The Impacts of Climate Change on Wastewater Treatment Costs: Evidence from the Wastewater Sector in China

Abstract

Treatment of wastewater is expected to become a major development issue in the years to come. We investigate the relationship between climate and costs of wastewater treatment with the objective of examining if changes in climate might have an impact on the costs of wastewater treatment. For that purpose, we use a cross-section sample of 163 treatment plants from China to estimate the industry’s cost function. The methodology used comprises an econometric estimation procedure of treatment costs of the wastewater sector, and a simulation of changes in these costs predicted with future climate conditions, policy implementation scenarios, population growth and development trends. Our results find evidence of climate change impact on treatment costs. We also simulate potential impact of future policy and climate scenarios on costs of treatment, and we measure the cost impact of all other cost determinants but climate—as these are indirectly affected by accounting for climate in the estimation procedure. This indirect impact predicts total cost changes of different magnitudes across the range of future scenarios investigated.