Econometric analysis of industrial water use efficiency in China

Abstract

Low industrial water use efficiency has become a resource bottleneck to industrial development in China. The SBM-undesirable and meta-frontier models were used in combination with empirical data in 30 provinces in mainland China (Tibet excluded due to data missing from 1999 to 2013), to compare industrial water use efficiency in mainland China under meta-frontier and group-frontier, and explore the influencing factors. The empirical results of the study reveal that: (a) there is a large difference in the industrial water use efficiency between meta-frontier and group-frontier in mainland China, due to the heterogeneity in the levels of industrial water use technology; (b) given the low recycle rate of polluted industrial water, there is room for improvement in the industrial water use efficiency in the 30 provinces in mainland China. Further, the study finds that the current price of industrial water is distorted to some extent, failing to coordinate with the use of water resources. Policy implications indicate that industrial water use efficiency is not only related to technological heterogeneity in different regions, but also the control and treatment of industrial water pollution. Therefore, the current price of industrial water should be gradually raised. A scalar water pricing system as residential water could also be applied to industrial water.