|Project Rationale and Linkage to Country/Regional Strategy
The People's Republic of China's (PRC) sustainable development is facing serious constraint from water resource scarcity. Its annual per capita water availability, between 1,800 and 2,200 cubic meters, is only about one-quarter of the world average, and the northern region is below the "water scarcity" level defined at 1,000 cubic meters. The considerable water scarcity in the PRC is aggravated by severe water pollution. According to the Ministry of Environmental Protection's (MEP) report on environment state in 2009, among the 408 river sections monitored, more than 40% have unsafe water for human consumption and about 18% unsafe for any use. Unfortunately, there is no evidence suggesting that water quality has improved significantly with rapid economic growth.
Sources of water pollution can be broadly defined in two categories: point sources and nonpoint sources (NPS). Point sources of water pollution, such as large industrial facilities or sewage treatment plants, emit pollutants into water body from a fixed, readily identifiable point. In contrast, emissions from NPS are geographically diffused and temporally stochastic. Major NPS of water pollution include agro-chemical (fertilizer, pesticide, herbicide) runoff, discharges from animal or aquatic production activities, and soil erosion, which are mostly concentrated in rural areas.
While the PRC government has made significant advances in the control of industrial and domestic point sources of water pollution, NPS pollution has become a growing challenge nationwide. The first national general survey of pollution sources carried out by the MEP between 2007 and 2010 concluded that NPS pollution accounted for about 44% of COD, 55% of total nitrogen, and 67% of total phosphorous discharges. Runoff from farm fields was the second largest source of total nitrogen discharges, next to domestic wastewater. Intensive animal husbandry industry was found to be the largest source of total phosphorous discharges, both of which contributed directly to the pervasive eutrophication of the PRC water. Therefore, NPS pollution will have to be dealt with effectively if the water pollution situation is to be brought under control.
The nature of NPS determines the difficulties and challenges in NPS pollution control. First of all, it is extremely difficult to monitor and measure (quantify) emissions from NPS although it is the basis for a number of pollution control instruments, such as emissions trading program. Emission proxies through measuring inputs (e.g., use of fertilizer), practices, performance (e.g., annual soil loss), and ambient concentrations of pollutants were often developed and adopted in various developed countries. It remains a question how to monitor and measure NPS emissions in ways that are suitable and cost effective in the context of developing countries such as the PRC.
Second, agricultural runoff as the major component of the NPS is by and large a result of choice and behavior of many small farmers. Without policy interventions, the dominant goal of the farmers is to increase agricultural production in the most cost-effective way, which suggests increasing dependence on fertilizer and choosing low-priced, single-ingredient fertilizers over high-priced, compound fertilizers. In response to market demand, there has been a tremendous growth in livestock production in the PRC. While it has increased rural income levels, the sector is characterized by numerous small- and medium-sized producers with low efficiency in terms of environmental preservation. Therefore, differing from point-sources regulations, management framework for NPS pollution control needs to take into account many small contributors with relatively limited income-earning potentials and possibly interact with policies in other sectors, such as agriculture and water resources, which affect the incentives and decisions of the polluters significantly.
Third, while a range of policy instruments are available for NPS pollution control, it remains largely unknown which one, individually or in combination, can work effectively and efficiently in a developing context. The potential instruments include direct regulations (e.g., mandatory use of certain practices), economic incentives (e.g., taxes and subsidies, eco-compensation), liability rules, education campaigns, etc. Given the limited experience with these instruments in dealing with NPS in the PRC, evidence on how they have worked is rather rare. With limited resources, it will be feasible and more effective to study these policy instruments with a case-study approach focusing on one of the key watersheds and then upscale the findings to the national level.
Chao Lake is the fifth largest freshwater lake in the PRC with a surface area of 776 km2 and lake basin area of 13,350 km2. The lake is the major source of drinking water for 6.3 million residents in the surrounding cities and towns and source of water for irrigation and industrial production. Chao Lake basin has been suffering from serious water pollution since 1990s, and NPS discharge, due to intensification of agricultural practices and dramatic increase in livestock production, is one of the major challenges. In addition to its importance and urgency, Chao Lake makes a good candidate for a case study because it is one of the operational priorities of ADB in the PRC. The loan project, Anhui Chao Lake Environmental Rehabilitation (P44036-PRC) currently under processing, aims to introduce an integrated approach to addressing Chao Lake pollution and NPS will be one of the project's focuses. Therefore, Chao Lake would serve as a good case study from resource sharing and efficiency perspectives.