Water-Saving Effect of Domestic and Industrial Water Pricing Policies Using Nonlinear Fixed-Effect Models

The Huang-Huai-Hai region (3H region) is an area with dense population, industry and agriculture in China, and is vital to the national economic development. Water scarcity in this region has become critical especially due to climate change and intensified human activities. It is therefore essential to quantify the impact of water pricing policies on water consumption for optimizing water consumption structure and improving water use efficiency. This paper analyzed the water-saving effect of water pricing policies based on nonlinear fixed-effect models considering users’ behaviors, and compared the water price elasticities in domestic and industrial sectors among provinces. The results show that the price elasticity of industrial water demand approached unit elasticity, whereas the price elasticity of domestic water demand is relatively low. Consequently, water pricing policies during 2007–2016 reduced industrial water demand by 55.9% and domestic water demand by only 23.8%. By 2030, water price needs to be raised about 45% to balance the total water demand, as the growth per capita Gross Domestic Product (GDP) and industrial Gross Value Added (GVA) are projected to drive significant rise in water demand (both P < 0.001). This study revealed the limitation of current water pricing policies on regional water conservation, which needs a combination with other measures to systematically promote water use efficiency and alleviate water stress.