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> topics > Economics

Ecological compensation improving in Yangtze River basin

LUO LAIJUN et al. | 2021-06-24 | Hits:
(Chinese Social Sciences Today)

An aerial view of  Jiangjin District in the southwest of Chongqing, which lies along the upper reaches of the Yangtze River Basin. Photo: CFP

Ecological compensation is an essential part of China’s ecological construction and environmental protection endeavors. It determines how well the country can build a “beautiful China” and achieve sustainable high-quality development both socially and economically. 
Improved mechanism
The Yangtze River Basin (YRB) covers approximately 1.8 million square kilometers, nearly 1/5 of China’s territory. The YRB enjoys abundant forest and water resources, as well as great biodiversity, making the basin fertile ground for China’s efforts in both ecological civilization construction and eco-compensation. 40% of China’s usable supply of fresh water can be found in the YRB, where the fresh water fisheries account for 60% of the national total. Meanwhile, the YRB’s national and provincial level natural reserves, wetland areas, and forestry areas take up 39.67%, 21.53%, and 40.76% of the national total, respectively. 
In the YRB, ecological compensation has been carried out in the following three ways. First, policies have been formulated and implemented from the top-down. The Central Party and national ministries and commissions have released national policies to guide YRB’s ecological compensation endeavors, including Incentivizing Policies for the Protection and Restoration of Ecosystems along the Yangtze Economic Belt
Second, the YRB has explored ways to conduct cross-provincial eco-compensation, with great results and indispensable experience. China’s first cross-provincial effort in this regard was the horizontal eco-compensation scheme by Anhui and Zhejiang provinces in the upstream and downstream Xin’An River Basin. Another noteworthy case is the long-term eco-compensation mechanism which is under joint development by Hunan, Hubei, Jiangxi, and Anhui provinces. Sichuan, Yunnan, and Guizhou provinces have also joined forces to develop a horizontal eco-compensation mechanism for the Chishui River Basin.
Third, horizontal eco-compensation has also been conducted within provinces, which is easier to coordinate. Typical locations for eco-compensation in the YRB, including Chongqing City, Sichuan, Hubei, Jiangxi, and Guizhou provinces, have already enacted horizontal eco-compensation mechanisms themselves, which significantly supported local ecological construction. 
Currently, a preliminary form of eco-compensation has taken shape in the YRB led by the government and carried out by both national and local institutions. In 2019, the Yangtze River Economic Belt (YREB) received 29.558 billion yuan of transfer payment funding from the central government, 41% of the yearly total transfer payment that the country has given to key ecological function zones, and a 10 billion increase from 2015. 
Each province and city within the YRB has basically established a compensation system to protect key ecological resources with the support of both regular and special financial investments. Pilot horizontal eco-compensation schemes have also been conducted among different districts, further deepening cross-regional cooperation. 
Setting standards
Although the eco-compensation drive has yielded great results, some problems still await solutions. 
First, the current determining standard for eco-compensation is not scientific enough. It lacks a scientific basis, verification mechanism, and clear design. This has led to unreasonable and insufficient capital allocation from government finance sources. 
The central government’s transfer payment for each key ecological function zone is based on gaps between financial revenue and expenditure, along with subsidy coefficients. The evaluation has little to do with the the area of ecological function zones, ecological protection tasks, and development opportunity costs for prioritizing ecological protection. Meanwhile, different government tiers (below provincial levels) are subject to their own financial strength when setting  compensation standards. Horizontal eco-compensation practices at the local level do not go by a consistent standard, but instead, mostly rely on negotiations.
Second, the eco-compensation mechanism needs a healthier, more effective management and market mechanism. The current legal institution, system, and mechanism are incomplete. Barriers persist between different management systems, while clear-cut mechanisms for coordination, responsibilities, and incentives between ecological construction and compensation are still lacking. 
What’s more, the dedicated national fund for YRB’s ecological compensation is split between various fields, including forestry, environmental protection, hydraulic engineering, housing construction, economy and informatization, and land. With so many fields to cover, the funding is inevitably not sufficient for local ecological protection endeavors. Meanwhile, due to the requirement that “a fund should be used for its specified purpose only,” different sectors’ special funds for eco-compensation cannot be combined for more efficient use. 
The third issue is inadequate public participation. Ecological protection has everything to do with people’s well-being. Therefore, it is in the public’s interest to fully engage in eco-compensation efforts. Opening a channel for the public to voice their concerns and appeal for ecological protection not only makes common endeavors more effective, but also makes it possible for the government to identify potential issues. 
Unfortunately, there are few existing platforms to engage the public in protecting the ecology and the environment. More should be done to ensure that the people’s demands receive the attention they deserve. It is also necessary for local people, communities, and enterprises to consider eco-compensation and ecological construction their responsibilities, and play a more active part in this important cause. 
Improving policies
To better the mechanism, it is necessary to first and foremost increase the eco-compensation financial fund’s allocation efficiency. This means when making plans for the YRB eco-compensation financial fund, more elements need to be taken into full account to ensure scientific allocation, including the ecological protection costs, development opportunity costs, and ecological service value for each region. 
Specifically, we should link funding with costs, and start offering preferential support to places with greater achievements in ecological protection and pollution abatement. Next, we should increase financial support for key ecological function zones. We can also explore and promote more compensatory approaches in the YRB. It is important to leverage the synergy between policies, and achieve comprehensive governance. Provincial governments should plan for one comprehensive fund, and allocate the fund in a more integrated way. It is also essential to use the ecological environment as a key factor to assess compensation fund allocation. 
Second, there should be incentive and restraint mechanisms. We should abide by the principle of “prioritizing the ecology, carrying out rewards and punishments rigorously.” This will keep all stake-holders motivated, thus boosting the achievement of eco-compensation. 
To make sure the reward and punishment system works, we need to establish an objective evaluation system. This can be accomplished by setting up key performance indicators that measure different places’ performance in eco-compensation. Evaluation results should also be made a determining factor for the acquisition of funding. Although the fund should be allocated in advance, spending requirements should be made clear so that awards and punishments can be made, promoting positive interaction between ecological protectors and beneficiaries. 
Third, a market mechanism for eco-compensation should be set up and improved. In 2018, the Action Plan for Building a Marketized and Diversified Ecological Protection Compensation Mechanism was released by nine sectors including the National Development and Reform Commission and the Ministry of Finance, stressing the need to establish a market-based and diversified eco-comprehension mechanism. 
Yet so far, little improvement can be observed towards this goal, and more should be done in the following aspects: improving the property rights system for natural resources; establishing ecological preservation areas, cross-basin and cross-regional emission right trading system; setting up and improving the financing market; learning from international experience and exploring and developing our own specialized ecological banks such as land banks and forest banks. 
Fourth, we should create channels and platforms to engage the public. Eco-compensation is an important cause that concerns sustainable and high-quality social and economic development. It requires active participation from society as a whole. 
For that to happen, we need to increase public awareness of eco-compensation and its policies, value, and activities. We also need to increase information transparency by requiring all levels of environmental protection sectors to keep environmental information open to the public, while accepting social supervision. What’s more, we need to create more channels and platforms for people to voice their comments, suggestions, and complaints regarding eco-compensation. The reporting system needs to be improved so that the public can truly monitor eco-compensation systems.
Luo Laijun is the dean of the Yangtze River Economic Belt Research Institute at Renmin University of China. 
Edited by WENG RONG