Abstract

A water rights trading scheme in China is currently in its initial stage of development, but is without a complete pricing mechanism. This paper proposes a pricing model for transfers of water rights from agriculture to industry in water-deficient areas of China. Both the cost price and the earnings price are considered and incorporated into the model. The cost price includes construction costs, operation and maintenance costs, renewal and reconstruction costs, and economic compensation for ecological damage. The earnings price is calculated according to a reasonable return coefficient and the difference in economic value of the water resources to the buyer and seller. The value of water resources was estimated based on emergy theory in accordance with the principle of mutual benefits equilibrium. This pricing model is then applied to the transfer of surplus water rights arising from agricultural water conservation schemes to industrial uses in the Southbank Ordos Irrigation Zone of the Inner Mongolia Autonomous Region. The results indicate that this pricing model could provide technical support to the scientific and reasonable pricing of water rights transactions in water-deficient areas and that it could play an active role in promoting the healthy development of future water markets.

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