Abstract:Water is the survival and irreplaceable natural resources and strategic economic resources.. Beijing is a serious resource-based water shortage city. The rapid economic development, sustained population growth caused the continuous deterioration in Beijing. In 2010, only 41.40% of river water system meet the Class Ⅲ water quality standards in Beijing. Water pollution is an important obstacle to the development of Beijing. Some industries with high energy consumption, high water consumption, high pollution, exacerbated the contradiction between population and the environment. Therefore, it is critical to explore the impact of a water pollution purification service on the urban socio-economic system to develop policies to scientifically adjust the socio-economic structure. This study introduced the water pollution purification service into the traditional Computable General Equilibrium (CGE) model, and built a Water Pollution Purification Ecosystem Service-Computable General Equilibrium (ES-CGE). Using this ES-CGE framework, we simulated the socio-economic changes in Beijing under different water pollution purification supply and demand scenarios. The results show that:when the supply and demand of water pollution purification services change, the output of the various sectors in the economic system will be adjusted accordingly, which reflects the inherent linkages between the ecosystem and the economic system, as well as components within the economic system. We found that limiting the discharge of sewage is preferable to improve the level of sewage management and enhance the household's welfare. Our results suggest that the highly polluted and water-intensive sectors should be prioritized in the transfer of non-core functions to Hebei Province, including oil, natural gas extraction, electricity, heat and fuel production, textile, apparel shoes, leather, feathers, paper printing, cultural and educational sporting goods manufacturing. Beijing can raise production tax, which is currently capped at 20%, for natural gas extraction, electricity, thermal fuel production, and supply industry sectors, and then push sectors, such as paper, textile, and other industries, gradually outwards. Compared with rural residents, urban residents are more sensitive to changes in the water pollution purification service; for example, the application of 5% ecological tax subsidies for water pollution purification service, will increase the welfare of urban residents by 2054.907×104 Yuan, and that of rural residents by 1820.143×104 Yuan. Lastly, we caution that policymakers should incorporate the interests of rural residents, in order to prevent the gap between urban and rural welfare widening. The ES-CGE model not only inherits the general equilibrium theory of the CGE model, but also considers the interrelationship between the environment and economic systems, and is suitable for the research of environmental policy analysis and comprehensive evaluation of environmental economic impacts. However, compared to other forms of capital, the human understanding of the value of ecosystem services is extremely limited. In the future, we should strengthen the use of measured data and calibrate alternative parameters in the procedure of parameters determination. Moreover, we should use a variety of integrated ways to quantify various types of ecosystem services.