20 PERSPECTIVES ON BUSINESS AND ECONOMICS | VOL 43 | 2025 droughts in recent years. These droughts are not the result of a lack of annual rainfall but rather an issue of resource management. The struggle for efficient water resource management in Taiwan is made difficult in large part due to temporal and spatial clustering of resources. Southern Taiwan faces a loosely defined dry season between November and April, followed by a rainy season in the opposing months. Due to these recurring variations in supply, a main strategy of the WRA under the Ministry of Economic Affairs (MOEA) has been to utilize reservoirs for water storage to mitigate seasonal fluctuations in availability. This way, consumers are protected when monsoons arrive late, or not at all. Spatial clustering is the issue of highly concentrated water use in small areas such as industrial and science parks. Ten of Taiwan’s largest industrial entities account for 41% of the island’s total nonagricultural water use (Crook, 2023, April 20). Many of these companies locate chipmaking facilities and manufacturing plants near each other, requiring diversion of water from nearby agriculture and domestic users to satisfy the disproportionate demand from industrial users. Unfortunately, the steep terrain of the Central Mountain Range, frequent earthquakes, and severe rainfall all lead to landslides and debris flows, resulting in sedimentation rates that are among the highest in the world (Wang et al., 2018). The average reservoir in Taiwan has sedimentation accumulation of roughly 33%, creating a 30% reduction in a total reservoir capacity across the island. Compounding the shortfall from sedimentation, the water leakage rate from conveyance pipes was 13.9% in 2021, meaning more must be pumped from reservoirs to make up for the loss due to leaking pipes (International Trade Administration, 2021). Since supply-side solutions, such as reservoirs and reducing pipe leakage, have unique drawbacks, some policymakers have begun to explore alternative approaches. They are shifting focus to demand-side solutions with the goal of reducing freshwater consumption rather than increasing the supply. The Taiwanese government’s main focus for such consumption is the industrial sector. This makes sense considering many of the largest individual water users on the island are industrial entities. Additionally, these entities are likely to be more capable of adopting alternative technologies, such as rainwater harvesting, seawater desalination, and reclaiming water. In regions with significant shortages, the Reclaimed Water Resources Development Act compels industries to use reclaimed water. When submitting a new water consumption plan to the MOEA, industrial consumers must use specific percentages of reclaimed water based on the severity of shortages in a facility’s location. The two main methods of procurement are purchasing reclaimed water from municipal wastewater plants and constructing onsite wastewater recycling facilities. The executive branch of the Taiwan government (Executive Yuan) hopes to supply 1.32M cubic meters per day of reclaimed water by 2031, of which 58% will be supplied by municipal wastewater treatment facilities and 38% by wastewater treatment plants on site at high-consumption industries and industrial parks. Only 0.05M cubic meters per day (4%) are planned to be processed within the domestic sector (Cheng et al., 2023). While the government has done its best to build municipal wastewater treatment plants and promote the use of reclaimed water, many consumers have little reason to switch. This is in large part due to the artificially low price of water and the high cost of procuring reclaimed water. Current water pricing Taiwan Water Corporation charges a tiered variable rate, raising the price of additional units of water as a customer’s consumption increases. These progressive price increases for different tiers of use are referred to as “blocks.” Taiwan Water Corporation serves most of the island other than Taipei City and a few small counties, charging for use based on a four-block rate structure. For the first 10 cubic meters per month, the price is NT$7.35 per cubic meter. The next 10 cubic meters are higher, NT$9.45 each, while the subsequent 20 cubic meters each cost NT$11.55. Any usage beyond this threshold is priced at NT$12.075 per cubic meter. This tiered pricing approach incentivizes conservation by making higher consumption more expensive, encouraging households and businesses in the higher blocks to use their resources more efficiently. The water consumption fee calculated from this tiered pricing structure makes up the vast majority of the volumetric cost incurred by the consumer (ignoring taxes). Water bills in Taiwan also include fixed charges based on the size of the consumer’s water meter and other small variable costs, which this article ignores. The calculation of consumption fees in most of Taiwan is represented in Table 1 and the accompanying formula (WRA, 2025). In contrast to a variable rate through increasing blocks, a fixed rate would charge the same rate per cubic meter of water used across all use profiles.
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