Impact of Water Saving Policy on Water Resource and Economy for Hebei, China Based on an Improved Computable General Equilibrium Model

Hebei Province of China is facing a severe water resource shortage, making it urgent to formulate economical and effective water conservation policies. However, few studies have focused on analyzing the resource and economic impacts of a water policy. This study developed an improved computable general equilibrium (CGE) model with an extended water resources module as a policy analysis tool. The extended water resources module includes different water resources as commodities and water sectors, and introduces a substitution mechanism among the water resources. Policy scenarios containing different policy types and policy objects were established, including water price, technology (tech) improvement, structure adjustment, and water reuse policies in primary, secondary, and tertiary sectors. The impact on the water resource and economy of the scenarios was analyzed using the CGE model. The recommended policies include: an agricultural technology improvement policy that decreases groundwater usage by 240 hm3; an industrial technology improvement policy under which water usage per 10,000 CNY of industrial added value decreases by 13%; an industrial water reuse policy that increases unconventional water usage by 20%; and a structure adjustment policy to increase the proportion of the tertiary sector. The study provides an analysis tool for simulating and evaluating a water resource policy.