**1. Introduction**

Water resource in Taiwan is mainly delivered through diversion from river, regulation of reservoir and groundwater extraction. Diversion from river is dependent on hydrological conditions on yearly bases. Reservoir regulation is unpredictable and subject to actual conditions of the watershed, and moreover, building a reservoir involves huge funding and takes a long time in addition to frequent confrontation of questioning and protests of environmental groups. As for groundwater extraction, land subsidence resulting from excessive groundwater extraction leads to national land conservation issues. Considering natural restrictions and environmental policies, wastewater reclamation has become an important topic when the government seeks for new water sources. Aiming to resolve the supply of water resource, the government is progressively promoting the wastewater reclamation industry and exploiting the corresponding market. With provision of statutes that favor the development of wastewater reclamation industry as well as financial setup that supports relevant technologies, the government expects to counsel the private sector to participate in establishing a wastewater reclamation industry that conforms to the trend of green ecology.

Taiwan has had a wastewater reclamation industry of the produce/use model instead of the produce/supply model. The produce/use mode is the situation that the supplier and user of the reclaimed water are the same. The reduce/supply mode is the situation that the supplier and user of the reclaimed water are different. The main reason is that the government has encouraged the industry to achieve "process recycle ratio" and "total plant recycle ratio" for more than 10 years, and there have been operators in Taiwan engaged in wastewater reclamation plants of "produce/use" model. However, wastewater reclamation plants of the "produce/supply" model still remain in the Model Plant stage and require successive fostering. Even in advanced countries such as EU, USA or Japan, there had been a number of barriers hindering the promotion of wastewater (sewage) reclamation; one of them is the dominant insufficiency of user confidence over quality and safety of the reclaimed water. In

The Willingness to Pay of Industrial Water Users for Reclaimed Water in Taiwan 263

approach began in 1970's when the Forest Act of UK and the presidential directive #12291 were promulgated; a number of researches were seen conducted with the CVM approach over economic benefits of natural resources. During the Exxon tanker oil spoil incident in 1989, the federal court of USA ordered compensation to be paid by Exxon appraised with the CVM approach, enhancing the authenticity of the same. By 1993, since the US government extensively used CVM to make public policies that concern natural resources, the National Oceanic and Atmospheric Administration (NOAA) therefore promulgated guidelines on the use of the CVM approach, regulating the use of Contingent Valuation Surveys. Research papers show that CVM is applicable to offering a rational valuation over public goods or environmental goods (Smith, 1993). Hutchinson, et al.(1995) also pointed out that as long as the questionnaire is duly designed, CVM is a highly credible means for

The CVM appraisal can be conducted with a Random Utility Model (Hanemann, 1984) or an Expenditure Function (Cameron, 1988). However, Cameron(1988) uses Censored dichotomous choice model to directly estimate the parameter of the Expenditure Function, it directly and easily obtaining the WTP of the public over environmental goods. The microeconomic theory also demonstrates that the indirect utility function has a dyadic relationship with the Expenditure Function; therefore it can also represent the utility preference of the consumer. In order to prevent excessive biases and to make adequate use of all the data acquired from the questionnaire survey, the study employs a close-ended dichotomous choice method design for the questionnaire, and uses the Expenditure Function model (proposed by Cameron (1988) and Cameron & James (1987)) for calculating

This study use the questionnaire survey in determining the price level that the factories are willing to pay for the reclaimed water, and to provide incentives for the factories becoming willing to use the reclaimed water, a hypothetic market must be conceptually established for the factories, to create a bidding function based on individual social and economical characters and the level of bidding prices. The main method is to estimate the acceptable price by way of Cameron's expenditure function model based on the WTP of the questionnaire and the percentage of factories that are willing to pay or willing to accept. Follow the defined of resource value by Freeman (1993). We set up the empirical model of

S is the price vector of market goods and individual social and economic characteristics

Y(Q0,Q1,U0, S) ≥ T (2)

Y(Q0,Q1,U0, S) is the bidding function of the factories for the reclaimed water;

E(Q0,U0,S) and E(Q1,U0,S) are the Expenditure Function.

If the price suggested by the CVM questionnaire is T,

Q0 is the situation that the factory do not get reclaimed water; Q1 is the situation that the factory got reclaimed water;

Y(Q0,Q1,U0,S) = E(Q1,U0,S) - E(Q0,U0,S) (1)

price evaluation.

the WTP function of the reclaimed water.

reclaimed water as follows:

U0 is the utility function of the factory;

In the formula,

vectors.

Taiwan, except adopting the produce/use model - in which factories who promote water saving within the industrial park reclaim their own wastewater for reuse, the environmental assessment requires that wastewater or sewerage within a building to be reclaimed by the building, or a wastewater/sewage treatment plant reclaims a portion of its own effluent for in-plant miscellaneous use - no other industrial development or application reference has been seen. Furthermore, affected by the lacking of experience and the rather low water price, the willingness to use reclaimed wastewater has been fairly low.

The Hydraulic Planning and Experimental Institute made a preliminarily research in 2009 and found that potential candidates for the use of reclaimed water include: 1. Water for secondary livelihood use: using effluent of urban wastewater/sewage treatment plant for watering nearby golf courses, to enhance flexibility of the local supply of water resources. 2. Water for agricultural use: treating effluent from the urban wastewater/sewage treatment plant to meet the standard of "water quality for irrigation" and using the reclaimed water for agricultural irrigation in areas having a water shortage. 3. Water for conservation: using water reclaimed from urban wastewater/sewage treatment plants for groundwater recharge, for artificial recharge of disaster prevention purposes, for agricultural use in substitution for the groundwater which would have originally been extracted, so as to alleviate groundwater extraction. And 4. Water for industrial use. Organizations that may increase water consumption in the future include: Hsinchu Science Park Yilan Base, Taoyuan Aviation City, Taipower Letzer Industrial Park Power Plant, Taipei Harbor Power Plant, Expansion Project of Dragon Steel Corporation, Middle Taiwan Science Park Taichung Base and Houli Base, Taichung Harbor Proprietary Areas (including power plant, petrochemical and industrial areas), Hsinchu Science Park Phase IV Tongluo Base, Yunlin Offshore Fundamental Industrial Park, Taiwan Petroleum Corporation Third Naphtha Cracker Renovation Project, Tainan County Great Hsinyin Industrial Park Development Project, Southern Taiwan Science Park Phase II, Development Project of Southern Taiwan Science Park LCD TV District (Tree Valley Park), Tinnan Industrial Park, and China Steel Corporation. The study carries out questionnaire interview with industrial water users to comprehend their willingness towards paying for the reclaimed water as well as their methods to use the same.
