Research on Water Rights Trading and Pricing Model between Agriculture and Energy Development in Ningxia, China

Abstract

The contradiction between the supply and demand of water resources has become increasingly prominent, and water rights trading is an effective approach to increase the efficiency of water resource utilization and allocation so as to achieve sustainable use of water resources. Current transferring cost and price in China are both underestimated, taking into account the construction and maintenance fee of water conservation project and the irrigation risk compensation fee but ignoring the renovation and reconstruction fee of water conservation projects, and the compensation fee for farmers. This paper takes assignee rights, assignee capacity, and compensation to third parties into comprehensive considerations in Ningxia Hui Autonomous Region, where the contradictions between water, energy and food are most prominent in China. Tradable water use rights were analyzed based on a water transfer pricing model. The results show that there is an obvious negative correlation between shadow water price and water usage, and the shadow price of water resources is between 10.91 and 40.52 CNY/m3, which is an optimal solution under the constraint of water usage from 6.65 to 7.03 billion m3. The reasonable water transfer price is 10.91 CYN/m3, of which the earning of the agricultural assignor was 5.96 CNY/m3. This price guarantees the interests of the assignee and is also affordable to the assignee. This research provides a specific calculation method for the transfer pricing of water rights under non-market conditions, which is of important theoretically and has practical significance.