China's Ningxia region uses market-based trading

This undated photo shows Lan Wenming demonstrating an automatic trough in the village of Zhonghe in Yuanzhou District in Guyuan, northwest China's Ningxia Hui Autonomous Region. PHOTO XINHUA YINCHUAN - Herds of cattle are guzzling water from a 4 meter-long trough in a rural area of northwest China's autonomous region of Ningxia Hui, which automatically replenishes itself when the water level nears the bottom.

Although this modern facility costs up to 1,000 yuan $141, it has become a popular option among cattle farmers in the water-starved Xihaigu area, where per capita water resources account for less than 8 percent of the national average.

If we used a stone trough, it would cause the water to splash around. Half of the water would be wasted, says Lan Wenming, owner of a major cattle breeding base in the Yuanzhou district of Guyuan, a city in Xihaigu.

The new equipment allows a specific amount of water in the trough, and the average daily water consumption per head of cattle can be reduced from 30 Chinese cents to 20 cents, he adds.

Due to its dry climate, Ningxia has often faced limited water resources. The region has introduced a water-use rights reform and launched a water-use rights trading scheme in 2021, with Yuanzhou as a pilot zone.

The strategy is similar to carbon-emissions trading, allowing for buying and selling of water-use quotas to reallocate water resources through a market-based approach.

Water-use quotas are assigned to villages, enterprises and major breeding farms based on their planting area, production scale, number of livestock and other factors.

With a capacity of 400 heads of beef cattle, Lan's breeding program has a daily water-use ceiling of 50 liters per head of cattle. If his water consumption exceeds the limit, Lan will not only face higher water bills but also have to pay extra to purchase unused quotas from those who consume less water.

The program is an effective water-saving recommendation. For those who use less water, the surplus quotas can either be reserved for expansion or sold to others as assets, Hongjie, a senior engineer at the water authority in Yuanzhou, said.

Since the launch of the reform, a total of 186 water-use rights transactions have been recorded in the region, encompassing 105.3 million cubic meters of water, with the total transaction value amounted to 380 million yuan.

Water use quotas can be used as collateral for a water-use quota, which has been transformed by the reform. So far, eight banks have provided pledging, credit, and lending services related to water-use quotas, as well as issuance of 450 million yuan of loans.

In the past year, three government agencies, including the Ministry of Water Resources, endorsed a Water-Use Rights Reform guideline, vowing to further enhance China's water-use rights system, intensify transaction oversight and establish a unified national water-use trading market by 2025.