China Policy Journal Volume 1, Number 1, Fall 2018 | Page 72

Payment for Ecological Services and River Transboundary Pollution
city D because of the water quality improvement
efforts of city C. This motivates
a transfer from D to C equal to
w D
(Q CD
-Q BC
)>0. We also have w D
(Q BC
-
Q AB
)<0, which means a transfer to receive
by D from B. Since Q CD
=II and
Q AB
=II, we have (Q CD
-Q BC
)=-(Q BC
-Q AB
);
therefore,W D
(Q CD
-Q BC
)=W D
(Q BC
-Q AB
),
which signifies that the transfer from
D to C for welfare increase is equal to
the transfer from B to D as compensation
for welfare decrease. Therefore, the
transfer from B to D is simply used by
D to compensate C for its abatement efforts.
An intuitive way to interpret such
double-transfers is that the “polluter”
city B compensates the “cleaner” city C
for its effort that prevents the negative
externality of city B’s transboundary
pollution from affecting city D.
Finally, for city F, since Q DF
=III,
which means that city D creates transboundary
pollution to F, W F
(Q DF
-III)>0
However, the total WTP changes can also
be decomposed into four parts: (Q DF
-
Q CD
)>0, (Q CD
-Q BC
)<0, (Q BC
-Q AB
)>0,
(Q AB
-II)=0 and (Q CD
-Q BC
)=-(Q BC
-Q AB
).
Therefore, we can distinguish a compensation
transfer from D to F, as
W F
(Q DF
-Q CD
)<0, and a compensation
transfer from B to F, as W F
(Q BC
-Q AB
)<0.
The latter part is then transferred to the
cleaner part, the city C, as W F
(Q CD
-Q )=-W (Q -Q B-
)>0. 5. Application of
C F BC AB
the New PES Standard Setting Regime
using He, Huang, and Xu (2015a)
5. Application of the New PES
Standard Setting Regime using
He, Huang, and Xu (2015a)
This new PES payment standard
setting regime implies an important
fact: the payments between
upstream and downstream cities
should be based not on the current pollution
situation of river sections across
the cities but on that of the transboundary
section flowing between the cities.
This requires the stated preference
studies to include both information
types in the estimation of WTP, which
thus makes it possible to isolate the part
of the WTP variation in one city due to
the transboundary pollution coming
from its neighbors.
Among the numerous stated
preference valuation studies that aimed
to provide a payment standard for river
related ecological services, we have
been able to identify only one paper
that directly studied the influence of
the transboundary water pollution on
the WTP of people in China, that of He,
Huang, and Xu (2015a), which is based
on an in-person CVM survey conducted
in 2012 in the 20 cities of four provinces
(Guizhou, Yunnan, Guangxi and
Guangdong) of southern China belonging
to the Xijiang river basin.
The Xijiang River is the main
channel and longest tributary of the
Pearl River (cf. Figure 5). The Xijiang
River flows for 2,217 kilometers from
the north of Yunnan province eastward
across Guizhou province and Guangxi
province and through the Pearl River
delta in Guangdong province and final-
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