Study On Economic Compensation Of Watershed Forest Environmental Benefits

Faustmann-Hartman forest resource model of economic and environmental benefits has been selected to study the economic compensation issues on environmental benefits, economic incentives are used to encourage the owners or/and managers of watershed forest resources to manage their forests for natural preservation, in the meantime, all stakeholders-the owners, managers, policy-decision-makers, investors and beneficiaries and losers will learn the opportunities and constraints of watershed forest resource management. The research will be meaningful to decision-making for compensation fee institution for environmental benefits.Three case study areas have been chosen in the paper, i.e. watershed forest resources of Muchuan County of Sichuan Province, Qilianshan and Miyun County, which are the representative of the middle of Yangtze River, the North of China and Northwest of China respectively. In accordance with the field trips and literature review, time series of environmental data, timber price and production cost. Econometrics and forest resource evaluation methods are adopted to decide the environmental and timber benefit functions of forest ages. Firstly, basing on environmental and economic benefits, compensation standards, ways and payments of environmental benefits and social welfares of relevant stakeholders without consideration of transaction costs are presented in the paper. Secondly, compensation standards, ways and payments of environmental benefits and social welfares of relevant stakeholders have been discussed in the paper with consideration of transaction costs.The analysis results indicate that environmental benefits of watershed forest resources are extremely important. In comparison with traditional forest resource management of timber yielding, environmental benefit consideration will cause changes of forest resource management and social welfare changes. When the compensation standards from 2.00%-10.00% of environmental benefits of forest resources reach the goals of improving environmental quality, raising managers' benefits and social welfares, higher compensation standards cause beyond these goals. Low compensation standards are selected in the less-developed economic areas, after economic development, the compensation standards are to be raised, full compensation fee system is to be adopted step by step. When transaction costs are taken into consideration, the benefits of stakeholders are to be reduced. The affect of transaction costs on the benefits of stakeholders are accepted within the range of 10.00%-50.00%. At present, public finance is used as compensation way to environmental benefits of forest resources, but from the long-term view, market creation of environmental benefits of forest resources is a better solution, government agencies will play important roles in institutional arrangements of environmental benefits of forest resources.Outstanding of the paper are the following: firstly, time factor has been included in Faustmann forest resource model; secondly, more data are used to estimate tree growth models; thirdly, time series models of environmental benefits of watershed forest resources are estimated to show time changes of environmental benefits of forest resources; finally, transaction costs are included with regard to compensation fee institutional arrangements.