China Policy Journal Volume 1, Number 1, Fall 2018 | Page 63

China Policy Journal
the source and the impact of the negative
externality. Moreover, to directly
relate such impact measurements to
an efficient payment mechanism also
requires a precise understanding of
how and to what extend such a negative
externality affects the well-being
of people living in the downstream and
upstream jurisdictions. In other words,
only when a reasonable measurement
of the intrinsic value of the environmental/ecological
service affected by
the negative externality is obtained can
one have confidence to hope that the
payment mechanism based on such
measurement can function correctly
and be incentive-compatible.
In this paper, based on the related
literature collected in China and in
the world, and particularly the findings
from the recent contingent valuation
method (CVM) study conducted by
He, Huang, and Xu (2015a), we try to
answer the following questions. First,
what is the current situation of transboundary
river water pollution problem
in China? Second, if it exists, how
does the transboundary pollution problem
affect people’s perception about the
efficiency of the existing water quantity
and quality control policies, whose implementation
is often closely related to
the local government’s capacity and local
economic conditions? How can such
concerns affect people’s expected utility
improvement for a targeted better water
condition? Finally, how can we establish
a valid payment standard for ecological
services between upstream and
downstream cities, and how will be this
standard compare with those of other
existing studies that have analyzed similar
measurements?
2. Existence of
Transboundary Pollution
There is already evidence for the
existence of transboundary pollution
at the international level
and in foreign countries. However, we
have not yet found studies that directly
revealed transboundary river water
pollution cases based on data from China’s
rivers.
Based on the data of GEMS/
Water 1 biochemical oxygen demand
(BOD) measured by 291 river monitoring
stations in 49 countries during
1979–1990, Sigman (2002) found the
BOD indicator to be significantly higher
at stations that were located upstream
of borders than comparable stations, at
least among stations located in non-European
Union (EU) countries.
Because most US federal environmental
policies assign regulation,
implementation and enforcement responsibilities
to state-level authorities,
Sigman (2005) investigated potential
transboundary spillover phenomena
in the US. To do so, a composite water
pollution index based on five major pollutants
compiled from 618 monitoring
stations from 1973 to 1995 was used.
Using a difference-in-difference logic,
Sigman (2005) found that, all else being
equal, the water quality indexes were 4%
worse at stations located downstream
from a state authorized and with power
to implement and enforce its own regulations
over river water pollution.
1 The UN’s Global Environmental Monitoring System Water Quality Monitoring Project.
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