Progress of Eco-compensation

in China

LIU GUIHUAN

PhD and Associate Professor

Chinese Academy for Environmental Planning, MEP, P.R.C

Nov.2013

The OECD international Expert Workshop on Biodiversity Offsets

Content

1. Background of Eco-compensation Implementation

2. Concept of Eco-compensation Mechanism

3. Development Stages of Eco-compensation Policy

4. Key Fields of Eco-compensation in China

5. What we want to learn from OECD Countries

1. Background of Eco-

compensation Implementation

Effective management and protection means need to

be explored for biodiversity conservation

• Present situation and problems: China, is one of 12 countries with

the most abundant biodiversity in the world. China is actively

protecting biodiversity, however, it remains to be strengthened and

improved in aspects of financial support, supervision mechanism for

project implementation, and the public consciousness on

biodiversity protection etc.

• Lessons and recommendations: biodiversity conservation shall

focus on protection of habitats and even a wider range of ecosystem,

instead of some individual species only, which needs to explore new

means for biodiversity conservation.

Eco-compensation is a new approach to

biodiversity conservation

On Jun 4th, 2012, the first conference of China Biodiversity

Conservation Committee was chaired by then Vice Premier Li

Keqiang in Beijing, who addressed an important speech.

To strengthen biodiversity conservation, the reform must further be

deepened, and the system mechanism must be improved. In view of the

current situations, it is most important to establish eco-compensation

mechanism and integrate biodiversity conservation into the eco-

compensation policy, so that the corresponding economic

compensation and institutional supports could be provided through the

fiscal and taxation systems.

Ecosystem is an Important Carrier for Biodiversity

Conservation and Eco-compensation Mechanism

• Eco-compensation is a comprehensive way to protect overall

ecosystem on the basis of integration of conservation and

sustainable utilization of ecosystem services with pollution control.

It is an effective means to establish eco-compensation mechanism

for protection of ecosystem services function, including

biodiversity. Since all natural elements in the ecosystem, such as

river basin, forest and grassland, closely relate to each other, the

mutual influences among different regions are also very

significant, so they are important carriers to establish eco-

compensation mechanism.

2. Concept of Eco-compensation

Mechanism

Academic Views on Eco-compensation

Emphasis on compensation

to protector

Emphasis on two-way

compensation

Eco-compensation shall meet five

conditions: Firstly, it shall be a kind of

voluntary trading behavior; Secondly, the

trading object shall be clearly defined as

environmental services; Thirdly, the

environmental server shall be available;

Fourthly, the environment supplier shall

be available; Lastly, consumers have to

pay if and only if the service provider can

ensure provision of the environmental

services.

In view of cost of the behavior subject, eco-compensation is considered as increasing cost (or earnings) of behavior to damage (or protect) resources and environment through charging (or compensating) on such behavior, so as to encourage the subject reduce (or increase) the external diseconomy (or external economy) result from their behavior, and achieve the resources protection.

Policy definition of Eco-compensation

• Eco-compensation is a kind of institutional arrangement to regulate

the economic interest relationships among the ecological protector,

beneficiary and impairer by means of fiscal, tax and market according

to the ecosystem service value or ecological protection cost,

ecological destruction and development opportunity cost with

purpose of protecting the ecosystem function and promoting harmony

between human and nature.

• In China, eco-compensation is not only an environmental economic

means, but also a means to regulate the social development.

3. Development Stages of Eco-

compensation Policy in China

11

Overall Situation of Establishing Eco-compensation Mechanism in China

Inception

Promotion

The researches and practice on eco-compensation have been

began in China since mid-1980s, the concept of eco-

compensation is put forward by MEP.

Eco-compensation means:

--National eco-compensation policy

promoted by the relevant ministries and

commissions;

--Local eco-compensation policy

formed on the basis of local exploration

practices. Eco-compensation fields: •Eco-compensation in forests, river

basin, grassland, key ecological

function zone, and mineral resources

development, etc

First Stage: Inception (1985～1998)

Since mid-1980s, a number of laws on

resources and environment have been enacted,

which has provided a legal basis for eco-

compensation practices.

In 1990, the State Council promulgated

Regulation on Further Strengthening the

Environmental Protection, which stipulates

the environmental protection orientation of “the

developer must protect, impairer must restore

and user must compensate" and “the

exploitation and utilization shall be equally

valued with protection and appreciation”, initially

established eco-compensation policy.

Ec

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om

pe

ns

ati

on

wa

s

pre

lim

inary

rece

ived

att

en

tio

n

Second Stage: Development (1999～2005)

A series of major ecological projects were launched, such as the

returning farmland to forest, natural forest protection, and nature

reserve, which promoted rapid development of eco-compensation in

China.

The CPC Central Committee and the State Council put forward definite

requirements on establishing eco-compensation mechanism, for

example:

In Dec 2005, Decision of the State Council on Implementing the

Scientific Outlook on Development and Strengthening

Environmental Protection was issued to stipulate that "Eco-

compensation policy shall be improved and eco-compensation

mechanism shall be established as soon as possible. This Decision

became a programmatic document to guide the coordinated economic,

social and environmental development in China during the period of

“the 11th Five-year Plan”.

Eco

log

ical co

mp

en

sati

on

go

t

fast

develo

pm

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t

Third Stage: Wide Promotion (2006～)

Since 2006, a number of relevant suggestions and proposals have

been put forward by NPC representatives and CPPCC members

during the annual "two sessions"; the government work report also

attaches great importance on it; even “the 11th Five-year" and the

"the 12th Five-year" National Plan, the key works of the State

Council all clearly proposed to establish a new eco-compensation

mechanism.

Some ministries, such as MEP, MOF, NDRC and MWR are actively

brewing to develop eco-compensation policy, and carry out the pilot

eco-compensation in river basin.

Some regions also began boldly exploring the eco-compensation

mechanism, and conducting pilot eco-compensation mechanism in

some river basin, some provinces have already established their

eco-compensation mechanism in the province-wide river basin.

Co

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siv

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rom

oti

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of

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4. Key Fields of Eco-

compensation in China

Key Fields of Eco-compensation Policy Issued Nationwide

Eco-compensation policies enacted in China are mainly concentrated in such fields as river basin,

forest, grassland, key ecological function zone, and mineral resources development.

River basin

Forest

Grassland Key

ecological zone

Mineral resources

development

About 40 files involving over 20 provinces

which have issued their eco-compensation

policies for river basin, mainly based on

local spontaneous exploration

About 20 files

involving over 10

provinces; state

promotes and local

government carries

out the pilots

State promotes

State promotes and local

government explores

the state promotes it in

form of transfer payment

for key ecological

function zones

Biodiversity Conservation Derived from Various Fields

• There is not any eco-compensation system specific to biodiversity

conservation in China, most of them are based on other eco-

compensation.

• Most of eco-compensation is to achieve biodiversity conservation in

form of project.

• These projects have big investment scale and are supported by the

Government, which not only improve the worsening ecological

environment in China, but also guide the local residents to transfer

their life style. So they relieve the environmental pressure, protect

the biodiversity to a certain extent, and promote the biodiversity-

friendly development.

5. What we want to learn

from OECD and other

Countries

Why to Offset

Who offsets whom

How much to offset

How to offset

Where fund comes from

How does it work

The fundamental purpose of eco-compensation is to improve the

ecological environment, and its ultimate goal is to keep

sustainable ecosystem service function.

The ecological beneficiary and impairer shall compensate the

protector and party who reduce ecological damage.

Direct input, development opportunity loss, extension input,

and input for restoration

The governmental and market compensation, as two major eco-

compensation modes in China, form a foundation to build eco-

compensation mechanism at different levels in China.

Financial transfer payment, special fund and market mechanism

Evaluation on the ecological, economic and

social benefits of eco-compensation

Ke

y lin

ks

Key links of Offsets & Compensation?

What we want to learn

How to narrow the objectives. The objectives of eco-compensation policy shall be

designed definite, simple and measurable, stressing on balance between biodiversity

conservation and social harmony, so as to realize win-win situation, and avoid

phenomenon of “applying one policy to all conditions";

How to unify the mythologies of evaluation on biodiversity. It’s difficult to find out a

very scientific and satisfactory to every stakeholder.

How to enhance Public Participation. Strengthen public education and public

participation to ensure that the stakeholders can be supported;

How to balance the relationship between government and market. Transfer the

Government from sole purchaser of ecosystem services to a supporter, establish and

maintain the environment and market to encourage individuals to participate in, and

explore a mechanism combining government compensation and market

compensation;

How to monitor and evaluate the effect. Pay attention to assessment on eco-

compensation effect, evaluate funds utilization, define the priorities on basis of such

evaluation, effectively use the limited compensation funds, and improve its utilization

efficiency.

Thanks for

Your Attention!

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