Research On Fiscal Policies For Watershed Ecological Compensation

Watershed is not only the birthplace of human civilization, but also the most important part of the world’s ecosystems. It meets the need of survival and development of the whole earth life body. However, with the rapid expansion of population, the demand for water grows rapidly. And the irrational exploitation of the river water make the watershed environment deteriorate sharply. To solve the shortage of water resources and water pollution problem has become one of the major challenges in the third millennium era. There are many rivers in China, but with the advance of industrialization and urbanization, many problems appears in China’s major watersheds such as water pollution, soil erosion, over-exploitation of water resources and other phenomena. The ecological environment situation of watershed is grim. To promote the sustainable development of watershed has become an important task for Chinese government.Watershed ecological compensation is essentially an incentive and restraint mechanism to balance the economic benefits between upstream and downstream stakeholders, and encourage the public to participate in watershed environmental protection through internalizing externalities in water resources utilization and ecological protection. China’s "Twelfth Five Year Plan" clearly pointed out: "we should accelerate the establishment of ecological compensation mechanism according to the principles that developers should protect environment and beneficiaries should compensate for environment. And encourage, guide and explore the ecological compensation between the downstream and upstream areas, developed regions and protected areas." Finance is one of the government’s macro-control means, but also an important means for the implementation of watershed ecological compensation. In the ecological compensation practices in many areas of China, the government compensation model with fiscal policies as the main implementation is still dominant. Therefore, how to further improve the fiscal system, innovative fiscal policy tool, and how to use fiscal policies to guide and cultivate the market and social compensation modes to establish a watershed ecological compensation mechanism which integrates three kinds of governance mechanisms, is a very important research topic.The article uses combination methods of case study and comparative analysis, normative analysis and empirical analysis. Starting from the fiscal perspective, taking watershed ecological compensation mode as the starting point, the paper studies on the problems of watershed ecological compensation in China. Firstly, the economics theories of externalities, public goods and the value of environmental resources provide the theoretical basis for institutional and policy arrangements for ecological compensation, and reveal the positive role of finance can play in watershed ecological compensation. Secondly, the paper analyses the ecological compensation practices, points out that in China, government is still in the dominant position in watershed ecological compensation, the market compensation mode and social compensation mode has not been really established. This situation will increase the pressures on government finance and go against improving the efficiency of watershed ecological compensation. In further analysis on relevant fiscal policy, the paper points out that there are many deficiencies in fiscal policy. For example, in government compensation mode, the fiscal revenue policy and transfer payment system is imperfect; the efficiency of the use of fiscal funds needs to be further improved. While in market compensation mode and social compensation mode, the fiscal policy is in the absence of state, which leads to slow development of the market and social compensation mode.Foreign countries started ecological compensation practices earlier, and made some achievements. So the paper carries on the analysis to the overseas watershed ecological compensation practice and finds that many countries attach great importance to the relevant laws and regulations. From the point of view of compensation mode, while the government compensation applied as the dominant mode, countries are also increasing emphasis on the role of market compensation mode, and use the social compensation mode as a beneficial supplement. No matter what kind of mode, the guarantee of fiscal policy is needed. On the basis of theoretical study and practical analysis, this paper presents the overall design of fiscal policies for watershed ecological compensation, which is integrating the watershed ecological compensation elements into the existing fiscal policy and the ecological compensation policies into existing financial systems, realizing the harmonious development of social economy of the watershed through the necessary transformation of the existing tools of fiscal policy and fiscal system. Finally, the paper puts forward the specific suggestions of fiscal policies for watershed ecological compensation. Given the government compensation mode will continue to be the dominant mode in China, so the focus of watershed ecological compensation is to improve and perfect the fiscal policies in government compensation mode and increase the efficiency of the use of fiscal funds. On this basis, make proper use of fiscal policies to guide and cultivate the market compensation and social compensation mode, and establish a multi-level system of fiscal policies for watershed ecological compensation. In government compensation mode, we should improve the fiscal income policy by levying water resource tax and water pollution tax, strengthening the policy design and collection management of non-tax revenue; and improve the fiscal expenditure policy by increasing the size of watershed environmental protection expenditures, reasonable arrangements for the expenditure structure, perfecting the inter-governmental transfer payment system and constructing the criss-crossed transfer payment system; and increase the efficiency of the use of fiscal funds by strengthening project management and coordinating regional development. In market compensation mode, we should make proper use of fiscal policy to promote emission permit trading, water rights transaction and eco-labeling; and the finance should also play an important role in guiding the enterprise to realize self compensation, promoting the development of ecological manufacturing enterprises, and promoting watershed ecological service trade. In social compensation mode, fiscal policy should be used properly to guide and encourage communities and non-governmental organizations to participate in watershed ecological compensation. In addition, in order to maximize the effect of policies, fiscal policies also need a series of supporting measures such as establishing reasonable systems of watershed management, ecological performance evaluation and the environment accounting.The innovation of this paper is mainly listed in the following three aspects:Firstly, the paper makes fiscal policies for watershed ecological compensation to be systematized and standardized. Watershed ecological compensation in China needs a relatively systematic fiscal policy framework to provide support for the sustainability of the policy. But from the existing research results, discussions of the fiscal policy scattered in various fields related to watershed environment, and has not formed a complete system. By drawing on the experiences of foreign watershed ecological compensation, and combined with specific conditions in China, this paper presents a more complete system of fiscal policy system for watershed ecological compensation.Secondly, the paper discusses fiscal policy for watershed ecological compensation from the perspective of ecological compensation mode for the first time, and enriches its connotation and extension. Domestic study on fiscal policy for ecological compensation is basically limited to government compensation mode, ignoring the role of market compensation mode and social compensation mode, even ignoring the influence of fiscal policy to market compensation and social compensation. And good governance is usually combined with three kinds of governance and complements each other. The paper discusses fiscal policies from the angel of ecological compensation mode, and proposes that in addition to perfecting government compensation mode, we should highlight the use of fiscal tools to foster market compensation mode and social compensation mode.Finally, this paper uses Malmquist-DEA method to analyze the utilization efficiency of fiscal funds in watershed ecological compensation in 31 provinces (autonomous regions, municipalities). The results shows that from a dynamic point of view, the use efficiency of ecological compensation funds in most provinces increases with the progress of science and technology; but from a static point of view, the national average comprehensive technical efficiency is only 0.5, where the low scale efficiency has more effect on the comprehensive efficiency. Therefore, on one hand the government should increase the scale of financial investment, on the other hand should also pay attention to the fine management to improve the utilization efficiency of fiscal funds.