Miracles or Magic – An assessment of Physical and Virtual Water Flows in China

Index Chinese miracles

China’s water facts

International trade theories

Virtual water flows

Drivers of Chinese water crisis

Conclusions

Dr Dabo GuanSenior Lecturer in School of Earth and Environment,

University of LeedsSenior Member and Director of Studies, St Edmunds College,

University of Cambridge

‘Poverty’ ‘Adequate food and cloth’

‘Well to do’

‘Agriculture’ ‘Industry’ ‘Services’

Chinese love miracles

‘Poor education’ ‘9 yrs free school’ ‘too many PhDs’

China’s Miracle

‘Wenchuan, 2008 earthquake aftermath’

‘Wenchuan, 2010 completion of re-construction’

Large scale ones with better technology

So, aluminium processingSmall scale power

plants This is low carbon development in China!

Low Carbon Development in the least developed region: A case study of Guangyuan, Sichuan province, southwest China” Natural Hazards, forthcoming 2011

China’s world NO. 1

China’s world NO. 1

China’s Water Facts

Three ‘bad features’ of the water availability in China:

1. unevenly distributed, South is rich of water, North is poor

Figure: Average annual precipitation in China

China’s Water Facts

Three ‘bad features’ of the water availability in China:

2. water scarcity of per capita volume, the figure in North China is 1/8 of the national average and 1/25 of the world average.

Three ‘bad features’ of the water availability in China:

3. serious pollution

China’s Water Facts

• Irrigation by using polluted water in North and Northwest China is very common.

Messages from Chinese government…

• “all rivers run dry in the North, and all water is polluted in the South”

• water consumption per unit of GDP to 125 m3 by 2020, down 60% from now with special focus on irrigations, in order to cope with the projected economic growth by 60% by that time.

• Jan 2011, the Chinese government announced that it will invest four trillion RMB (US$600 billion) over the next ten years to protect and improve access to water. The major applied instrument is nothing new but massive funding for construction of more water related infrastructure with the latest technology.

China’s Water Facts

Catching up with the ‘North’

Environmental implications of urbanisation and lifestyle change in China: Ecological and Water Footprints” Journal of Cleaner Production 17(14), p. 1241-1248

Other possible physical water transfers

Can economics help dealing with water scarcity?

International Trade Theories

David Ricardo

Adam Smith

E. Heckscher

&Bertil Ohlin

Absolute Advantage:Countries would tend to export products they produced more cheaply than their trading patterns and import goods they produced more expensively.

Comparative Advantage:Mutually advantageous trade will always be possible because trade patterns will be based on relative prices rather than absolute prices.

The Heckscher-Ohlin TheoryA country will tend to export the commodity that uses relatively more of the factor of production which is relatively most abundant in that country.

International Trade Theories

Wassily Leontief

Leontief Paradox :Leontief calculated the labour and capital content of the exports of the United States to test the HO theory. However, he found a paradox, which is the US was endowed with more capital relative to labour resources but the US export labour intensive products while import capital intensive goods.

Dabo Guan

It will be interesting for us to examine whether the interregional trade patterns in China are consistent with the HO factor endowment theory from the perspective of efficiency of water resources distribution and management.

Assessment of regional trade and virtual water flows in China” Ecological Economics, Volume 61, Issue 1, Page 159-170

Virtual Water Flows

Virtual Water Flows: water embedded in products and used in the whole production chain, are traded between regions or exported to other countries.

Water footprint is the total virtual water content of products consumed by an individual, business, town, city or country.

Your water footprints

= 7,000 liters

Spatially Explicit Analysis of Water Footprints in the UK” Water, 3, p 47-63

Virtual water flows accounting model

We develop the accounting model based on input-output analysis, which allows us to account for all virtual water throughout the whole supply chain of a product production.

Input-Output Structure Monetary Unit: e.g. $

Activities Intermediate Demand

Final Demand Total Output

Activities Intermediate Inputs

I/O Flows Sales

Primary Inputs Value Added

Total Inputs

Water Input-Output Structure Monetary + Physical Unit

Activities Intermediate Demand

Final Demand Total Output Wastewater

Activities Intermediate economic Inputs

I/O Flows Sales

Primary Inputs Value Added

Total Inputs

Fresh Water Input

Assessing virtual water flows

Virtual freshwater flows

Regions

Sectors

North China South China

Money flow(million Yuan)

Freshwater flow

(million m3)

Money flow(million

Yuan)

Freshwater flow

(million m3)

Agriculture -44,670.8 -4,284.2 16,521.8 349.4

Paper -9,934.6 -28.6 -29,203.9 -77.6

Textile goods -30,602.6 -67.4 18,271.6 39.7

Food processing -29,443.5 -57.7 -11,383.3 -15.8

Electricity 35,898.1 147.9 1,609.1 -5.3

… … … … …

In Total 53,187.3 -4,225.4 51,222.6 148.1• North China – water-scarce region, but exported almost 4,300 million m3 of water, mainly through the trade of water-intensive products.

• South China – water-abundant region, but imported water-intensive products such as agricultural products.

• In terms of the HO theory, a trade paradox apparently exists from the perspective of natural resources allocation and efficiency.

Virtual water flows in Yellow River basin

Assessing regional virtual water flows and water footprints in the Yellow River Basin, China”. Applied Geography . 2011, 34, 691-701

Virtual water flows in Yellow River basin

• Overall YRB is net virtual water exporter.

• Lower YRB – the most water stress region, exports more water to other two YRB regions than it receives comparatively.

• Lower YRB engages less agricultural activities than the other two YRB regions, the exported virtual water are largely driven by food processing, chemicals and other water intensive industry products

Water footprint in Yellow River basin

Regional total water footprints of the YRB (million m3)Note: Domestic is the domestic water resources consumed  by the local production and consumption activities in each reach. Upper, Middle, Lower and RoC indicate that the total water footprints are contributed from the Upper, Middle, Lower and RoC water resources, respectively.  Why is household in there?

Water footprint in Yellow River basin

Per capita water footprints per person in the YRB

Hydro-economic Accounting and Analytical Framework

Water Availability

Returnflows

Domestic

DirectConsumption

IndirectConsumption

Agriculture,Industry, etc

Surface,Ground

Recycled,Reused

Water resourcesRe-distribution

Water Consumption

Water Accounting

Economic Sectors

Water SupplySectors

WastewaterFlow out

Hydro-ecosystem

(m m) (m n)

(n m) (n n)

Water Accounting

Hydro-economic accounting model

r̂

Net Water Supplies in China in 1997

78.8%

0.2%

1.3%

8.4%

0.6%

2.3%

7.3%

1.1% Agriculture

Manufacturing

Energy generation

Construction

Transport and Posting

Services

Urban households

Rural households

Wastewater Discharge in China in 1997

25.1%

1.5%

5.5%

23.9%

0.3%

43.7%

AgricultureManufacturing

ConstructionTransport and PostingServices

Households

Total Water supplies: 317,800 million m3

Total Wastewater discharge: 81,900 million m3

China's Economic Production and Household Consumption in 1997

0

2000

4000

6000

8000

10000

12000

Bill

ion

Yua

n (1

997)

In terms of a simply mass balance hydrological model, by adopting COD as the indicator:

203,330 million m3 of freshwater resource was contaminated by wastewater discharge.

Water Accounting

Driving forces of China’s water crisis

Here we decompose the total changes (orange line) of freshwater consumption and COD discharge into 5 factors. Δp (blue line): population changes. ΔF (red line) water / pollution efficiency level changes, measured by water/GDP. ΔL (green line): production structure changes. Δys (purple line): consumption pattern changes. Δyv (yellow line): consumption volume changes.

Economic Sectors

Water SupplySectors

Annual freshwater consumption: unit

billion m3

Driving forces of China’s water crisis

Economic Sectors

WastewaterFlow out

Annual COD discharge: unit thousand m3

Driving forces of China’s water crisis

Cumulative COD: unit thousand tons

WastewaterFlow out

Hydro-ecosystem

Driving forces of China’s water crisis

Water SupplySectors

Hydro-ecosystem

Water Accounting

Conclusions

• Virtual water flows can provide an option for solving the regional water scarcity

• In terms of the HO theory, a region/country endowed with rich amount of water resources should export relatively more water-intensive/polluted products

• However, we found a paradox in North China and Yellow River Basins with regards to the HO theory.

• As there is low cost or even no cost on natural water resources, it may not be applicable to the HO theory.

• The virtual water flows should be incorporated in trading decision-making process for water-scarce regions like North China or lower reach of YRB in order to meet present and future consumption and production levels.

Tackling water crisis is a long-term and continuous task…

• Investment to improve water service related infrastructure. China has the largest increase of waste water treatment plants over the past years.

• In both 2004 and 2010, surveys from Chinese Environmental Protection Ministry, over half of sampled wastewater treatment plants are not either fully or partially in operation.

• China needs to build an integrated network to monitor surface and groundwater, and use it to assess and set water policies through an integrated water-resource management system.

• The Clean Development Mechanism (CDM) of the Kyoto Protocol lists methane capture at wastewater treatment plants as a viable source of carbon credit.

Conclusions

Enjoy your water, but please think differently…

about water

Thank you!

Dabo Guan: d.guan@leeds.ac.uk