China Policy Journal Volume 1, Number 1, Fall 2018 | Page 58
Payment for Ecological Services and River
Transboundary Pollution: Policy Inspirations
from a Contingent Valuation (CV) Study on the
Xijiang River Drainage Basin in South China
Jie He 1
China Policy Journal • Vol. 1, No. 1 • Fall 2018
Abstract
Based on the contingent valuation study results reported by He,
Huang, and Xu (2015a), we propose a new payment standard-setting
framework that could include the total transfer that a city
should pay as a polluter or receive as a victim. This new framework
differs from the previous mechanism by explicitly excluding
the willingness to pay (WTP) reduction due to a city’s own pollution
discharge and focusing only on the WTP variation caused
by transboundary pollution. This new framework also allows the
calculation of detailed bilateral monetary transfers between cities
depending on their location on a river and their contribution to
the variation of water quality. One advantage of our approach is
the possibility to identify not only polluters and victims but also
“cleaners” who inherit bad water quality from the upstream neighbor
and clean it up. The compensation regime proposed by our
approach can thus determine both the compensation for negative
externalities to be paid by the polluters to victims and the compensation
from the “victim-to-be” to the cleaners for their efforts,
which creates positive externalities and prevents their downstream
neighbors from suffering from potential welfare loss. Based on our
results, it seems that simply using the total WTP as the compensation
standard for a better ecological service risks mixing the pollution
caused by upstream cities with the pollution from a city’s own
activities, which thus tends to exaggerate the necessary compensation
payment; for the Xijiang River, such exaggeration can range
from 2 to 10 times. We also compared our results with the Xin’an
River PES pilot program, whose transfer amount was arbitrarily
fixed at 500 million yuan per year, which is approximately 86% of
the compensation amount that Foshan city needs to pay to Zhongshan
city. Our results therefore can be considered a supportive ar-
1
University of Sherbrooke, Canada; [email protected]
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doi: 10.18278/cpj.1.1.3