MINISTRY OF NATURAL RESOURCES AND ENVIRONMENT VIET NAM INSTITUTE OF METEOROLOGY, HYDROLOGY AND CLIMATE CHANGE HOANG THI HUE RESEARCH ON HA NOI AREA

Transcription

1 MINISTRY OF NATURAL RESOURCES AND ENVIRONMENT VIET NAM INSTITUTE OF METEOROLOGY, HYDROLOGY AND CLIMATE CHANGE HOANG THI HUE ECONOMIC ANALYSIS Nghiên OF DOMESTIC cứu sinh: Tăng WATER Thế DEMAND Cường MANAGEMENT: RESEARCH ON HA NOI AREA Major: Natural Resources and Environmental Management Code: SUMMARY OF DOCTORAL THESIS ENVIRONMENTAL CONTROL AND PROTECTION Hanoi, 2018

2 The thesis is completed at: VIET NAM INSTITUTE OF METEOROLOGY, HYDROLOGY AND CLIMATE CHANGE Doctoral advisor: 1. Assoc. Dr. Le Thu Hoa - National Economics University 2. Assoc. Dr. Duong Hong Son - Viet Nam Institute of Meteorology, Hydrology and Climate Change Reviewer 1:.. Reviewer 2:.. Reviewer 3:.. The thesis is defended in front of Thesis Examination Board at Viet Nam Institute of Meteorology, Hydrology and Climate Change at date month year 2018 The thesis can be found at: - National Library of Vietnam; - Library of Viet Nam Institute of Meteorology, Hydrology and Climate Change See thesis in the libraries:.. (Name of libraries where the thesis is submitted)

3 1 ABSTRACT 1. Rationale For many countries in the world, water demand management plays an important role in the national water resources strategy. Water demand management is the use of different techniques, policies, and solutions to influence the need for water to achieve the goals of economic effect, efficiency, and sustainability. Experience of developed countries has proved that the shift from water supply management (for example finding new water sources, build dam and reservoirs, water supply stations, water treatment stations, etc.) to water demand management can significantly reduce the pressure on freshwater resources, contribute to the sustainable use of water resources and ensure the equity among water users. With the rapid urbanization speed, Vietnam in general and Hanoi in particular are facing many challenges in urban water supply. According to the report on current state of the environment in 2016, the percentage of people provided with clean water in urban areas in Vietnam is only 82%. The current situation of water use in many urban areas, including Hanoi, shows a lot of inadequacies including the loss of water, poor awareness of people in saving water, illegally destroying the pipelines, etc. which make the water resources more and more exhausted, while the demand for clean water in urban areas is increasing in both quantity and quality. Meeting the demand for clean water to 2030 with average liter/person/day is a great challenge for such as special city as Hanoi. Many measures of urban domestic water demand management (UDW demand management) have been initially applied in Hanoi, such as increasing water tariffs and water loss control. However, there is no study to evaluate the effectiveness of these management programs, thus, the problem needs to be addressed is to evaluate economic effect of the UDW demand management programs on the basis of comparing benefits and costs, both at present and in the future. Therefore, with the desire to provide the state management agencies with scientific data as a reference in making the policies to ensure effective management, sustainable use of water and economic efficiency, the author selects the thesis with the topic: "Economic analysis of domestic water demand management: Research on Hanoi area". 2. Scientific and practical significance The thesis has established a methodological basis, model, and process for economic analysis of UDW demand management. The research on water demand management in Hanoi urban area is to evaluate the effectiveness of UDW demand management and provide information for the state management to meet the demand of clean water of people and ensure the efficient use of water resources.

4 2 3. Research objectives 3.1. General objectives Set up the model and process for economic analysis of UDW demand management, apply the research on UDW demand management into Hanoi to assess the effectiveness of UDW demand management and provide information for the state management to meet the demand of clean water of people and ensure the efficient use of water resources Particular objectives The thesis will focus on the following research objectives: Firstly, the thesis interprets the theoretical and practical issues on UDW demand management and economic analysis of UDW demand management; Secondly, propose model and process for economic analysis to assess the effectiveness of UDW demand management in line with Vietnamese conditions; Thirdly, assess the conditions for the application of UDW demand management in Hanoi and analyze the economic efficiency of UDWdemend management measures in Hanoi; Lastly, propose some solutions and policies for domestic water demand management which are suitable for Hanoi in the current period and until Research scope and object - The research scope is urban area of Hanoi city (specifically in 3 (among 7) districts of Hanoi: Dong Da, Hai Ba Trung, Hoan Kiem) - The research object is the economic efficiency of UDW demand management in Ha Noi's urban districts (directly related to the households using clean water and Hanoi Water Company) 5. The new contribution of the thesis Scientific contribution: The thesis has developed a detailed research framework to clarify the rationale and practical basis of UDW demand management; developed the model and 6-step process for economic analysis of UDW demand management in Vietnam, contributed to fill the gaps in the study of urban water management. Practical contribution: The thesis analyzes, evaluates scientifically and objectively the needs of application of UDW demand management; applies the model and process of UDW demand management economic analysis in Hanoi to provide information for the city water management until The specific contributions from research results: 1. Results of the survey show that average water use per capita in urban area of Hanoi is 3.8 m 3 / person/month and the average cost of domestic water per household is 110, VND / month; the number of households using water from 10 m 3 to 20 m 3 per month accounts for the highest rate of 46.15%; Estimated ratio of UDW demand for essential and non-essential purposes of the households in Hanoi are respectively 94.76% and 5.24% compared to total UDW demand. The UDWdemand for non-essential purposes is about 0.78 m 3 / household/month. 2. The survey results show that the willingness to pay for clean water in urban area of Hanoi is WTP TB = 9, VND / m 3. The results of multivariable regression analysis with dependent variables which is the

5 3 willingness to pay (WTP) and independent variables (age, gender, educational level, income, and volume of used water) show that the independent variables in the model can explain about 62.34% of WTP variation. In particular, income and water use variables are strongly correlated with WTP variable. 3. The estimated amount of water saved by implementing UDW demand management until 2025 is 6.98 million m 3 (equivalent to 17.1%) compared with the expected increase in water demand of 40, 92 million m 3 in the baseline scenario (BAU). 4. Implementing UDW demand management also partly saves the cost from the construction and operation of water supply and wastewater treatment systems, while also provides many other environmental and social benefits. Applying a discount rate of 0.08 in the cost-benefit analysis of UDW demand management in Hanoi until 2025 resulting to NPV = 734, (million VND, 2013) has shown the effectiveness and necessity to apply UDW demand management. 6. Structure of thesis Apart from the abstract, conclusion, list of references and appendixes, the thesis consists of 4 main chapters: Chapter 1. Overview of Urban Domestic Water Demand Management and Economic Analysis of Urban Domestic Water Demand Management Chapter 2: Theoretical Basis of Urban Domestic Water Demand Management and Economic Analysis of Urban Domestic Water Demand Management Chapter 3. Approach framework and methodology Chapter 4. Economic Analysis and Proposed Solutions for Urban Domestic Water Demand Management in Hanoi.

6 4 Chapter 1: OVERVIEW OF URBAN DOMESTIC WATER DEMAND MANAGEMENT AND ECONOMIC ANALYSIS OF URBAN DOMESTIC WATER DEMAND MANAGEMENT 1.1 Overview of previous studies Since the beginning of the 1970s, there have been many studies on UDW demand management. In these studies, UDW demand management was driven in different directions such as economic solutions, technical solutions, and education to raise awareness and some economic analysis to evaluate the effectiveness of UDW demand management program. In general, these studies have provided many solutions to address the issue in many different aspects by application of flexible UDW demand management options which are suitable for each area. Most of the studies on the effectiveness of UDW demand management used cost-benefit analysis. The studies have identified and compared the costs and benefits of different options. The result of social net profit assessment provides the decision makers with the right method and solution. However, the studies have not adequately estimated and assessed the benefits-cost of UDW demand management, and the scholars around the world are continuing to work on this approach. Some scholars in Vietnam have initially studied a number of aspects of UDW demand management. There was a study proposing economic calculations in using water-saving devices by a quick assessment of payback time, but the study has not conducted a cost-benefit analysis for overall solutions to implement UDW demand management A practical overview of urban water demand management From the experience of applying UDW demand management in the countries around the world and initial application of UDW demand management in some cities of Vietnam, it is possible to draw the following conclusions: - UDW demand management solutions commonly used include water conservation strategy, rising water tariff programs, water loss control, communication and education to raise awareness about the efficient use of clean water, the audit of water use in schools, reuse of domestic wastewater for other public activities, subsidies for the installation of water-saving equipment, etc. - Among the solutions, applying progressive water tariffs and roadmap of raising water tariffs are effective solutions for UDW demand management; - Improve awareness of people about efficient water use plays a great role in promoting the effectiveness of UDW demand management; 1.3. Evaluate the gaps in previous studies From the overview of existing studies, it can be stated that UDW demand management is a promising management method which has been studied popularly in the world, initially applied - but not yet popular - in Vietnam. Many studies in the world mentioned the concept, conditions, and solutions for UDW demand management, provided many approaches to view and solve the problems related to UDW demand management in various aspects and evaluated the effectiveness of UDW demand management program. In urban areas of Vietnam in general and urban area of Hanoi in particular, there have been some initial studies on UDW demand management, but there is no study on economic analysis of UDW demand management. Therefore, the thesis "Economic analysis of domestic water demand management: research on Hanoi area" will selectively inherit the local and international scientific basis and experience of UDW demand

7 5 management, thereby develop economic analysis model and process and apply UDW demand management in practice to assess and propose UDW demand management solutions in accordance with specific conditions of Vietnam in general and Hanoi in particular. In order to complete the mission of the thesis and research objectives, the thesis will focus on the following issues: Firstly, interpret and clarify the theoretical and practical issues in UDW demand management and economic analysis of UDW demand management. The thesis should clarify the theoretical and practical basis of UDW demand management: conceptual interpretation, the factors influencing UDW demand management, the solution to implement UDW demand management, the assessment of experience and the existing studies about UDW demand management in the world and Vietnam. The thesis should develop a model and economic analysis process for UDW demand management that is appropriate to Vietnam circumstances: including model selection, development of economic analysis process with specific steps, identifying the formula and place the monetary value to the costs and benefits to assess the economic efficiency of UDW demand management. Secondly, evaluate the conditions to apply UDW demand management and conduct an economic analysis of UDW demand management in the urban districts of Hanoi; The thesis will analyze the current status of UDW demand management, indicate the opportunities and the need of applying UDW demand management; The thesis will analyze and evaluate the urban water demand - the level of willingness to pay for domestic water in Hanoi as a basis for analysis of UDW demand management options; The thesis conducts a cost-benefit analysis to evaluate the economic efficiency of UDW demand management in Hanoi. Thirdly, propose direction and some solutions to implement UDW demand management in Hanoi until Propose some recommendations, orientations, and solutions to implement UDW demand management in Hanoi until 2025 from the results obtained above combined with the theory and experience from local and international practices.

8 6 Chapter 2: THEORETICAL BASIS OF URBAN DOMESTIC WATER DEMAND MANAGEMENT AND ECONOMIC ANALYSIS OF URBAN DOMESTIC WATER DEMAND MANAGEMENT 2.1 Urban domestic water management Urban domestic water management consists of supply management and demand management. While supply management concerns about the effort of water supply units (for example, find new water sources, build dam and reservoirs, water supply stations, water treatment stations, etc) to expand water supply and meet increasing need of the consumers, demand management influences the behavior of water consumers to encourage or force them to reduce water consumption. In the context that natural resources in the world is increasingly scarce, traditional supply management has become increasingly difficult; demand management is considered as a more appropriate method for the efficient and sustainable use of water resources. Based on the scientific basis of water demand management and specific conditions of urban area in Vietnam, the author suggests that: UDW demand management is to manage the water volume used for the needs of daily living of urban people/households; based on the selective application of policy, economic and technical measures and other supporting measures to influence the "willingness to buy" of urban people/households in order to promote the water saving, efficient, equitable and sustainable use of water resources. Solutions of UDW demand management Group of economic solutions : 1. Subsidies for installation of water-saving devices in the households 2. Water tariff and water tariff calculation framework Group of solutions for education and awareness raising: 1. Include water-saving education in schools 2. Propaganda and social mobilization campaign on water saving and efficient use of clean water 3. Promote the benefits of water saving and efficient use of water 4. Popularize the guidelines on water saving and efficient use of water Group of technical solutions: 1. Solutions to reduce water leakage and loss 2. Use water saving devices in the households 3. Install water meter for the households 4. Water reuse/water recirculation Group of institutional solutions: 1. Abolish the regime of fixed total price per month for any volume of used water 2. Restriction on water use in the specific season or rush hours 2.3. Economic analysis of urban domestic water demand management Economic analysis of urban domestic water demand management is defined as the identification, evaluation and comparison of the costs and economic benefits from implementing UDW demand

9 7 management options, thereby proves the effectiveness of the options, provide information for the decisionmaking process of state management agencies and water supply units. For the process of cost-benefit analysis, many authors provide the different number of step in the process. However, their processes are different only when major analytical steps are divided into detailed steps. Thus, cost-benefit analysis always follows a process with the key steps, including: (1) Select the option(s), (2) Determine and evaluate cost-benefit of the option(s) in a certain period of time, (3) Place monetary value and evaluate the costs and benefits, (4) Evaluate the economic effect of the options, (5) Propose the best option and recommend. Based on general cost-benefit analysis process, the thesis develops the economic analysis process for UDW demand management (Section 3.2.8).

10 8 Chapter 3. APPROACH FRAMEWORK AND METHODOLOGY 3.1. Research framework of the thesis The thesis aims to synthesize and systematize the scientific basis of UDW demand management, develop UDW demand management model and a process of economic analysis, apply the research on UDW demand management in Hanoi to evaluate the effectiveness of UDW demand management. To achieve the research objectives mentioned above, the author proposes research framework with 3 main parts as illustrated in Figure 3.1, which is explained as follows: (1) The first part: Scientific basis of UDW demand management and economic analysis of UDW demand management (2) The second part: Economic analysis of UDW demand management in Hanoi (3) The third part: Proposed direction and solutions to implement UDW demand management in Hanoi. Figure 3.1. Research framework of the thesis 3.2. Methodology Method of collecting and synthesizing secondary data To carry out the analysis and evaluation in the thesis, a number of secondary data were collected including: Documents from local and international publications; Statistical yearbook of Hanoi city; the data related to production status and urban water management activities of HAWACO Hanoi Water Company; Master plan for socio-economic development of Hanoi city to 2020 orientation to 2030, etc Method of obtaining expert opinions

11 9 To add the source of information and reliability of the results of the thesis, the author met with experts in the field of water supply management, including HAWACO water plant staff, Experience in the field of economic management, water resources management Methods of sociological investigation In the thesis, the author established 02 questionnaires: 01 questionnaires for the households using tap water; 01 questionnaire for managers of water supply units in Hanoi. The author delivered 30 survey sheets to the managers and 400 survey sheets to the households in 3 districts of Dong Da, Hai Ba Trung, Hoan Kiem. The number of valid survey sheet collected from the households is Market price method In the thesis, the market price method is used to evaluate the benefits of saving wastewater treatment costs and saving electricity costs for wastewater treatment. The formula is determined by: Bi = Qi Qo P (3.2) Where: Bi: value of benefit number i when UDW demand management is applied (million VND); Pw: treatment cost for 1m 3 of wastewater (VND / m 3 ); Pwđ: electricity cost to treat 1m 3 of domestic wastewater (VND / m 3 ); Qi: Volume of wastewater treated according to UDW demand management option Ca (million m 3 ); Qo: amount of wastewater treated according to BAU (million m 3 ). Based on the data from Yen So wastewater treatment plant, the cost of processing 1 m 3 of wastewater (excluding electricity cost) is 2, VND/m 3, the electricity cost to treat 1m 3 of wastewater is 800 VND/m Value transferring method The thesis uses BTM method to estimate the benefits of water saving education and the costs of investing in water saving education. Education programs in the city include the development of a watersaving curriculum which is included in textbooks, workbooks and related experiments for the students at all levels. The benefits of water saving education: converting these benefits as defined by Bill de Blasio in the study of New York City, USA, The costs of investing in water saving education: Conversion of these cost as defined by Beacon Pathway in the study of Tauranga, New Zealand, The formula (3.3)is: Where: V đ : The value is converted to the target area Hanoi (VND/m 3 ); V đc : Value of benefit/cost of control area ($ Mỹ/m 3 hoặc $ New Zealand/ m 3 ). GDP PPP-đc : GDP per capita in purchasing power equal to control area

12 10 GDP PPP - đ : GDP per capita in purchasing power equal to target area Hanoi Contingent valuation method (CVM) In the thesis, to estimate the willingness to pay (WTP) of urban residents and to build the UDW demand curve for Hanoi, the thesis was conducted in 5 steps of CVM: Step 1: Set up questionnaire Step 2: Conduct the interviews with the specific sample size Step 3: Analyze the results of the interview and calculate the average WTP Step 4: Calculate total WTP Step 5: Evaluate the factors affecting WTP The thesis carried out WTP regression by the following variables: age (Age), gender (Gen), education (Edu), income (Inc), volume of used water per capita in the household (X). - The regression equation is: WTP = C+β1 Age + β2 Gen + β3 Edu + β4 Inc + β5x (3.4) To build the demand function and draw the water demand curve for urban areas in Hanoi, the thesis uses the software Eview Method of forecasting urban domestic water demand Water demand forecast is used to estimate the demand for UDW in relation to the selected options, thereby determine the amount of water saved when UDW demand management is implemented compared to non-udw demand management. The thesis selects the method of combining expert judgment and trend analysis. Trend analysis is based on an extrapolation of historical trends, or population growth figures multiplied by the average volume of used water per capita. Non-UDW demand management option (baseline scenario - BAU): From 2010 to 2013, the water demand was determined by using the actual data of water supply from Hanoi Water Company, the water demand per capita increased by 0.7%/year. From 2013 to 2025, the water demand per capita is extrapolated to increase at the same rate of 0.7%/year. UDW demand management option: From 2013 to 2015, the water demand was determined by using the actual data of water supply from Hanoi Water Company (as the solution of raising water tariff was applied, water demand per capita has increased less than the years when UDW demand management was not applied). The average water demand per capita was 0.35%/year. From 2010 to 2013, the amount of water used for daily living was recalculated based on the assumption that water consumption per capita increased by 0.35%/year. In the period from 2016 to 2025, extrapolation with the assumption that water consumption will continue to increase at a rate of 0.35% per year from 2013 to Method of cost-benefit analysis Based on the documents and experience in analyzing economic effect of the economists, and specifically based on the cost-benefit analysis process, the thesis develops the process of cost-benefit analysis for UDW demand management option. To assess the effectiveness of UDW demand management in Vietnam in general and Hanoi in particular, the economic analysis process proposed by the thesis consists of six basic steps:

13 11 (1) Identify problems and develop the option - UDW demand management option (QLCa): Hanoi implements three groups of solutions, which are: (1) Water loss management, (2) Water tariff increase, and (3) Education to raise awareness about water saving and efficient use of water. - Non-UDW demand management option or "baseline scenario" (BAU), is a hypothetical analysis about the impacts occurring if Hanoi does not choose to implement UDW demand management. (2) Determining cost-benefit of QLCa option In Hanoi urban area, based on a survey of current status and expert consultation, the thesis lists 10 potential benefits and 3 costs arising from the implementation of UDW demand management from a management perspective. (3) Evaluate (estimate) the values of the costs - benefits The main methods used to estimate the values of costs and benefits in the thesis are: estimated market price; BTM; CVM to build domestic water demand curve; correlation function. (4) Analyze the effectiveness of QLCa option In the 3 indicators of economic effectiveness, the thesis selects NPV (net present value) to perform the calculation and evaluation. The formula is: NPV B C n t t t t 0 (1 r) Where: r: discount rate; n: estimated number of years of project/program existence; t: corresponding time, 1, 2,..., n; B t : benefit at year t; C t : cost at year t. (5) Sensitivity analysis by factors affecting cost-benefit The thesis conducts a sensitivity analysis with the changes of the factors including water tariff, cost of water loss management and cost of education to raise awareness about water saving, discount rate, and electricity costs. (6) Select the appropriate option to apply The selected option is the one with the largest positive NPV.

14 12 Chapter 4: ECONOMIC ANALYSIS OF URBAN DOMESTIC WATER DEMAND MANAGEMENT AND PROPOSED SOLUTIONS FOR URBAN DOMESTIC WATER DEMAND MANAGEMENT IN HANOI Introduction about Hanoi Hanoi is the capital of Vietnam, the second largest city of the country, located in the center of the Northern Delta with many advantages and opportunities for socio-economic development. However, satisfying the demand of clean water for the people in Ha Noi is a great challenge for many reasons: the urbanization process and the challenge of increasing urban population in Hanoi lead to increasing water demand; the demand of water quality is higher and higher while the quality of water supply decreases; clean high rate of water leakage and loss in Hanoi. 4.2 Current status of domestic water production and supply in Hanoi The results show that the city has 12 main water plants managed and operated by Hanoi Water Company. However, the exploitation of underground water is so difficult that 90% of the factories cannot. maintain the capacity. The average output of the plants is 1,462,000 m 3 /month. Among the water consumption groups, the household is the largest group, accounting for 55.04% of total commercial water production. From the statistics on urban water supply from Hanoi Water Company, data about the consumers, the number of people accesses to clean water in Hanoi, the study calculated the average water supply per capita supplied to people in urban districts of Hanoi, as shown in Table 4.3. Table 4.3. Water supply per capita supplied to people in urban districts of Hanoi No. Business unite Number of consumers Area Water supply per capita 1 Ba Dinh /14 wards in Ba Dinh District and 6/8 wards in Tay Ho District 121 liters/person/day 2 Hoan Kiem Hoan Kiem District 120 liters/person/day 3 Dong Da The area in Dong Da district 158 liters/person/day 4 Hai Ba Trung The area is in Hai Ba Trung district and 6 wards in Hoang Mai district 121 liters/person/day 5 Cau Giay wards in Cau Giay district, 2 wards in Tay Ho district 120 liters/person/day 6 Hoang Mai The whole of Hoang Mai district 142 liters/person/day Source: Calculation of the author from the data of Hanoi Water Company, 2016 [4] Thus, the average water use rate per capita is 130 liters/person/day (equivalent to 3.93 m 3 /person/month). The results of survey conducted with staff of the company show that the water supplied to the market now meets 80% of the demand, of which the percentage of people accessing water in the inner city is about 95.75%, in suburban area is 14%. However, in fact, many areas lack water, especially in the summer in the dormitories, old streets with high population density Current status of UDW demand management in Hanoi The results of secondary data analysis show that Hanoi start using UDW demand management: - The implementation system is People's Committee of the city, relevant departments such as Department of Finance, Department of Construction, Department of Agriculture and Rural Development through Hanoi Water Company to influence the households, domestic water consumers. - Two UDW demand management solutions are water loss prevention and water tariff increase;

15 13 - A number of important legal documents of the central government and Hanoi city contain the regulations on saving and efficient use of urban water Assessment on urban domestic water demand in Hanoi Current status of using domestic water of Hanoi people According to the survey results, the average number of households using water from 10 m 3 /month to 15 m 3 /month accounts for the highest rate of 46.15%. As described by statistical results, the average usage of 308 households is m 3 /month (equivalent to 3.8 m 3 /person/month). The thesis performed a descriptive statistic of the rate of average water use for non-essential purposes which results in 5.24%. Thus, the water demand for non-essential purposes is estimated at 0.78 m 3 /household/month Willingness to pay of Hanoi people Statistical results describe WTP of the surveyed households in 3 urban districts of Hanoi (Table 4.8). Table 4.8. Statistical WTP of the surveyed households Willingness to pay Mean 9, Standard Deviation 1, Sample Variance 1,544,942 Minimum 8,000 Maximum 11,000 Count 258 Table 4.8 shows that the average WTP of the households for 1m 3 of water is WTPTB = 9, VND/m 3, with the observation of 258, the standard deviation of 1, Assess the factors affecting willingness to pay Eview 8.1 is used to analyze the factors influencing WTP, in which independent variables include age, gender, education level, income and volume of used water. The results of multivariate regression are shown in Table 3.9: Table 3.9. Results of multivariate regression and affecting factor Correlation Boundary effect Regression coefficient Coefficients (dy/dx) (P-Value) C Age Gen Edu Inc

16 14 X Reliability 95% R 2 0, Observation Willingness to pay 258 Unwillingness to pay Thus, regression is: WTP = Age Gen Edu Inc X R - Square = means that the independent variables in the models (the age, gender, educational level, income, and volume of used water) can explain about 62.34% of WTP variation in Y (price for which the consumers are willing to pay). The remaining 37.66% is for contingent factors and other factors not included in the model. Among independent variables, income and volume of used water are strongly correlated with WTP variable. Current domestic water demand curve in Hanoi The study conducts descriptive statistic of average volume of water used by the households, the average number of family member, thereby estimates the average volume of water per capita. Combination of this data and current population of Hanoi (year 2016) will create a basis for the calculation of total volume of used water in Hanoi corresponding with each price level. The results are shown in table 4.10 Table Total volume of used water corresponding with each price level Average Willingness to pay (VND/m 3 ) Average volume of used water (m 3 /month/household) number of family member Average volume of used water (m 3 /person/month) Total volume of used water (million m 3 /year) (person) 8, , , , From the figure in table 3.10, water demand function is established and shows the relationship between the price of WTP (Y) and the total volume of used water (X). The demand function is: Y = -1080,88 X ,19 (3.1) Linear function (3.1) with: a = -1080,88 < 0. Thus, the volume of used water decreases when the prices increase, this is perfectly consistent with the theory and practice; b = ,19 represents for the remaining factors not included in the model. Correlation coefficient R 2 = proves that the independent variables can explain 72.49% of the dependent variable values, the error due to other factors (noise) is 27.51%. 11,500 11,000 10,500 ND) 10,000

17 15 Figure 4.9. Urban domestic water demand curve in Hanoi Consider the limit of the values X, Y: The WTP value is the basis for the construction of demand function and the nature of WTP curve is to coincide with the demand curve. Thus, the value of Ymax is the highest level of willingness to pay of Hanoi people for domestic water use. According to the survey results, Ymax value = VND/m 3, put this value into the equation 4.1, value of X = (million m 3 ) Forecast of domestic water demand in Hanoi until 2025 According to data from Hanoi Water Supply Company, the average volume of water supply per capita in the city is 3.93 m 3 /person/month. The sociological survey shows that the average water demand per capita is 3.8 m 3 /person/month. It is found that the average volume per capita of water demand and water supply are not much different (3.8 m 3 /person/month and 3.93 m 3 /person/month respectively), thus, the difference may be explained by the loss of water. As a result, the forecast of urban domestic water demand in Hanoi to 2025 is based on the assumption (section 2.5.6) is reliable. Urban domestic water demand in Hanoi from 2010 to 2025 is calculated according to BAU and QLC options shown in Table Table Forecast of domestic water demand in Hanoi by each option, period BAU QLCa Total water Population Total water Year Average volume Average (people) volume (m 3 /person/year) (million (m 3 /person/year) (million m3) m3)

18 Based on the calculated data in the table, it is forecasted that domestic water demand will increase by million m 3 in 2025 compared to 2013 (for BAU option) and the volume of water saved by implementing UDW demand management by 2025 is 6.98 million m 3. As a result, even there is no investment in expanding water supply infrastructure, the application of UDW demand management can address 17.1% of increased domestic water demand Economic analysis of UDW demand management option in Hanoi Domestic water management option in Hanoi Option with UDW demand management (or QLCa): Solution of water loss management: install, check and replace/repair the broken water meters; verify water meters. Solution of water tariffs: Progressive water tariffs applied to the private sector (daily activities). Water tariffs are adjusted from 2013 to Educational solutions for efficient water use in schools: develop water-saving curriculum included in textbooks, workbook, related experiments for students at all levels. Organize water conservation seminars for teachers. Compared option or "baseline scenario" (BAU) Hanoi does not apply UDW demand management Identify cost-benefits from UDW demand management option in Hanoi The author conducted the survey and expert consultation to determine the cost-benefit list of suitable QLCa for Hanoi (Table 4.12). Table Các lợi ích và chi phí của việc thực hiện phương án QLCa so với phương án BAU ở Hà Nội Major Benefit/Cost Code STAKEHOLDER METHOD OF VALUATION Benefits of QLCa option 1. Save operating costs for water supply (excluding electricity cost) B 1 Water supply company Establish the function for the relationship between operating cost and total volume of water supply from the data of Hanoi Water Company combined with the data of estimated annual water volume 2. Save energy costs needed for water supply B 2 Water supply company Establish the function for the relationship between energy costs for water supply and total volume of water supply from the data of Hanoi Water Company combined with the data of estimated annual water

19 17 Major Benefit/Cost Code STAKEHOLDER METHOD OF VALUATION volume 3. Save cost for wastewater treatment (excluding electricity costs) B 3 Wastewater treatment plant 4. Save energy costs in wastewater treatment B 4 Wastewater treatment plant 5. Reduce greenhouse gas emissions B 5 Community Place monetary value by application of the social cost of carbon (SCC) 6. The value of using clean - CVM method water for consumers B 6 Community - Building urban domestic water demand curve - The value in use of water for consumers is estimated by calculating consumer surplus (CS) 7. Increase value of water in the flow B 7 Community Use BTM value transferring method to convert Veco values according to the research of US. 8. Entertainment benefits B 8 Community 9. Reduce scarcity of water resources B 9 Community 10. The benefits of Using BTM value transferring method to convert the community education on water savings B 10 Community value of QLCa benefits with the solution of raising community awareness on water use in New York City, US (Bill de Blasio, 2010) Chi phí phương án QLCa 1. Cost for increasing water tariff program Using BTM value transferring method to convert the value of this cost with reference to the program implemented in Hue city - Cost of research and recommendation of water tariff increase policy C 1a Hanoi city People's Committee / Water supply company Reference price / expert consultation & reference to the implemented programs - Administrative costs to the C 1b Hanoi city People's Reference price / expert consultation & reference to the

20 18 Major Benefit/Cost Code STAKEHOLDER METHOD OF VALUATION implementation increasing Committee implemented programs water tariff program from Hanoi city People's Committee to each district, ward and commune - Training costs to improve Hanoi city People's Reference price / expert consultation & reference to the capacity C 1c Committee / Water supply company implemented programs - Cost of operation, control Hanoi city People's Reference price / expert consultation & reference to the and evaluate C 1d Committee / Water supply company implemented programs - Communication costs for Hanoi city People's Reference price / expert consultation & reference to the increasing water tariff program C 1e Committee / Water supply company implemented programs 2. Investment cost of the program to manage water loss C 2 Water supply company Establish the function for the relationship between the cost of water loss management and total volume of water supply from the data of Hanoi Water Company combined with the data of estimated annual water volume 3. Investment cost for watersaving education program implemented UDW demand management C 3 Hanoi city People's Committee / Water supply company Using BTM value transferring method to convert the value of UDW demand management cost with the solution of raising community awareness on water use in Tauranga city, New Zealand (Beacon Pathway, 2010) Nguồn: Tổng hợp của tác giả luận án The calculation results of costs and benefits from implementation of QLCA option in Hanoi in the period are shown in Figure 4.16.

21 19 Figure 4.16: Values of costs and benefits from QLCa option in the period (the fiscal year 2013) The thesis has estimated 8 benefits and 3 costs of QLCa option in Hanoi in the period The study calculated the net present value of QLCa in Hanoi which is NPV = 734, (million VND) with a discount rate of However, values of two benefits that are not estimated: Entertainment benefits (B8) and Reduce scarcity of water resources (B9). Although these two benefits may arise in the study to a certain extent, it is difficult to assess these benefits due to lack of the necessary data Proposed direction and solutions to implement urban domestic water demand management in Hanoi In order to implement effective management of the demand for irrigation water supply in Hanoi, the thesis proposed a solution based on the results of the analysis of the current status of water supply management in Hanoi. The results of net present value analysis of NPV correspond to each bridge management solution, to select the priority order of solutions, include: Increased water tariff: increasing water tariff with reasonable roadmap and consensus of consumers. Include increased wastewater treatment cost in the water tariff. On the water bills of the households, 0.78 m 3 will be separated by applying price at level 4 in the progressive pricing framework. Strengthen water loss management: water use audit in the households, schools, offices; apply GIS in customer pipeline network management. Diversify forms of communication and education to raise community awareness on efficient water use: Integrate education programs on water saving in schools; Propaganda and social mobilization campaign on water saving; popularize the guidelines on water saving on the mass media.

22 20 CONCLUSION AND RECOMMENDATIONS Urban domestic water demand management has proven to be a very effective management method in the context of many difficulties in the urban water supply. UDW demand management has been applied, developed and achieved significant results in many countries around the world. However, UDW demand management is a relatively new concept in Vietnam. Until now, there is no available study on economic analysis of UDW demand management; Hanoi in particular do not have any comprehensive and systematic research on UDW demand management. The thesis " Economic Analysis of Domestic Water Demand Management: Research on Ha Noi Area" aims to interpret and clarify theoretical and practical issues of UDW demand management, theoretical issues of economic analysis of UDW demand management and evaluate the conditions to apply UDW demand management in Hanoi urban districts, thereby develop and propose solutions for the development of UDW demand management in Hanoi until The thesis has achieved the following results: 1. Systematize, interpret and supplement the theoretical and practical issues of UDW demand management and economic analysis of UDW demand management. The thesis identifies the gaps in theoretical and practical aspects on which the thesis should focus on to research and solve; the thesis clarifies the concept of demand for urban domestic water and UDW demand management; 2. The thesis proposes an approach to the economic analysis of UDW demand management comprising 6 closely related steps and a specific system of research methods for economic analysis of UDW demand management in Vietnam in general and application in Hanoi in particular; 3. The thesis analyzes and evaluates by combining qualitative and quantitative methods - current status of UDW demand management in Hanoi. Hanoi urban areas have initially implemented UDW demand management with two groups of solutions: raise water tariff; and water loss management. Results of observation, survey, and analysis show that average water usage per capita in Hanoi is 3.8 m 3 /person/month. It is estimated that for the households in Hanoi, the percentage of UDW for essential purposes and UDW for non-essential purposes is 94.76% and 5.24% respectively compared to total UDW demand. The descriptive statistic of willingness to pay (WTP) of households for UDW in urban Hanoi is WTP TB = 9, VND/1m 3. The estimated volume of water saved by implementing UDW demand management until 2025 can solve 17.1% of additional water demand for Hanoi. Hanoi city has fully met the conditions to implement and develop UDW demand management: favorable policies and regulations of central government and the city, the support of urban community which expressed their determination to implement UDW demand management. 4. This study analyzes, synthesizes the research methods with QLCa option and BAU. From the options above, the thesis performs the assessment - by combining qualitative and quantitative methods of costs and benefits arising from the implementation of UDW demand management option in Hanoi urban districts. The solutions of QLCa include: increasing water tariff; promote water loss management programs, education to raise awareness about efficient water use. The thesis has estimated 8 benefits and 3 costs of QLCa option in Hanoi in the period Net present value of QLCa implementation in Hanoi urban districts is NPV = 734, (million VND) for a discount rate of Generally, the quantitative results of this study provide very clear evidence for the hypothesis that there are huge potential gains from the application of UDW demand management.

23 21 5. The thesis proposes orientation for suggesting a policy of implementing UDW demand management in Hanoi until The thesis proposes the solutions to successfully implement UDW demand management. Specific groups of solutions include: (i) economic solution - increasing water tariff; (ii) management solution - water loss management, (iii) eduction solution raise public awareness of water saving, efficient water use, and PPP solution for UDW demand management. Limitations of the thesis The thesis should research on the benefits which are not calculated, such as recreational benefits (B8) and reduce the scarcity of water resources (B9). The limitation of this thesis can open the new topic for further research. The thesis uses value transferring method BTM in evaluating and quantifying benefits/costs. In practice, BTM requires a conversion function between the two areas. However, due to the lacks of data on UDW demand management and social characteristics related to water demand, the conversion function cannot be formed. This study uses only GDP per capita with purchasing power parity to transfer the benefits from the control area to the target area. Direction for further development of the thesis To bring the results of the thesis into practice and apply them for other similar cities, it is necessary to study the following issues: - Continue to estimate the value of the benefits and costs of UDW demand management in Hanoi which have not been implemented in this thesis. - In the future, the thesis can develop by building, analyzing other options of UDW demand management in the 6 step process proposed by the thesis. The other options can be: Subsidies for installation of water-saving devices in the households; Propaganda and social mobilization campaign on water saving and efficient use of clean water; Popularize the guidelines on water saving and efficient use of water; etc. - The study should estimate the elasticity of domestic water demand by the cost to assess accurately the change in water demand when water tariff changes./.

24 22 LIST OF PUBLISHED WORKS OF THE AUTHOR 1. Hoang Thi Hue (2013), "Estimate economic value of ecosystem in Dam Vac, Vinh Yen city, Vinh Phuc Province", Journal of Natural Resources and Environmental Sciences, No Pham Thi Hong Phuong. Hoang Thi Hue (2016), "Values of use evaluation for ecosystem in Nhue Day river basin (the section running through Ha Nam province)", Journal of Environmental Economics, published in May. 3. Hoang Thi Hue, Le Thu Hoa. Trinh Thi Thuy (2016). "Current status and opportunities for economic tools application in water resources management in Vietnam", Journal of Natural Resources and Environment, published in June. 4. Hoang Thi Hue, Duong Hong Son (2016), "Current situation of water loss in Hanoi urban area and propose solutions to improve management efficiency", Journal of Natural Resources and Environment, published in June. 5. Le Thu Hoa. Hoang Thi Hue. Nguyen Quoc Duong (2017). Economic analysis of urban water demand management in Hanoi. Vietnam, Proceeding of 8th NEU KKU International Conference, National Economics University Publishing House. 6. Hoang Thi Hue, Le Thi Hoa (2017), "Assess clean water demand and willingness to pay for clean water supply in Quang Yen town", Environmental Journal, Thematic publication II.