mineral resources); and watershed services. MEP also set out five fundamental principles for developing eco-compensation policies and mechanisms (MEP 2007a):
•Those who develop and exploit resources should also protect the environment, those who destroy the environment should repair it, those who benefit from it should subsidize it, and those who pollute should pay.
•Responsibility, right, and power are synonymous.
•Agreement on public construction of the environment and public benefit can help achieve “win–win” development.
•Government guidance and market regulation should encourage diversification of funding sources and harnessing of market forces.
•Adapt central policy to local conditions and energetically innovate.
The ambition and momentum of these initiatives is evident in the 11th Five-Year Plan (2006–2010), which calls for policy makers to innovate in environmental policy, develop eco-compensation pilot projects and accelerate the development of eco-compensation mechanisms (especially intraregional and watershed-related eco-compensation mechanisms), and resolve issues over funding conservation.
As part of implementing the 11th Five-Year Plan, the 2007 State Council workplan called for “…deepening product pricing and emissions fee reforms for key natural resources, perfecting a resource taxation system, and improving a paid mineral resource use system; quickening the development of eco-compensation mechanisms.” The PRC’s revised water pollution control law now states that “the PRC will, via such means as financial transfers and payments, develop sound environmental protection compensation mechanisms for regions located in drinking water source protection areas, and river, lake, and reservoir upper watershed conservation and ecological protection areas.”5
In 2009, both President Hu Jintao and Premier Wen Jiabao also made clear statements reiterating that the PRC will develop a “sound system of paid use of (mineral and natural) resources” and “eco-compensation mechanisms” (Jin and Zuo 2010; Wang et al. 2010).6 Against this backdrop, the central government is developing a national eco-compensation policy framework, and possibly a law, in preparation for the drafting of its 12th Five-Year Plan (2011–2015).
Local government innovation influences central policies
The contribution of local governments to building momentum and innovation in this PES frontier deserves recognition and study. They are adapting centrally designed eco-compensation programs to meet their own needs, drawing upon multiple central and provincial policies and funding sources. The result is a diverse catalogue of initiatives and public programs that incorporate both direct payments for ecological services renders and incentive-based elements at all government levels. These hybrid programs often feed back into central government policy development, stirring a healthy debate on how to improve these programs while exploring more market tools and regulatory innovations (Bennett 2009). For example, current experiment and experiences with emission trading in Jiangsu and Zhejiang provinces, particularly in the Tai Lake Basin, suggest that such a system may soon be replicated in various locations across the country, and will provide valuable insights into the types of institutional and legal reforms that the country will need to develop this system.
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