Can water rights trading improve water resources use efficiency: empirical evidence from China's pilot program

In the face of increasingly severe global water scarcity, improving water resources use efficiency (WRUE) constitutes an important way to alleviate water conflicts and promote sustainability. The synthetic control method is used for the first time to evaluate the impact of water rights trading (WRT) policy on WRUE. The pilot program of WRT policy implemented in China since 2014 is a natural experiment. The super efficiency slacks-based measure model taking the chemical oxygen demand emissions and ammonia nitrogen emissions of wastewater as undesirable outputs is used to measure the WRUE of 30 Chinese provinces and cities from 2005 to 2021. The results show that: there are remarkable differences in WRUE among areas in China, ranging from 0.57 to 2.60; compared to the non-pilot areas, the WRUE has significantly increased in the pilot areas, with Henan, Gansu and Inner Mongolia Provinces improving by an average of 7.2%, 6.8%, and 5.2%, respectively. These results remain robust after a comparative analysis of the period reassigns and areas substitution of policy shock. The potential for increasing efficiency in some areas is considerable. China's WRT policy has effectively improved the WRUE of the pilot areas, considering undesirable by-products of environmental harm. The WRT policy should continue to be promoted to improve the efficiency and sustainable use of water resources in China.