China’s Regulations on Ecological Protection Compensation, the first of its kind, will come into effect on 1 June.
The new regulations outline a compensation system that includes three mechanisms: central fiscal transfer payments; inter-regional compensation; and market mechanism compensation.
The compensation system in China dates back to 1998, starting with an initiative to return farmland to forests and grasslands. The latest regulations aim to consolidate past local practices and signal the country’s long-term commitment to ecological protection, stated Guo Lanfeng, a member of the Communist Party of China’s Leadership Group of the National Development and Reform Commission. Their introduction “provides a consistent framework that can help stabilise the expectations of those involved in ecological protection”, he said.
According to the Ministry of Finance, the central government has steadily increased its compensation over the years. Fiscal transfer payments for key ecological function areas rose from 42.3 billion yuan (USD 5.9 billion) in 2013 to 109.1 billion yuan (USD 15.2 billion) in 2023, with a total investment of 790 billion yuan (USD 110.6 billion). From 2015 to 2023, funds for water pollution prevention and control nearly doubled.
Within inter-regional compensation, since 2012, China has established mechanisms in 20 inter-provincial river basins, including nine in the Yangtze River and four in the Yellow River, according to CCTV.
Previously limited to provinces, this compensation has been extended to the village level. In a compensation mechanism in the Xiayang River basin, for example, the upstream village enhances ecological protection efforts, while the downstream village develops waterfront ecotourism and provides compensation to the upstream village.
The mechanism has seen success. In 2012, the water quality of Qiandao Lake was classified as Class 4, with Class 5 being the lowest quality. The implementation of the mechanism has led to sustained cooperation between upstream and downstream areas, resulting in the lake’s water quality improving to Class 2 and being consistently maintained at that level.
Guo stipulated that compensation should not be limited to financial support and requires more coordinated efforts. For example, ecological beneficiaries and protectors could jointly develop an industrial park focused on low-carbon, low-emission, and low-pollution green industries. This approach would increase tax revenue and provide employment for ecological protectors, he said.
Read Dialogue Earth’s recent analysis on justice in a decarbonising China.