Chapter 7
Water Pricing
Abstract This chapter analyzes the water pricing framework, the reform process
of pricing components, key issues, and suggestions. Water pricing reform in China
after 1980 has been an exploration of various policy possibilities. In theory, China
has developed a comprehensive, systematic, and advanced water pricing policy and
framework. The framework establishes a variety of instruments that could, in principle, deal with various circumstances related to tariffs and their structure. In practice,
however, the reform process in China has progressed hesitantly, through a series of
trials and errors: in macro-policy, reform has wavered between economic, social, and
environmental targets; in policy direction, tariff reform has gradually evolved from a
service charge to a resources charge and finally an environmental charge, accompanied by increasing price levels. In future, under the decisive role of the market in the
Chinese economy, it will be critical to develop a clear and sustainable water pricing
formulation mechanism. Cost recovery should be redeveloped as a key principle for
service charges.
Keywords Water pricing framework · Water resources fee/tax · Water supply tariff
from hydraulic engineering · Urban water supply tariff · Wastewater collection and
treatment tariff · Pollutant discharge fee/tax · Cost recovery
Water pricing is an efficient and effective instrument to manage water resources and
their services, such as improving allocation and raising revenue. However, water
pricing has many objectives focused on specific issues, and these goals often conflict
with each other. Consequently, water pricing is a trade-off among different objectives (OECD 2010), making it the most difficult measure to implement politically to
promote equity, efficiency, and sustainability in the water sector (Rogers et al. 2002;
Dinar 2000).
The chapter is based on Shen et al. (1999) Water pricing theory and practices. Science Press: Beijing;
Shen et al. (2006) Water pricing theory, methodology and practices. China Water and Power Press:
Beijing; Shen and Wu (2017) State of the art review: water pricing reform in China. International
journal of water resources development, 33(2): 198–232; Shen and Reddy (2016) Water pricing in
China and India: a comparative analysis. Water Policy, 18 (S1): 103–121.
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021
D. Shen, Water Resources Management of the People’s Republic of China,
Global Issues in Water Policy 26, https://doi.org/10.1007/978-3-030-61931-2_7
143
Water Pricing
Abstract This chapter analyzes the water pricing framework, the reform process
of pricing components, key issues, and suggestions. Water pricing reform in China
after 1980 has been an exploration of various policy possibilities. In theory, China
has developed a comprehensive, systematic, and advanced water pricing policy and
framework. The framework establishes a variety of instruments that could, in principle, deal with various circumstances related to tariffs and their structure. In practice,
however, the reform process in China has progressed hesitantly, through a series of
trials and errors: in macro-policy, reform has wavered between economic, social, and
environmental targets; in policy direction, tariff reform has gradually evolved from a
service charge to a resources charge and finally an environmental charge, accompanied by increasing price levels. In future, under the decisive role of the market in the
Chinese economy, it will be critical to develop a clear and sustainable water pricing
formulation mechanism. Cost recovery should be redeveloped as a key principle for
service charges.
Keywords Water pricing framework · Water resources fee/tax · Water supply tariff
from hydraulic engineering · Urban water supply tariff · Wastewater collection and
treatment tariff · Pollutant discharge fee/tax · Cost recovery
Water pricing is an efficient and effective instrument to manage water resources and
their services, such as improving allocation and raising revenue. However, water
pricing has many objectives focused on specific issues, and these goals often conflict
with each other. Consequently, water pricing is a trade-off among different objectives (OECD 2010), making it the most difficult measure to implement politically to
promote equity, efficiency, and sustainability in the water sector (Rogers et al. 2002;
Dinar 2000).
The chapter is based on Shen et al. (1999) Water pricing theory and practices. Science Press: Beijing;
Shen et al. (2006) Water pricing theory, methodology and practices. China Water and Power Press:
Beijing; Shen and Wu (2017) State of the art review: water pricing reform in China. International
journal of water resources development, 33(2): 198–232; Shen and Reddy (2016) Water pricing in
China and India: a comparative analysis. Water Policy, 18 (S1): 103–121.
© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021
D. Shen, Water Resources Management of the People’s Republic of China,
Global Issues in Water Policy 26, https://doi.org/10.1007/978-3-030-61931-2_7
143