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

part of implementing the 11th Five-Year Plan, the 2007 State Council workplan called for “…deepening product pricing and emissions fee reforms for key natural resources, perfecting a resource taxation system, and improving a paid mineral resource use system; quickening the development of eco-compensation mechanisms.” The PRC’s revised water pollution control law now states that “the PRC will, via such means as financial transfers and payments, develop sound environmental protection compensation mechanisms for regions located in drinking water source protection areas, and river, lake, and reservoir upper watershed conservation and ecological protection areas.”⁵

      In 2009, both President Hu Jintao and Premier Wen Jiabao also made clear statements reiterating that the PRC will develop a “sound system of paid use of (mineral and natural) resources” and “eco-compensation mechanisms” (Jin and Zuo 2010; Wang et al. 2010).⁶ Against this backdrop, the central government is developing a national eco-compensation policy framework, and possibly a law, in preparation for the drafting of its 12th Five-Year Plan (2011–2015).

       Local government innovation influences central policies

      The contribution of local governments to building momentum and innovation in this PES frontier deserves recognition and study. They are adapting centrally designed eco-compensation programs to meet their own needs, drawing upon multiple central and provincial policies and funding sources. The result is a diverse catalogue of initiatives and public programs that incorporate both direct payments for ecological services renders and incentive-based elements at all government levels. These hybrid programs often feed back into central government policy development, stirring a healthy debate on how to improve these programs while exploring more market tools and regulatory innovations (Bennett 2009). For example, current experiment and experiences with emission trading in Jiangsu and Zhejiang provinces, particularly in the Tai Lake Basin, suggest that such a system may soon be replicated in various locations across the country, and will provide valuable insights into the types of institutional and legal reforms that the country will need to develop this system.