| 1. Introduction
In the face of China’s severe environmental problems, new and innovative policy mechanisms need to be found to counter the continuing trend of environmental degradation. At the present time, economic policies which integrate environmental concerns are still largely missing. Beneficiaries are gaining from the use of ecological resources without bearing responsibilities and costs of a deteriorating ecological environment. At the same time, environmental protectors are not getting necessary economic incentives. Implementation of adequate eco-compensation mechanisms is a necessary measure to readjust the ecological and economic costs and benefits of the stakeholders. The Chinese government has realized the importance of eco-compensation mechanisms for achieving sustainable consumption and production and for achieving a sustainable development. The CCICED Task Force for Eco-compensation Mechanism and Policies has the aim to support the government in its endeavor of developing and implementing an adequate eco-compensation mechanism in China.
The Task Force report first gives an introduction to the definition and underlying principles of eco-compensation. Subsequently, it gives insight in the current state of research and initiatives at the national and international level. It puts forward a general framework of eco-compensation and looks at the key characteristics of the approach. In addition, the report includes pilot studies in selected key fields (Watershed, Mineral, Forest, Nature Reserve). The report concludes with a set of policy recommendations for the implementation of eco-compensation mechanism in China.
2. Definition, theoretical foundation and basic principles of eco-compensation
The Task Force defines eco-compensation as “a type of institutional arrangement to protect and sustainable use ecosystem services, and to adjust the distribution of costs and benefits between different actors and stakeholders, mainly through economic measures.” Eco-compensation works on the basis of ecosystem service values, cost for ecological conservation, opportunity cost and via means of the government and market mechanism. It includes economical incentives for the protection of the eco-system and natural resources and compensation for environmental loss due to damage of the eco-system and natural resources. One of the theoretical foundations of eco-compensation is externality theory. Its basic postulation is that positive or negative environmental externalities result if during the production or consumption process environmental benefits or costs are created which are not fully captured by their producer/consumer. This has adverse environmental outcomes. The externalities can be internalized when an actor is taxed or subsidized by exactly the amount of the positive/negative externality he is producing by a given activity, leading to the socially and environmentally optimal choice of action.
Basic principles of eco-compensation are:
Damager Pays Principle (DPP): the damager should take the responsibility for his action’s negative impact on the ecosystem.
User Pays Principle (UPP): the user of environmental resources should compensate the government for using scarce resources. Measures include taxation of arable land occupation, cutting trees and non-wood resources, mineral resource exploration.
Beneficiary Pays Principle (BPP): the beneficiary should compensate the provider of ecological services. Measures include, for example, downstream communities paying compensation for ecological services by upstream communities.
Compensation to the Protectors: those groups and individuals who contribute to the ecological construction should be compensated according to their investment and opportunity cost.
3. Current state of research and initiatives at the national and international level
In international practice, eco-compensation measures include:
Direct public payments by the government to rural land owners and other providers of ecosystem services;
Cap-and-Trade Schemes, in which the government sets a limit on the amount of ecosystem degradation or pollution permitted in a given area to which companies/individuals can either comply directly or by financing others to undertake conservation activities that fully offset the damage. The “Credits” reflecting such offsets can be traded and thus acquire a market price. One example is the European Union Emissions Trading Scheme (EU-ETS) the Kyoto Clean Development Mechanism;
Direct private payments voluntarily by NGOs or companies for ecosystem services;
Eco-Certification Programs which give consumers the opportunity to choose to pay a price premium for products which are certified to be produced in an ecologically friendly way.
In China, government compensation is the most important and most easily to implement type of eco-compensation. Government compensation considers the Central Government/upper level governments as the provider and regional/local governments and stakeholders as the compensation receivers. It includes financial transfer payment, policy support with regional differences, ecological protection projects and environmental taxes. Key fields for eco-compensation in China are forest and nature reserve protection, watershed, mineral resource development, and regional eco-compensation. In these fields, several programs have already been set up by the government. The Task Force, on the basis of its pilot studies, comes to the conclusion that although much work has already been done, many challenges still need to be overcome. Examples are the gap between theory and practice of eco-compensation schemes, a lack of information of the stakeholders, lack of financial resources, significant institutional constraints and the lack of an adequate legal framework. With regard to the value of ecosystem services, there is a lack of standard for indicator selection and valuation of services as well as a huge gap between compensation capacity and ecosystem service values. Therefore, evaluation results can only be considered as theoretical ceiling values for compensation.
4. Policy Recommendations for Implementation of Eco-compensation Mechanism
1) Establishing and perfecting the legislation process of eco-compensation step by step
Five principles should be followed while making the law: (1) Sustainable development, (2) Adjustment of measures to local conditions, and provision of compensation by types, (3) Adjustment of measures to temporal dimension, and promotion of eco-compensation by phases, (4) Unification of the plan and its implementation by sectors, (5) Pilot studies for a step-by-step demonstration.
2) Dealing with several important relations in eco-compensation
Relations between the Central Government and local governments: the Central Government needs to provide policy guidance, legislative basis and financial support to local governments which will be the main actors in formulating and implementing eco-compensation mechanisms.
Relations between government and market: in China, the government will play the key role in establishing eco-compensation mechanism. A market approach can only be used in some cases where providers and receivers of the compensation have been clearly identified.
Relations between eco-compensation and poverty alleviation: Eco-compensation differentiates from poverty alleviation and it cannot be mixed up with it. However, eco-compensation can lead to poverty alleviation when beneficial areas provide socio-economic support to protection areas.
Relations between “blood generating” and “blood transmitting”: “Blood generating” kind of compensation should be encouraged through initiating of eco-conservation and capacity rising programs, while “blood transmitting” kind of compensation could be applied for the ordinary people.
Relations between new funds and the previous funds: Priority should be given to solve the problems existing in the new funds.
Relations between integrated and sectoral platforms: An integrated eco-compensation platform dominated by the government should be established for effective operation. In addition, various platforms should be set up at the local level for exploring various types of eco-compensation.
3) Enhancing efforts for financial transferring, and increasing funding via various sources
To establish an eco-conservation oriented financial transferring system
To encourage the local governments to support eco-compensation.
To complete a financial policy system of eco-compensation and develop multiple financing channels.
4) Improving the management mechanism of eco-compensation
At first, it is urgent to strengthen eco-compensation work and to integrate projects related to eco-compensation within departments and administrative borders. In the long run, it is necessary to establish an eco-compensation management committee/group under the leadership of the State Council which should comprise the relevant ministries.
5) Raising stakeholders’ awareness of eco-compensation and encouraging their active participation through broad propaganda and education programs
The success of eco-compensation depends directly on the knowledge, perceptions and willingness of community residents. Public participation needs to be encouraged and, in poor areas, relevant international projects should be used as a platform for capacity building of governmental agencies and local communities.
6) Enhancing scientific research and pilot study eco-compensation
Eco-compensation issues should be integrated into the national key scientific research plan. |
