Optimal Level of Groundwater Charge to Promote Rainwater Usage for Irrigation in Rural Beijing

Since groundwater is diminishing rapidly in rural Beijing, rainwater harvesting for irrigation is being promoted. As the cost of pumping up groundwater is low, farmers have few incentives to use rainwater. To promote the consumption of rainwater, the Beijing Water Authority may in the future raise the cost of using groundwater by introducing a charge. Higher cost of groundwater will increase the consumption of rainwater, but can have a negative impact on farmers' incomes. This paper aims to study how to increase rainwater consumption without discouraging farming. The relation between the cost of groundwater and the consumption of rainwater has been studied by analyzing the elasticity of groundwater demand graphically. If the cost of groundwater is lower than the elasticity threshold, farmers lack incentives to use rainwater. If the cost of groundwater is higher than the threshold, rainwater consumption increases. The elasticity threshold of groundwater can move down following a change in the characteristics of rainwater harvesting systems. With linear programming analysis it has been found that increasing subsidies and enlarging the size of rainwater harvesting systems decreases the elasticity threshold of groundwater. This results in a proposal for a realistic charge for groundwater, affecting the consumption of rainwater but also taking into account the income of the farmers.