helped edit, design, and produce this product.
This product has also benefited from the strong support of and close collaboration with the National Development and Reform Commission (NDRC), through whose successful organization and hosting of the conference made this report worthwhile. ADB is particularly grateful to Du Ying, the Vice Chairman of NDRC, for his leading role in cross-ministerial efforts on payment for ecosystem services in the PRC. ADB would also like to thank Qin Yucai, the Director of the Department of Western Regions Development of NDRC, and his colleagues Zhang Yadan, Tong Zhangshun, and Xiao Weiming for their excellent coordination and technical capacity in dealing with this cross-agency work.
Abbreviations
| ADB | – | Asian Development Bank |
| CCFG | – | Conversion of Cropland to Forest and Grassland |
| CRP | – | Conservation Reserve Program |
| ES | – | ecosystem service |
| EU | – | European Union |
| MEP | – | Ministry of Environmental Protection |
| NDRC | – | National Development and Reform Commission |
| NEPA | – | National Environmental Protection Agency |
| PES | – | payment for ecosystem services |
| PRC | – | People’s Republic of China |
Weights and Measures
| ha | – | hectare |
| mu | – | a traditional Chinese unit of land measurement (1 mu = 1/15 ha) |
Currency Equivalents (1 September 2010)
| Currency Unit | – | yuan (CNY) |
| CNY1.00 | = | $0.14665 |
| $1.00 | = | CNY6.79878 |
Note: $ refers to United States dollars, unless otherwise specified.
Introduction: Ambition and Momentum for Eco-Compensation Policy
The People’s Republic of China (PRC) is at an exciting phase in the development of its national environmental policy framework. The fast-paced economic growth of the past 3 decades has lifted hundreds of millions of rural dwellers out of poverty, but it also greatly multiplied the environmental challenges for policy makers at all levels of government, has increased the pressure on fragile ecosystems, created a range of new pollution and environmental safety issues, and further strained the country’s already limited per capita natural resource base. The imbalanced economic growth between regions was partly due to the regional differences in environmental resources. Regions with relatively fast economic growth have exerted greater demand on natural resources for food, water supply, and energy consumption, much of which are provided by poorer regions. Policy makers are debating the extent to which the economically advanced regions should pay poor regions for the provision of these environmental services. “Eco-compensation,” as it is known in the PRC, is important to sustainable use of natural resources and more balanced growth across regions.
Having experienced growth as it has, the PRC must now use its financial capacity to reverse environmental damage through closer monitoring, enforcing its environmental laws, and funding new initiatives and policies (Figure 1). The more prosperous regions now have the financial capacity to compensate poorer regions for the ecosystem services they provided during the rapid growth periods and will continue to provide for future growth.
Figure 1Government Revenue versus Selected Pollution Indicators, People’s Republic of China, 1998–2007
CNY = yuan, CO2 = carbon dioxide, COD = chemical oxygen demand, GDP = gross domestic product.
aWastewater discharges are calculated as discharges from consumption plus untreated industrial wastewater discharges.
Source: National Bureau of Statistics of China, various years. CO2 emissions data are from the International Energy Agency (2009).
In response to both the need and potential for addressing environmental damage, policy makers have been experimenting with new approaches to environmental management, resulting in a wide array of policy and program innovations under the broad heading of eco-compensation. Many of these incorporate or provide a policy framework for market-based approaches to payment for ecosystem services (PES).
PES attracts respectable government financing levels
Today, the PRC can be credited with driving some of the largest public PES schemes in the world. The government has
•spent more than CNY130 billion ($19 billion) since 1999 on the Conversion of Cropland to Forest and Grassland Program (also known as “Grain for Green”), which has paid farmers to retire and afforest or plant grass on more than 9 million hectares (ha) of sloping or marginal cropland;
Today, the PRC can be credited with driving some of the largest public PES schemes in the world
•spent more than CNY13.34 billion ($2 billion) since 2001 on the Forest Ecosystem Compensation Fund, a program that pays households, communities, and local governments to protect about 44.53 million ha of key forest areas across 30 provinces in the country; 2 and
•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
PES policy gains momentum
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):
•Those who develop and exploit resources should also protect the environment, those who destroy the environment should repair it, those who benefit from it should subsidize it, and those who pollute should pay.
•Responsibility, right, and power are synonymous.
•Agreement on public construction of the environment and public benefit can help achieve “win–win” development.
•Government guidance and market regulation should encourage diversification of funding sources and harnessing of market forces.
•Adapt central policy to local conditions and energetically innovate.
The ambition and momentum of these initiatives is evident in the 11th Five-Year Plan (2006–2010),