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[Opinion] Cradles of sustainability



Eco-compensation schemes need to be developed further to support China's river basin strategies

The Yangtze River and the economic belt it defines play an important role in the historical, cultural and political identity of China, and are also a key driver of the country's economy. It is also one of the world's most bio-diverse regions, with ecosystems and natural resources that underpin national water, food and energy security. Yet over the past four decades, the Yangtze River Basin has undergone large-scale and high-intensity development that has had a severe impact on its ecological and hydrological conditions.

Water pollution, changes in flow, reductions in the wetland area and eutrophication of lakes have significantly affected the basin's ecosystems and biodiversity. The region is emblematic of the challenges China faces as it looks to transition toward sustainable and green development.

The central government has taken a more balanced approach to the development of this region as a priority national strategy, releasing the "Yangtze River Economic Belt Development Plan" in 2016, which was then supported by the country's first law on river basin protection in 2020. In 2018, the Ministry of Finance issued the Guiding Opinions on Establishing Eco-Compensation and Long-Term Protection Mechanism in the Yangtze River Economic Belt, outlining several tasks including emphasizing ecological protection in general fiscal transfers from the central to local governments and particularly increasing the central government transfers from the National Key Ecological Zone Program to the region's provinces.

Accordingly, the central government transfers from the National Key Ecological Zone Program to the 11 Yangtze River provinces had increased from 23.99 billion yuan ($3.59 billion) in 2017 to 32.51 billion yuan in 2020, focusing on provinces in the upper reaches of the river, such as Yunnan, Guizhou and Sichuan.

Defined by monetary incentives for ecologically beneficial actions, eco-compensation in China not only includes direct government payments to individuals and communities for the protection and provision of ecosystem services, but also frameworks for cooperation and fiscal transfers between different local governments.

This stems from the government's efforts to incentivize the reforestation of steep slopes and manage soil and water erosion in the upstream of the Yangtze and Yellow river basins in response to severe hydrological disasters in the late 1990s that cost lives and billions of dollars of economic value.

Eco-compensation mechanisms-fiscal transfers used to incentivize and compensate for the costs of ecological protection-are increasingly used to support China's basin strategies of the Yangtze and Yellow rivers, with both their number and scale growing rapidly in varied forms. However, despite the achievements having been made so far, there are still opportunities to further develop and use eco-compensation schemes to support China's river basin strategies.

It is vital to develop national guidelines, standards, and protocols. The National Regulation for Eco-Compensation, formulated by the National Development and Reform Commission in 2020 and currently under consultation, should provide an improved legal basis for the national implementation of eco-compensation schemes.

Specific protocols, regulations, and methods are useful in guiding local implementations and reducing transaction costs, especially in establishing cross-provincial programs. To address the implementation issues related with separating policy areas and providing clear demarcation of implementation and service delivery roles from consultative, executive, regulatory, monitoring, and evaluation roles within and between government agencies, more efforts should be made to coordinate different sector planning processes and sector plans in areas such as the river basin master plan, spatial planning, the environmental and ecological protection plan. River basin authorities could act as conveners to promote inter-jurisdictional coordination.

Developed through basin-wide hydrological and water quality modeling and subsequent basin management plans, basin-level objectives could help provide valuable guidance for sub-national programs, and help target ecosystem synergies and avoid trade offs. Hot spot analysis can be conducted at the basin level to identify locations for the most cost-effective interventions.

At present, the information available to the public remains limited. Greater information publicity and data transparency measures could help increase understanding, accountability and confidence in the results. Some non-governmental organizations have tried to provide more data to the public by machine learning technologies that consolidate various data from online sources, and online platforms and smartphone apps that allow the public to upload and download information.

Funding resources need to be diversified to enhance the sustainability of eco-compensation programs. China's current eco-compensation programs largely rely on government funding. Diversifying funding resources and attracting private sector participation are crucial to the sustainability of those programs and their achieved outcomes. Diversified benefit-sharing mechanisms can also be developed. In addition to financial subsidies, industrial support, technical assistance, talent support, employment training, and other compensation methods should also be encouraged to make their contributions to the eco-compensation drive.

The establishment of an impact evaluation system could promote performance-based financing. Collection of a wider range of ecological indicators would support increasingly sophisticated programs and facilitate impact and performance assessments. This requires enhancing the system of monitoring, tracking and performance evaluation of ecological and environmental spending, which is crucial to maximize the ecological protection outcomes with limited public resources.

The author is an associate professor at the Bay Area International Business School at Beijing Normal University at Zhuhai.