Promoting agricultural water saving through cross–industry water rights trading in China: An effects analysis based on bi–level multi–objective programming

Since the early 2000s, China has been promoting and implementing water markets and water rights (WRs) trading systems to address its intensifying water shortage problem. While existing studies have primarily examined the effects of WRs trading on individual water users, limited attention has been paid to the interdependent effects of cross–industry WRs trading on multiple water users. This study investigates the mechanisms of cross–industry WRs trading and quantifies its effects on agricultural water–saving and economic benefits in China. A bi–level multi–objective programming model is developed to examine how variations WRs trading prices and water resource tax rates affect WRs trading volume, water use efficiency, agricultural water savings, and economic benefits in the agricultural and industrial sectors. Using Shaanxi Province, China, as a case study, the results indicate that cross–industry WRs trading has a greater effect on industrial economic benefits than on agricultural economic benefits. An increase in the water resource tax is associated with higher growth of agricultural economic benefits but a slight decrease in the growth rate of industrial economic benefits. In contrast, ecological benefits are more strongly affected by cross–industry WRs trading and remain largely insensitive to changes in the water resource tax. Furthermore, cross–industry WRs trading promotes water resource conservation through two main pathways: reducing water withdrawals and improving water quality. In the case of Shaanxi Province, cross–industry WRs trading enables the agriculture sector to save approximately 14 million m³ of water, lower COD treatment cost by 2.3 million yuan, and increase ecological benefit by 6.928%.