An Eco-Compensation Policy Framework for the People's Republic of China

An Eco-Compensation Policy Framework for the People's Republic of China
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Economic growth has multiplied the environmental challenges faced by the People's Republic of China but has also created opportunities, by increasing available funding for environmental management and conservation. At the nexus of these countervailing trends, policy makers have been experimenting with new approaches to environmental management under the broad heading of «eco-compensation». Many of these are market-based, particularly payments for ecosystem services; an emerging policy debate is regarding the extent to which beneficiaries should pay, and the providers should be compensated, for the provision of natural resources and environmental services to promote sustainable, balanced growth. This paper synthesizes the findings of the International Conference on Payments for Ecological Services convened in Ningxia Hui Autonomous Region in September 2009 to support eco-compensation programs in the country.

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Qingfeng Zhang. An Eco-Compensation Policy Framework for the People's Republic of China

Contents

Foreword

Acknowledgments

Abbreviations

Introduction: Ambition and Momentum for Eco-Compensation Policy

PES attracts respectable government financing levels

PES policy gains momentum

Local government innovation influences central policies

The Policy Debate: What is Meant by “Eco-Compensation”?

Defining Payment for Ecosystem Services

Defining Eco-Compensation

Usage in this Report

Current Status of Eco-Compensation in the People’s Republic of China

The Reality Check: Challenges in Designing Payments for Ecosystem Services

Uncertainty and Risks

Market Failures

Institutional Coordination

International Experience and the Role of Government in Ecosystem Service Markets

Role 1—Buyer

Role 2—Regulator

Role 3—Enabler

International Experience in Choosing More Cost-Effective Payment Mechanism

Direct Payment—General Subsidy

Direct Payment—Negotiation

Direct Payment—Scored Subsidy

Direct Payment—Reverse Auction

Mitigation and Offset Payments

Certification

Towards a More Effective Eco-Compensation Policy Framework

Legal and Regulatory Grounds for Eco-compensation

Keys to Making Eco-Compensation More Effective

Leveraging Existing Sector Policies and Measures

Conclusion

References

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An Eco-Compensation Policy Framework for the People’s Republic of China

Challenges and Opportunities

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•conducted a total estimated transaction value of $7.8 billion on a variety of payment schemes for watershed services, which has escalated from eight in 1999 to more than 47 in 2008 and covering about 290 million ha.3

In 2005, the fifth Plenary Session of the 16th Central Committee of the Chinese Communist Party issued, for the first time, the principles for developing eco-compensation mechanisms. As a result, the State Council released Document No. 39, State Council Decision Regarding Using the Scientific Development View to Strengthen Environmental Protection, which states that the government “…should improve eco-compensation policy, and develop eco-compensation mechanisms as quickly as possible” (State Council 2005).4 The PRC’s Ministry of Environmental Protection (MEP) has also issued its own Guiding Opinions on the Development of Eco-compensation Pilot Work, which targets four pilot areas: western PRC; key ecological function reserves (e.g., nature reserves and restricted construction zones); natural resource use (e.g., forests, grasslands, wetlands, and mineral resources); and watershed services. MEP also set out five fundamental principles for developing eco-compensation policies and mechanisms (MEP 2007a):

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