China Policy Journal Volume 1, Number 1, Fall 2018 | Page 62

Payment for Ecological Services and River Transboundary Pollution
environmental pollution disputes. Either
overlaps or gaps that exist between
the competences of the two authorities
may largely compromise the efficiency
of their efforts with respect to transboundary
river water pollution control.
In addition to leading to higher
pollution levels in neighbor regions, a
more worrying aspect of transboundary
pollution is its potential dynamic
impacts on the motivation for regions
to efficiently control their own resource
usage and pollution discharge. Oates
and Portney (2003) indicated that the
presence of the risks of transboundary
negative externalities may lead to a
“race to the bottom” of regional pollution
control policies since the concerns
about the transboundary movements
of pollution from neighbors may compromise
the determination of a region
to exert effective pollution control measures.
Since 2000, the payment for ecological
services (PES) mechanism has
become one of the most advocated environmental
policy measures in China.
From the beginning, many Chinese
scholars have considered this policy
tool to be one of most efficient measures
to improve the ecological conditions
of different river drainage basins and
to ease the heavy pressure on China’s
relatively poor water resources from
economic activities. Numerous pilot
projects have been carried out in China
for several years. These include not
only the application of the PES mechanism
in wetland protection projects in
many key areas but also some quantity
preservation and quality improvement
projects in surface waterbodies (e.g.,
the Beijing Miyun Reservoir, Dongjiang
Source Area, Thousand Island Lake
Basin, Pearl River Drainage basin and
the River Heihe Drainage Basin) (MEP
2013).
Fundamentally, PES is a mechanism
aiming at remedying market
failures caused by the nature of public
good and the poorly defined property
rights of ecological services. By intentionally
establishing an artificial market
mechanism, the logic of the PES is to
motivate and institutionalize a payment
system between upstream and downstream
jurisdictions along a river, which
can serve as a monetary counterpart to
internalize the negative externalities
along rivers due to transboundary pollution
over-discharge.
Although the theoretical foundation
of the PES mechanism seems
easy to understand, its application in
the real world has proven to be much
more difficult. PES is a mechanism for
internalizing transboundary negative
externalities; determining whether
and how to apply the PES mechanism
requires a good understanding of the
phenomena of such externalities. Although
the existence of transboundary
pollution has already been confirmed
at both the international and province/
state levels, to date, there have been
few studies that directly consider its
existence in China. Additionally, even
if we can provide evidence about the
existence of transboundary pollution
along rivers in China, to build a direct
measurement of such a negative externality
requires explicit identification of
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