Commodity Modeling and Pricing: Methods for Analyzing Resource Market Behavior

CHAPTER 14

Critical Needs in China’s Water Resources

Andres Liebenthal

INTRODUCTION

China is facing a severe water crisis. For years, water shortages and pollution have constrained the sustainability of growth, affected public health, and caused extensive damage to the ecology. Ineffective water resource management and pollution-control institutions and excessive reliance on administrative approaches appear to have been the leading causes. To address the growing water scarcity, China needs to accelerate its move toward increased reliance on market-based approaches, supported by the twin pillars of integrated river basin management and rigorous pollution management.

This chapter reviews the underlying causes of China’s emerging water crisis and identifies key elements of a comprehensive strategy for resolving it. The first section discusses the commingling of water shortages and extensive pollution that have created a growing water scarcity crisis. The second section highlights the many technically viable and economically feasible water-saving and cleanup options available to address water scarcity and outlines the potential for the market to accelerate their implementation. The next section discusses the rebalancing of the institutional framework around the integrated river basin management approach needed to support the establishment of a functioning water market. Then we identify key areas of the pollution management system that deserve more attention, including nonpoint source ...