Study On Market Mechanism Of Payments For Watershed Ecosystem Services In China

With the rapid economic growth in China, the ecological and environmental issues have become the bottle-neck of socio-economic development. In terms of watershed, numerous material products and ecological services have been provided by watershed services, but human's demand on watershed ecosystem services are still growing, which places great pressure on watershed environment and are challenging the continuous provision of watershed ecosystem services. Currently, various watershed protection measures are being carried out all over China, Chinese government is also directly investing a large amount of money in watershed ecosystem protection and construction, in addition to using"Polluter-Pay-Principle"to control the water pollution. All these measures are indeed functioning quite well.Due to its characteristics as public goods, watershed ecosystem protection needs governmental participation in the payments for environmental services (PES). However, the government-led PES schemes have many disadvantages as well. This paper explored the application of PES, compensating directly the services providers from the services beneficiaries, building up the direct transaction between the sellers and buyers based on the principle"Beneficiaries Compensate, Protectors Benefit". Establishing the market mechanism for PES for watershed has been recently a hot topic, and several provinces and cities have attempted to do it in this field and have already brought into significant effects. On the other hand, a series of national policies and pilot projects have also demonstrated that China has already possessed the scientific, practical background and political will to set up the market mechanism for watershed PES scheme.On the basis of literature review and analysis of relevant articles and papers in China and abroad, this paper defined the ecological compensation and PES for watershed in specific context, and took use of three theories on externality, public goods and environmental resources value to analyze the foundation of PES for watershed. After design of the overall framework of market mechanism for watershed PES, this thesis explored separately the supply-demand mechanism, pricing mechanism, and payment mechanism, then identified the market participants and their demand and supply of ecosystem services. In accordance with the characteristics of various watershed ecosystem services, the pricing methods which can be applied to one or more than one type of ecosystem services were constructed, such as opportunity cost method, water quality and quantity oriented method, beneficiaries'output method, and so on. In addition, based on the status of social-economic development in drainage area in China, three payments approaches were introduced to improve the payment mechanism for ecosystem services, including open trade system, voluntary private transaction, and eco-labeling. In the end, in order to ensure the formulation and development of market mechanisms for watershed PES, institutional arrangement with respect to law making and regulation were suggested.