Since the Hangzhou Conference of CCICED in April, 1993, the expert working group of resource accounting and pricing policy has concentated on making a further r esearch on the pricing of coal, water and forest resources. Now we offer a repor t about the achievements we have made in our research, This report is divided in to the following sections:

　　Section I . Considerations about Our Theoretical Framework

　　Pricing policy is a very important constituent in making policies concerning res ources and environment. As to the pricing of natural resources, the theory of MO C(marginal opportunity cost) is relatively comprehensive among others, for it el iminates a commen defect shared by other theories, that is, neglecting depletion and externality of exploiting and using resources from the perspective of envir onmental economics land natural resource economics. Prices of resources paid by consumers should be equal to prices of exploitation and depletion of resources f or which the whole society should be responsible, that is, MOC. Such prices of r esources as are lower than MOC will stimulate over-exploitation of resources and lead to the deterioration of environment, whereas those as are higher than MOC will restrain normal consumption of resources.

　　According to MOC theory, natural resource price (P),is constituted by MPC(margin al production cost), MUC (marginal user cost) and MEC (marginal external cost):

　　P=MOC+MUC+MEC.

　　This formula is the theoretical framework and the standing point of our research .

　　Theoretically speaking, MPC refers to production costs such as those for explora tion, cultivation and expolitation, MUC refers to losses of unrenewable resource s which present exploitation brings forth to future users. MEC refers to environ mental and ecological losses caused by the exploitation of resources.

　　However, in practice, Some enivronmental and ecological losses have been allocat ed into production costs, for instance, engineering costs for handing polluting and medical costs paid for labourers. Here. MPC includes all production costs of resources in the marked dealings, but MEC does not include environmental and ec ological losses in the market ddealings, in other words, it refers to environmen tal and ecological losses shared by the public. For those renewable resources an d those which can be eternally exploited, MUC should be 0. In fact, due to over- exploitation, the speed of exploitation is greater than that of natural revewal. Thus, the reservation and the quality of resources are degraded; therefore, cos ts for resourcwes increase. For example, due to over-expolitation of water resou rces, we have to transfer water from distant areas, hence, MUC>0.

　　In the actual research of MOC, since all the items of the costs are specific, th e distinction between the above-mentioned two costs can be regarded as different categories to which those items of costs belong. Therefore, as a whole, such di stinction cannot affect MOC. In our research, we will use the two ways of distin guishing two costs in accordance with the actual circumstances so that they cann ot be confused.

　　MPE, MUC and MEC have different connotations to different resources. Specific ca lculations of the costs are affected due to the limitation of data collection. W ith the development of human society, and the change of evaluating standards, th e calculations of the costs are accrdingly changing. One of the important tasks for our esearch is to specify different costs for differentresources, and to fin d out approximate formulas and lower-limit methods of calculating costs by all m eans, furthermore, to discuss the change of the index for value judgement.

　　We will divide our statement of the research of pricing policy for different res ources into the following categories: geographical dispersion of the resource in China; demand, supply and pricing, specifying MOC for this resource and its cal culating formula, cse analysis, policy-making suggestions.

　　Section II. An Research on Pricing Policy of Coal Resources in China

　　I. The Current Circumstances of Coal Resources in China

　　1. Coal is the main raw energy in China, 70% of the total formation. Suich stuct ure in which coal is the main raw energy win last for a long time in China.

　　2. China is one of the nations with the greatest coal reserves. However, the pro ven reserve is insufficient. The geological and exploited coal reserve in China respectively takes up 20% and 22% of the world coal deposits, the second largest in the world. Due to the insufficient investment for exploration, the reserve-p roduction ratio is only 166 in 1990, lower than that of the U.S, the former USSR and the world average level.

　　3. China has geographically unbalanced dispersion of coal mines. The underdevelo ped north and west with vast coal production are of severe water shortage, which hampers is exploitation and cultivation. The inefficient traffic severely restr aints the transportation of coal resources from the north to the south and from the west to the east.

　　4. There exists severe waste in coal's exploittion and use. The percentage of re cvery is low. The ratio of raw coal which is washed is also low. The high-qualit y coal has not been put into rational usage.

　　5. There exists great environmental destuctions, including those caused by explo itation: earth subsidence, pollution of waste rock and dirts and air pollution c aused by the use of coal, which is the main source for air pollution in China.

　　6. The coal price is irrational. The state-owned big coal mines have been in def icit for a long time, 95% of which are subsidized by the State. Since the State does not levy on the tax of exploitation, collective and private coal pits have been established, which leads to over-exploitation and destruction of coal resou rces. Without the tax of exploitation, the State does not have sufficient invest ment for exploration, which leads to exhaustion of coal reserve. The State does not levy or just levy on a litle amount of environmental tax, therefore, the des truction of environment cannot be prevented and restored.

　　II. A OPricing Model

　　1. Setting pit raw coal as the object for pricing.

　　2. MPC; including production costs, exploration costs and internalized environme ntal costs. Two rectifications should be maderedundant employees should be reduc ed, and the shadow price should be used to adjust intermediate investment.

　　3. MUC: adopting reverse algorithm to calculate MUC of the base year, MUC0. The depletion will be increased with the time, so the dynamic MUC (t) should be calc ulated.

　　4. MEC: according to the pricing policy of pit raw coal, we only calculate envir onmental costs in the exploration-MEC, In our research, we only calculate the co sts of handlung pollution and of environmental damage, the part of which has not been internalized, that is, the lower limit of MEC. In addition, we calculate t he environmental costs caused by burning and giving off SO2 (MEC2).

　　III. A Case Study

　　1. We set Datong Coal Bureau of Shanxi Province as the object for case study. Da tong Bureau is typical of coal mines in China, which is the largest state-owned coal mine in China, the production base of the best power coal, and enjoys the h ighest evaluation index concerning economy and technology.

　　2. In 1991, the financial costs of Datong Bureau is 54.47 / ton (including envir onmental costs of 1.04). The actual market price is 48.57 / ton)

　　3. According to the MOC theory, MOC=107.13 / ton, 57.7% of which is MPC, 37.8% o f which is MUC and 4.5% of which is MEC1. MEC1 is relatively low, so we need fur ther estimation of it.

　　The real price of Datong in only half of MOC, so it too low.

　　According to our calculation. MEC2 of coal for daily-life use is 11.64 / ton, th at for power plants is 18.43 / ton.

　　4. In 1991, the international market price (CIF) is 315.3 / ton on average. For Datong coal, MOC+transportation costs to Qinghuangdao = 140.73 / ton, only half of the international market price. The reason is that all the costs are relative ly too low in China, the estimation of MEC1 is also low and China has abundant c oal resources.

　　5. As time goes by, exploitation of coal mines will become more and more difficu lt. As a result, exploitation costs in China increase. If the result of explorat ion can guarantee steady coal reserve (i.e. we might assume MUC is constand), we can add exploration cost into MPC which is used for exploiting coal resources ( i.e. MPC and MOC will be increased). As a result, by 2020s, the market price of coal in China will be close to the world price. If MUC (t) increases at a certai n rate from now on(i.e. future exploration investment is allocated into the curr ent costs as the compensation for depletion), by the end of 2010s, Chinese coal price will be close to the world price.

　　IV. Policy-making Suggestions

　　1. Price difference between domestic and international markets is very big, whic h is advantageous for exportation. All the coals that reach the standard for exp ortation should be exprted. However, only 2% of coals are exported in China. Sin ce the demand for coal in the world market is linited, exported coal cannot be i ncreased within a large scale. Therefore, we can only price Chinese coal in acco rdance with its Chinese MOC. At present, it is very difficult to coordinate Chin ese coal price with the world price.

　　2. We should establish the rental system of coal resources. Considering explorat ion costs and public responses, we can set a proper increasing index of MUC to s et down the rent, which can be used for exploration of new resources and exploit ation of the substitute resources.

　　3. We should levy on environmental compensation fees, the amount of whch is equa l to MEC1. As the public places higher demand

　　for ecological environment and the items of MEC1 are extended, environmental com pensation fees can be gradually increased.

　　Environmental cmpensation fees can be added up to MOC. It should be linked with the percentage of recovery so that exploitation efficiency can be increased. It should also be set down with the consideration of local characteristics, for env ironmental effects vary with geographical locations.

　　4. We should levy on waste gas emission fees, which is on the basis of MEC2. wit hthe consideration of local environmental capacity.MEC2 could be included in the coal price and be levied in advance from coal consumers. Handling with pollutio n should be encouraged. The fees can be returned it, on the condition that the h andling is effective. If the pollution still exceeds the standard, extra fees mu st be levied.

　　Section III. A Research on Pricing Policy of Water Resources in China

　　I. The Current Circumstances ofW ater Resource in China

　　1. Chinese water reserve is relatively low with unbalanced temporal and spacial dispersion. The water reserve per capita in China is only 1 / 4 of the world ave rage level. In South China, the water reserve per capita is 4.4 times as much as that in North China. Precipitation is condensed in summer and autumn.

　　2. The utilization efficiency of water resources is low. The rate of recycling w ater for industrial use is only 20-30%, only half of that in the developed natio ns. Flood irrigation is commonly adopted in Chinese agriculture, whose water con sumption is 1 time higher than that of drip irrigation.

　　3. Water pollution is very severe. In the mid-1980s, 85% of waste water for indu strial and daily-life uses was drained without any treatment. The severely pollu ted areas re mostly big cities or populous areas. In such water-abundant areas a s the South, because of pollution, there exists a great shortage of water which reaches the standard for daily-life use.

　　4. Water resources in priceless or low-priced for a long time, which stimulates the disproportion between supply and demand.

　　II. Pricing Model ofw Ater Resources

　　1. We set down usable surface and subterranean as the object for reseach. Besaus e of distinct local characteristics of water dispersion, regional difference of pricing model and data is quite drastic.

　　2. MPC: mainly allocated costs and operational costs of water supply engineering s. Discount treatment is adopted when we calculate investment for the engineerin gs and the amount of water supply so that their temporal value can be directly r eflected.

　　3. MEC: including environmental, geological ecological losses caused by overuse of water resources, and economic loss which the protection of water source bring s forth to water-supply areas. MEC also includes public costs without any specif ic payers due to the pollution of water source (including surface and subterrane an water). In water-abundant areas, Some big cities have to explore new water so urce so that costs for water supply keep increasing, mainly because original wat er source has been polluted. MEC1 refers to the part which can be internalized. AIC (average incremental cost for water supply) = MEC1+MPC. MEC2 refers to the p art which cannot be internalized. In a certain area, because of the pollution of water source, new water source has to be explored. Then the difference between the present and the future AIC (AIC2-AIC1) reflects the loss caused by pollution , which not only is shared by future water consumers, but als must be shared by present water consumers. MEC2 refers to the part which should be shared by prese nt water consumers. In our research, we have designed a formula which is done in several steps to estimate MEC2.

　　4. MUC: In water-abundant regions, surface runoff is sufficient for eternal and continuous use. Here, MUC=0. In water-shortage areas, if the speed of exploitati on exceeds that of renewal, depletion will occur. Then more costly new water sou rce has to be explored. The difference between the present and the future AIC (A IC2-AIC1) reflects the results of depletion. MUC is the part which present water consumers have to share. In our reseach, we have designed a formula which is do ne in several steps to estimate MUC.

　　III. Case Study

　　1. The costs of water source in Beijing and Shanghai are set down as the object for research. Since both are the most inportant cities in China and resprectivel y belong to water-shortage and water-abundant regions, they are representative i n China. Both of them are confronting severe water crisis, and undergoing the co nstruction of tremendous water-supply engineerings.

　　2. We estimate that the costs of water source in both cities are lower than MOC. Shanghai's cost is close to MOC while Beijing's only half of MOC. It is quite e vident that MOC is low in Shanghai because it is located in water-abundant areas ; whereas, MOC in Beijing much higher because it is located in water-shortage ar eas and MOC is estimated on the background of tremendous investment of the engin eering which transfers water from the Yangtze River to the north. The estimation also shows that the increasing range within this century is steady in Beijing a nd steep in Shanghai. The reason is that the engineering of transformation water can solve the problems of water supply in Beijing for a long time, whereas, eng ineerings will be continuously constructed in Shanghai due to its incessant wate r pollution. Thus MOC in Shanghai is increased in a steep range.

　　3. The elasticity of water demand for daily-life use is also estimated. Acording to our estimation, in Shanghai, the price elasticity of water demand for daily- life use (E1) is -0.40, and the income elasticity of water demand(E2) is 0.20. S o |E1|>|E2|. According to 1991 development report by World Bank, in developing n ations, E1=-0.25,E2=0.3,|E1|<|E2|. We may conclude that the capacity of saving w ater which is induced by increasing price in Shanghai is higher than the average international level.

　　4. The bearing ability of increasing tap water price for Shanghai citizens in al so estimated. According to dynamic estimation, in Shanghai, tap water price is i ncreased due to the change of resource price. As long as the citizens can bear t he change of tap water price.

　　IV. Policy-making Suggestions

　　1. The aim of pricing policy of water resources is as follows: to graduall set d own appropriate water prices, to stimulate rational exploitation and efficient u se, to protect water quality and environment. and to consider social bearing abi lity for increasing prices.

　　2. Both water-shortage and water-abundant regions must levy on MUC and MEC2, whi ch shoud belong to the state and be used for favorable subsidies in the exploita tion of new water source, for the compensation for the fields occuied by new wat er source, and for subsidizing low-income household's water use.

　　3. The water price difference between industrial, agricultural and daily-life us e should be carried on. In water-shortage areas, MUC of water for industrial, da ily-life and agricultural use should be prespectively estimated on the backgroun d of engineerings of transferring water and of engineerings of reserving surface water, so that economic base of the policy of price difference can be guarantee d. In water-abundant regions, MEC2 is estimated on the similar background.

　　4. When we are planning for new water conservancy projects, we should consider t he influence which the price brings forth to water demand so that efficient resu lts of the investment can be achieved.

　　Section IV. A Research on Pricing Policy of Forest Resources in China

　　I. The Current Circumstances of Forest Resource in China

　　1. China has insufficient forest resources, and a coverage rate of 13.4%, which is much lower than the world average level (22%). The per capita forest area is less than 0.13 hectares, only 12% of the world average level. The poor forest re sources give rise to harsh ecoogical, environmental and climatic circumstances i n China.

　　2. China has an unbalanced forest dispersion, 3 / 4 of which is located in remot e mountainous areas in the Southwest, the Northwest and the Northeast where traf fic is inconvenient. The percentage of exploited forest is low.

　　3. With the increasing population and economic development, China has placed gre ater an greater demand for wood. It is destimated that if the current speed of e xploitation is kept, the reserve of mature forest will be exhausted in 6 or 7 ye ars, Since China has implemented the policies of protecting foreast, the quality of forest resources is still decreasing. After young forest grows into maturity in 10 years, such quality decrease can be prevented. We might concluded that at present, Chinese forest resources are in the state of relative depletion.

　　4. The forest price is irrational. In particular, rational using and environment al costs have not been set down, levied and used, so it is disadvantageous for t he protection of environment and resource.

　　II. Pricing Model of Forest Resources

　　1. We set down log as the object for pricing, that is, costs of felling trees an d transportation costs from the place of felling trees to distributing centre in main lines of communication. Owing to drastic species and geographcal differenc es, price difference for different species and areas is also darastic.

　　2. MPC: costs of felling trees and of transportation, and also including rationa l operational costs.

　　3. MUC: Since forest is in the middle of renewable and unrenewable resources, MU C>0. We should calculate the accumulated discount of P1 (the rent of forest land ) and f P2 (costs of artificial forest fostering). The accumulated discount of P 2 should be incorporated into MPC. However, for the same species of natural fore sts, it is reasonable to incorporate P2 into MUC. No matter what kind of cost P2 is incorporated into, the amount of MOC remains stable.

　　4. MEC: We set down the loss of ecological functions caused by deforestation as the basis of our calculation. Ecological functions include 8 items(e.g. water an d soil conservation). The loss can be measured by such methods as substitution a nd research, etc.. Ecological value is a dynamic concet which varies with the ch anges of economic development, personal income and value standard. In our resear ch, a stage coefficient of the development of ecological value is adopted to adj ust ecological loss and to work out MEC at this stage.

　　III. Case Study

　　1. We est down Songhua Lake Natural Protection Region as the object for our rese arch, which is located in Changbei Mountain, Northeast China. This region has un dergone exploitation for half a century. Primitive forest has been eradicated. I t is typical of secondary natural forest which is mainly composed of oaks.

　　2. The Result of Estimation: In 1992, MOC of standing forest resources in Songhu a Lake Region is 352.5 / m3, 39% of which is MPC, 37% of which is MUC and 24% of which is MEC. If we incorporate P2 in MUC into MPC, then the percentages are as follows, MPC 44%, MUC 32% and MEC 24%. Such price is higher than the fluctuatin g tendency of log price since the end of 1980s. Therefore, it is more or less ra tional. However, since 1990, wood price in China has drastically increased, even exceeding the world price ($ 100 / m3). Under such conditions we have to analyz e the reasons and to rectify wood price.

　　IV. Policy-making Suggestions

　　1. For a long time, low forest price has induced depletion of forest resources a nd ecological destruction. In recent years, wood price is drastically increasing . If forest resources price remains as it used to be, businessmen will reap stag gering profits and whereas forest resources will be over-exploited. Therefore, l og price should have more acute reaction toward the change of market so that abn ormal over-exploitation can be prevented.

　　2. If Chinese wood price is higher than the world market price, exportation shou ld be implemented so as to protect rare forest resources in China. We should mak e a comprehensive consideration because exportation is relevant to our payment c apacity of foreign currencies.

　　3. We should make an emphasis on pluralistic administering index of forest resou rces. We should notice not only the change of the coverage percentage, but also the quality of forest components so as to make an over-all protection of forest resources.

　　This is a brief report of out group. We should show our gratitude of EPC of Stat e Council, NEPA, departments concerned of central government and of provincial a nd municipal government for their great supports to our research.

　　All the data used in our research are second-handed. Some of them may not be pre cise, others are those of previous years. Therefore, errors in our numerical con clusion are inevitable. However, we still think our research methodology and pol icy-making suggestions are reliable and thus functional.

　　Section V. Future Work

　　In the latter half of 1994 and in 1995, our working group plans to finish the fo llowing tasks.

　　1. For coal and water resources,

　　① We should improve the achievements we have made in our research, rectify the results of our calculation and reduce errors in our calculation;

　　② we should put emphasis on the discussion of pricing policy of resources, espe cially of the interaction between the pricing policy of resources and Chinese ec onomic reform.

　　2. For forest resource,

　　① we should make further case study;

　　② finish the calcuation of forest price and policy-suggestions.

　　3. We should finish designing the theoretical framework in which a certain kind of resource is incorporated into SNA, and calculate the results of incorporating coal resource into SNA.

　　4. For environmental influences of urban traffic,

　　① we should set down evaluation index and methods;

　　② make case study in some cities; and

　　③ calculate MOC of urban traffic in those cities.

　　5. We should finish editing the publications concerning the achievements of theo retical methodology and pricing policy of coal, water and forest resources.