Urban wastewater treatment efficiency improvement needs public–private partnerships

A research team of scholars' from Southwestern University of Finance and Economics and Beijing Normal University verified the potential benefits of public-private partnerships in improving the efficiency of urban wastewater treatment.
Published in Sustainability
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Urban wastewater treatment capacity in emerging economies is insufficient for sustainable production and living. The industrial agglomeration and population growth in urban areas inevitably generate increasing volumes of wastewater. However, the limited public budgets of governments force demands improving the urban wastewater treatment efficiency (UWTE) rather than expanding wastewater treatment infrastructures (WTI) globally. Governments worldwide use various tools, including penalties, subsidies, and administrative rules, to inhibit the discharge-based wastewater. Nevertheless, strengthening the discharge-based supervision does not mean the inevitable improvement of the UWTE. Once the urban wastewater has been produced, the ability of the WTI to purify it becomes the key element in determining the UWTE.

Efforts have been made to link macro-institutions and policies to the WTI capacity, which are highly related to the construction and operation mode selected for the WTI. Since 2018, a team led by Pro. Shulei Cheng (at Southwestern University of Finance and Economics, SWUFE) and Pro. Fanxin Meng (at Beijing Normal University, BNU) has been established to reveal the role of WTI in improving the UWTE under the public–private partnership (PPP) model.

In a new paper in npj Clean Water, we innovatively evaluated the impact of the PPP model on the UWTE by collecting data from 1,303 urban wastewater treatment PPP projects in 283 prefecture-level cities in China from 2014 to 2019 and used data envelopment analysis and Tobit regression model. We found that the UWTE was significantly higher in prefecture-level cities that introduced the PPP model in the construction and operation of WTIs, particularly those with a feasibility gap subsidy, competitive procurement, privatised operation, and non-demonstration. Moreover, the effects of PPPs on UWTE were limited by the economic development level, marketisation, and climatic conditions.

The results may aid local governments in China facing budget constraints to improve the UWTE. China is undergoing rapid urbanisation and industrialisation, accompanied by a surge in demand for urban wastewater treatment. Wastewater treatment facilities require vast public budgets during the construction and operation stages, and the technology and consumer expectations for service quality are high. Therefore, local government officials ‘take advantage of loopholes in the law’ to finance local infrastructure construction, for example, with land finance, local bonds, and local investment and financing platforms. However, the disordered development of these financing models has exposed local governments to significant potential debt risks when encouraging the construction of local infrastructure. Therefore, the promotion of the PPP model for urban wastewater treatment can be considered a way to improve the UWTE and avoid the excessive risk of implicit debt. Moreover, because our study specifically emphasises the identification of the causal relationship between the PPP model and UWTE, the empirical study of Chinese prefecture-level cities provides valuable insights for improving the UWTE in other emerging economies that are experiencing the contradiction between the need for urban expansion of public wastewater treatment services and limited local public budgets.

All the authors have fully participated in the research and these efforts made the article published. Pro. Jiandong Chen (at SWUFE) and Pro. Gengyuan Liu (at BNU) gave constructive suggestions in research designing, Ms. Yu Yu and Ph.D Candidate Yongtao Chen (both at SWUFE) had made valuable contributions to data mining and processing. Dr. Wei Fan (at SWUFE) contributed to visualize the empirical findings. We urge other scholars to work together to find feasible solutions for UWTE improvements in emerging economies.

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