Increasing Block Pricing For Urban Residential Water And Its Effectiveness In Lanzhou

In recent years, with the development of economy and society and the improvement of the people’s living standards, the contradiction of the water supply and demand in Lanzhou is exacerbating. Lanzhou has been one of 110 cities that are severely short of water in China. At the same time, the residential water accounts for the total urban water is increasing continually. Therefore, saving water in residential living field will play a more and more important role in urban water conservation. The price of water is one of the important means to regulate the demand of residential water. And the reform of increasing block pricing has become a mandatory requirement of the central government. In this context, it is an important and urgent issue for Lanzhou how to formulate an effective policy of increasing block pricing which can help to conserve water, promote fair and compensate cost.Firstly, based on summarizing the domestic and international literatures on the water pricing, this paper combs systematically the theories of the residential water pricing. Secondly, it analyses the current situation of residential living water in Lanzhou, from the aspects of the demand change of residential water and the evolution of water pricing system. Thirdly, it analyses the ability to pay for the price of water in different income groups according to the established ELES model, and measures out the water quantities and prices in every block based on given approach to estimate parameters of the increasing block pricing model. Finally, it studies quantitatively the validity of the increasing block pricing from the perspectives of water saving effect and fairness. The paper reaches the following conclusions:(1) Low price of water and the single pricing model are two important reasons of residential water wasting and too much extravagant water from high-income groups.(2)The government should consider fully the low-income families, and even provides water subsidies for them to ensure basic needs of water, when adjusting the price of residential water. Simultaneously, it is necessary to widen the gap among different price blocks, especially the gap between the third block price and the first block price, in order to stimulate high-income families to save water.(3)The increasing block pricing program this paper has estimated is effective on saving water, but not able to promote fair. In terms of saving water, residential water per capita saves 6.4 tons in one year, after the program carried out, and water-saving effect is obvious. In terms of promoting fair, although the increasing block pricing is able to achieve the absolute fairness between different water users, it is not able to promote the relative fair between the different income groups. In order to promote social fair, the government should establish corresponding fair protection mechanism when implementing residential water block pricing in Lanzhou, such as water subsidies for low-income families.