Study on the Unconventional Water Subsidy Policy in the Arid Area of Northwest China

Abstract

The arid regions of Northwest China are facing water shortages and ecological fragility. Making full use of unconventional water is one of the effective ways of solving water issues and achieving high-quality regional development. The high cost of unconventional water utilization is the main obstacle to its utilization and technological development, and the subsidy policy may become a breaking point. Taking Ningdong Energy and Chemical Industry Base (NECI Base) as a case study, the article proposes raising the Yellow River water price to subsidize the utilization of mine water. The development and utilization of mine water can be effectively improved. Considering the optimal allocation of multiple water sources and the substitution relationship between the Yellow river water and mine water, this paper extends the water resources module (WRM) of the Computable General Equilibrium (CGE) model. The model can reflect the substitution of water sources and the linkage between water prices and the economy. Ten different subsidy policy scenarios are simulated through the extended CGE model, and the laws and mechanisms of the subsidy policy on the economy and water usage are summarized. The results show that increasing the price of Yellow River water by 8% to subsidize the mine water will achieve optimal socio-economic output. Under this scenario, the industrial value added (IVA) is basically unaffected, the water-use efficiency (WUE) is significantly improved, and the affordability of the enterprise is satisfied. The Yellow River water usage decreased from 319.03 million (M)m³ to 283.58 Mm³ (11.1% saving), and mine water usage increased from 27.88 Mm³ to 47.15 Mm³ (69.1% increase).