of all cities in China and recen
nmental pricing policies should be developed around the concept of
57
marginal social cost of the use of the en tal resource concerned. Based on a
l cost of water in Beijing should be around 7
ide
e components of the
jected that wastewater treatment cost would be around 1.25 RMB/ton by 2010.
The wastewater charges should be equal or maybe higher than this level to ensure that
et
stic water uses, to better reflect efficiency and equity considerations.
f system
vironmen
current estimation, the long-run margina
RMB/ton and that should serve as the basis for Beijing’s future water pricing policy
reform. In addition, pricing policy should consider the impact on the poor and prov
relief. Besides the price level, concerns should be given to th
water price, which should not only reflect the water supply cost, but also the water
depletion cost and environmental cost associated withwater uses. The current water
resources charge is still too low to reflect the water depletion cost. The wastewater
charges are about 0.9 RMB/ton, which just recover the wastewater treatment cost. It
was pro
the treatment cost is being recovered and to attract private investment into this mark
to provide environmental services.
(3) Higher prices for essential environmental services such as clean water may have
significantly regressive impacts. A uniform pricing scheme may attain efficiency
conditions at the margin, but it also gives rise to affordability problems for the poorer
sections of the population.
(4) An increased block tariff system should be introduced instead of the uniform tariff
for urban dome
The IBT can transfer the burden of water tariffs from poor to rich households and the
evidence is that poor households will prefer this system to a uniform tarif
since their welfare can be increased by up to 2.7% of their income. As is the case in
other water scarce countries like Chile, a comparison must be made of converting the
lifeline tariff to a direct cash subsidy, which redistributes income to the poor, to , or
other wealth distribution policies.
58
（5）For making water pricing policy, stakeholders’ participation approaches shoul
be introduced.For example, the public hearingwould provide opportunities for the
stakeholders to state their interests and to ensure effective results, the public hearing
process must be transparent and coupled with information disclosure..
d
f
ieve
rious
e
the current research, it seems
implies that a 3 block may not
t
).
n
private
n in capital. Sterner (2003) notes
（6）In order for residents to respond to price changes, alternative water conservation
technology and facilities must be provided. （7）Although an IBT system can gain
welfare improvement, some issues should be given concern:
Revenue Sufficiency: The estimated elastic price response means that the vast
majority of consumers end up in the lowest block of the IBT and lifeline tarif
systems. The implication of this is that most households will be subsidized in
their water consumption. Such a prediction is important for the Beijing tap
water and sewage treatment companies since the tariff will fail to ach
cost recovery and hence the quality of the water supply (regularity, wastage,
water quality etc.) will be hard to sustain or improve. Altering the va
facets of the IBT could resolve the problem: the size of the first block and th
size of the steps are important here. Based on
that the first block should be narrowed down, the 3 tons/person might be
higher than the lifeline water needed. It also
needed, that a two block is enough and it can greatly reduce the managemen
cost.
The incentives for a water supply corporation: the problems with IBT
structures are well documented (Whittington and Boland 2000, Sterner 2003
Not least among these is the incentive effect that such a structure has upo
water supply corporations whose objective is full cost recovery or
companies whose objective is to earn a retur
59
that when an IBT is introduced, lets say for equity reasons such as
described above, since it is the poor who are generally subsidized by thes
tariff structures they frequently become a low priority for the water suppliers.
For example, if water supply fails, a supplier who aims for cost recovery wi
be more inclined to fix a rich household’s supply before the poor household.
Ultimately, the tariff structure introduced specifically to assist the p
perversely induces a lower quality service for poor households in the long
run. The potential for such disincentives, and the regulation required
remove them, needs to be tallied against the potential welfare enhanci
effects described above.
Subsidization of the rich: It should be made clear that the IBT system
subsidizes all water consumers, rich and poor, for the initial units of water
consumption. Furthermore, the subsidy is only available when households
consume the full quota of
those
e
ll
oor
er
to
ng
water. Not all poor households will do this of
e
was
eing more than 15% of household income. The analysis
course and hence they will not receive the full subsidy. In Chile, the lifelin
tariff was replaced by a direct cash subsidy in certain urban areas. This
available as a refund to households upon application and was conditioned
upon the water bill b
shows that in general there will be a preference for cash subsidies as
measured by the deadweight loss.
i. Family size: It is frequently the case that poor households have larger families
than richer households. Although family size appears to be relatively uniform in
Beijing, it is likely that at the lowest extremes of the income distribution, households
will lose out from a system based upon a 4 member family. This will be especially
true where households share one metered connection.
60
61
nd
ii. Seasonal Tariffs: given the clear importance of seasonal changes in demand
indicated by the analysis: rich households respond to seasons more than the poor, a
the imposition of seasonal tariffs might be an interesting means by which to induce
conservation and target wealthy consumers.
Annex 1: Summary of the Cities Introducing the IBT System
in China
City Time Rate 1 Xia Men Jan.
1,1997 0.6 RMB/ton under 1.5 tons 1.4 RMB/ton for 15-20 ton 2.1 RMB/ton for over 20 tons
2 Ren2002 2 times of life line water price for 3-5 M3
Qiu July 1, Life line water price being applied for 3 m3 person per month
10 times of life line water price for over 5 M3 3 Jiao
2003 m3, with price of 1.80 RMB, above 20 m3will be charged 2.4
Zuo July 1, First block is 12 m3 per household, with price of 1.2 RMB; 13－19
RMB4 Yin Chuan Jan 1, IBT for domestic and non-domestic uses
2004 5 Kun
2004 2.45 RMB for 11-15 tons; Ming April 1, 8 RMB for 10 tons of per household
3.1 RMB for 16-20 tons 3.75 RMB for 21 above
6 Wen Zhou May of 3 RMB for under 8 tons per household 2004 4.5 RMB for 8-14 tons
6 RMB for over 14 tons 7 Zheng
ZhoApril 1, IBT
u 2005 8 Qing Dao June 1,
2005 1.6 RMB for 5 tons per household 2.5 RMB for over 5 tons
9 QinHuaDao
-5 tons 17.4 RMB for over 5 tons
g ng
Dec. 2005
1.74 RMB for 3.5 tons per person 3.48 RMB for 3.5
10 Guang Zhou
Jan. 1, 2006
1.32 RMB for 22 tons per household 1.98 RMB for 23-30 2.64 for over 30 tons
11 Zhu Hai Jan. 2006 1.38 RMB for under 15 tons 1.85 for 15~23tons 2.35 for over 23 tons
12 Wu Han May 1, 3 steps IBT, With ratio of 1�2006
1.5�2
13 Ning Bo July 1, 2006
2.1 RMB for 17 tons 2.93 RMB for 18-30 3.75 RMB for over 30 tons
62
14 Nan Jing July 1, 2006
IBT
15 Fo Shan Aug 10, 2006
0.95 RMB for under 23 tons 1.425RMB for 23-30 1.9 RMB for over 30 tons
16 Lang Fang Sep 20, 2006
1.9 RMB for 3 tons 4.9 RMB for 3-5 20.1 RMB for over 5
17 Tai Yuan Sep 20, 2006
1.9 RMB for 3 tons 4.9 RMB for 3-5 20.1 RMB for over 5
18 Xin Xiang Nov. 1, 2006
1. 5 RMB for 12 tons 2.25 for 13—20 tons 3 RMB for over 20 tons
19 Wei Hai Jan 1, 2007
IBT
20 Jin Zhong April 1, 2007
2.1 RMB for 2 tons/person month 3.15 RMB for 2.01-3.5 tons 4.20 RMB for over 3.5 tons
63
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