Municipal Wastewater Cost Recovery in China. Greg Browder World Bank Water Week Feb. 28, 2007
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1 Municipal Wastewater Cost Recovery in China Greg Browder World Bank Water Week Feb. 28, 2007
2 Presentation Based on: World Bank 2007 AAA: Strategic Directions for Improving the Performance of China s Urban Water Utilities. Since 1990: 25 Bank-financed wastewater project with $4.0 billion investment
3 Organization of Municipal Wastewater Service in China 3 Common Models: --Drainage Departments + Municipal Conveyance/Treatment Company --Drainage Departments + Private BOT Treatment Project --Municipal Wastewater Company: Collection, Conveyance & Treatment Wastewater Services Provided By Local Government With Minimal Oversight By Provincial Governments
4 Rapid Construction of Treatment Plants 2000 State Council Circular: 60% Urban WW Treatment by : 364 out of 662 cities have WW Treatment Plants Wastewater Treatment Capacity (million m3/day) Wastew ater treatment capacity (million m3/day) Waterw ater treatment rate (%) (target) 70% 60% 50% 40% 30% 20% 10% 0% Wastewater Treatment Rate
5 Large WW Investment Program Ahead : US$25 Billion : US$35 Billion Preliminary Estimates for Wastewater Investments: 11th Five Year Plan Sludge Management, 40 Billion RMB, 13% Water Reuse, 10 Billion RMB, 3% WWTP, 48 Billion RMB, 16% Networks, 200 Billion RMB, 68% Source: CIECC 11th Five Year Sector Plan
6 Average Water and Wastewater Tariffs in China Based upon 128 sample cities*, as of July 2005, in RMB WS Cost Recovery 3 US$0.4/m3 Wastewater Cost recovery US$0.25/m3 WW Treatment Cost recovery US$0.15/m Water Supply Wastewater Source: H20 Reports Rich Medium Poor
7 General China Wastewater Tariff Approach Drainage Operating and Capital Costs Paid by Government (Considered a Public Good) Wastewater Tariff Pays for Treatment Only (Considered a Commercial Activity) Wastewater Treatment Fee and BOT Price (RMB/m 3 ) Region Largest Cities Coastal Areas Northeast Middle and West Average BOT Price 0.99 ($0.12) Average Wastewater Fee Ratio 76% 68% 83% 66% Source: Tsinghua University Brief, 2006
8 Why Wastewater is Not Managed as a Network Business in China Existing Drainage Departments are Overstaffed and Inefficient: --Start Fresh with Wastewater Treatment Company Tariff Levels Can Be Set At Cost Recovery Levels for Treatment --Can Attract BOT Investment or Bank Loans Many Combined Wastewater and Stormwater Drainage Systems: --Stormwater Costs Not Related to Wastewater Generation
9 Problems With Not Managing Wastewater as a Network Business No Single Entity Responsible for Wastewater Management Municipal Government Funding Constraints: Capital and Operating Costs --Collection Infrastructure Lags Behind --Operation and Maintenance Suffers True Cost of Service Remains Hidden
10 National State Bond Program: Concessionary Finance China s Central Government Issues GO Bonds --Distributes to Provinces/Cities for All Types of Infrastructure 1998 Start: Stimulate Economy; Present: Promote Equity Grants and Concessionary Loans: --Approximately 30% of WW Investments/Mainly Drainage Not a Structured Program for Water and Wastewater --Limited Eligibility Criteria, Appraisal, Monitoring, etc.
11 Affordability and Efficiency Environmental Agency Has High Discharge Standards: Parameter BOD (mg/l) SS (mg/l) Total-P (mg/l) Total-N (mg/l) Class 1A Class 1B Cities Are Constructing Separate (SW and WW) Collection Systems Sludge Management Costs Are Large and Growing --Construction and Labor Costs are Low in China--
12 Economic Disparity Among Cities in China City Type Per-Capita (US$) # of Cites Population (Million) Large and Rich > $3, Medium $1500-$ Small and Poor <$1500 2, Note: Small and Poor Include County Capital Towns, Source: EASUR Estimate
13 Getting the Wastewater Package Right: Strategic Directions for China 3. Tariffs Component 1. Service Standards 2. Utility Efficiency 4. Government Capital Contribution 5. Government Operating Contribution China Issue High Effluent Standards Separate Collection System Inefficient Drainage Departments Below Treatment Full Cost City Funds Drainage Works Unstructured National Program City Funds Drainage O&M Proposed Strategic Directions For Poorer Cities: -Transitional Effluent Standards -Combined Systems -Manage WW as Network Utility Business: Collection & Treatment -Recover Full Costs for Treatment and at Least O&M for Drainage -Incentive Based National Finance Programs -Reliance on Tariffs
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