City-Level Decoupling-Case Studies

In the early 1990s, academics from Beijing recognised OST as an interesting field of study. Pilot projects and other experiments with OST technologies were conducted at universities and research institutes, predominantly aimed at exploration of the new field rather than developing marketable products. One research group from Qinghua University later partnered with a transnational water company to become one of the world’s leading centres of expertise on membrane bioreactor technologies – a core process for many OST systems. To begin with, entrepreneurial experimentation in OST systems was largely inspired by imported technologies from Japan and Europe. Foreign companies struggled to acquire a dominant market share and many eventually left Beijing, deterred by corruption and a lack of clarity on the regulations. Toward the end of the 1990s, small Chinese companies started offering copies of imported products which were much cheaper but did not function as well. Based on the positive results achieved in the hotel sector, Beijing’s government decided to extend the OST regulations to new residential developments in 2003. Developers of new residential developments with a total floor surface in excess of 50,000 m 2 would need to install on-site water recycling facilities. At the time, Beijing was undergoing a construction boom, and this addition to the regulations opened a market niche which presented enormous opportunity to local businesses. Demand for OST systems grew substantially, and many new local companies were founded to serve this market. In the first few years, these companies underwent a steep learning curve, finding out about and adapting to technical and organisational challenges. The growth of local knowledge was aided by interactions between business and academia, as new companies sought scientific knowledge from research institutions, which in turn learned from the practical experiences of local start-ups. With its international linkages, the academic community also helped to keep Beijing’s OST industry up to date with the latest international developments in the field. Local actors started to move into the hotel market, gaining market share as international companies continued pulling out of Beijing. Despite increasing enthusiasm about OST and the rapid development of new knowledge and technologies, it became evident within five years of the new regulations that their application in the residential sector had failed due to numerous institutional shortcomings. Inadequate regulation and a lack of law enforcement meant that the ongoing operation and maintenance of OST plants was inadequate, and many of the new systems failed within a few years. Beijing’s water pricing structures also made it impossible to run residential OST plants profitably, further disincentivising the re-use of waste water. These institutional issues delegitimized the use of OST in the residential sector to such an extent that only an estimated 10-15% of the residential systems installed are still in operation. This demonstrates the importance of adapting institutions and regulations to support new technologies, and of pricing scarce resources appropriately to encourage their conservation. In the last 5 years, Beijing’s real estate market has slowed down and the OST expertise developed in the city has begun to be applied elsewhere. Despite poor penetration of water recycling technologies into the residential market, Beijing’s OST community has recognised opportunity in national policies pushing for the build-up of infrastructure in peri-urban and rural areas. Since 2007, advocacy

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