(Ecns.cn) –China implemented its strictest regulations in history this year to address its paramount environmental problem – a shortage of fresh water. The regulations introduced a new method called "water rights trading" which has now become the hope of many parched regions across the country.
To quench the thirst of cities undergoing severe water shortages, China promulgated the Interim Measure for Water Quantity Allocation on Feb. 1, 2011, providing a framework for the distribution of water rights across provinces, autonomous regions and municipalities under the direct jurisdiction of the central government, according to Oriental Outlook.
This has been seen as an innovative step that could potentially open Chinese markets to the trading of water resources – resources which could one day be more valuable than gold or oil.
The Yiwu-Dongyang agreement
Yiwu is a small city in east China's Zhejiang Province famous for its small commodity trade and vibrant free markets. But due to the rapid development in the 1990s, the city's population swelled at a gallop and resulted in a scarcity of water resources.
In November 2000, the city decided to pay 200 million yuan ($30.9 million) to neighboring Dongyang City to buy 50 million cubic meters of water from a reservoir on a yearly basis.
This was the first case of water trading in China, though it was not a "water rights trade" per se, but only a transfer of use rights to a reservoir, said Pan Tianming, an official from the Department of Water Resources of Zhejiang Province.
At the beginning, Yiwu planned to build its own reservoir, but the idea was deemed unfeasible after a thorough evaluation by a group of water resource experts, revealed Pan. And because Dongyang is located upstream from Yiwu, its water quality is much better, yet another reason for the agreement.
After signing the pact it took more than four years to finish construction of the pipeline network between the two cities, and on Jan. 6, 2005, the project was finally put into use. Yiwu avoided the significant cost of having to build its own reservoirs, while Dongyang received funds for maintaining its existing reservoirs and water infrastructure, resulting in a mutually beneficial situation.
A model province
Though Zhejiang is estimated to have a total of 95.5 billion cubic meters of water resources, its population is approaching 60 million. Moreover, under the influence of the typical monsoon climate, water resources are scattered across the province and distribution varies from season to season.
In recent years, Zhejiang has frequently carried out trans-basin water diversion projects to balance its uneven distribution of water resources. Among them, the largest is the East Zhejiang Water Diversion Project, which takes water from the mouth of the Qiantang River to aid the drought-ridden Shaoning Plain and Zhoushan area.
Li Yunjin, deputy director of the Planning Office at the Department of Water Resources of Zhejiang Province, said there are currently three modes applied to these projects. One is the Yiwu-Dongyang mode, another is the joint-stock investment mode (in which two parties fund the construction of a new reservoir), and the other is a non-economic mode of water transfer planning.
Zhejiang has acquired much experience in the use of water resources, and rights trading has proven to be a good method, said Li, but it must be done only after careful planning. If all goes well, market-based tools may accelerate progress towards water conservation, protection and pollution control, he added.
National schemes
By allocating water rights, China has launched a number of trial projects in several regions, including Ningxia, Inner Mongolia, Jiangxi, Chongqing, Shanxi, Beijing and Hebei. The projects are either local initiatives spurred by acute water crises or efforts by the central government to promote water saving.
Traditional practices of promoting conservation are no longer able to keep up with China's rising water demand, making such an innovative step essential to quenching the nation's growing thirst.
China is not the only country coping with this problem, however. Trading water rights takes place all over the world as water resources are stretched by a rising global population, climate change and increasing urbanization. For example, the Australian water market is estimated to have grown to nearly $3.1 billion in water licenses in 2010.
Global water use doubled from 1960 to 2000 and is projected to grow twice as fast as oil consumption by 2030, and various forms of water trading are likely to play an important part in addressing the problem.
