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Framework of Basin Eco-Compensation Standard Valuation for Cross- Regional Water Supply E a Case Study in Northern China Journal of Cleaner Production 279 (2021) 123630 Contents lists available at ScienceDirect Journal of Cleaner Production journal homepage: www.elsevier.com/locate/jclepro Framework of basin eco-compensation standard valuation for cross- regional water supply e A case study in northern China * ** Zhou Fang a, 1, Junyu Chen b, c, 1, Gang Liu c, , Huimin Wang a, , Juha M. Alatalo d, e, Zhangqian Yang f,EnyiMug, Yang Bai h, i a State Key Laboratory of Hydrology Water Resource and Hydraulic Engineering, Hohai University, Nanjing, 210098, China b School of Business, Suzhou University of Science and Technology, Suzhou, 215009, China c College of Management and Economics, Tianjin University, Tianjin, 300072, PR China d Department of Biological and Environmental Sciences, College of Arts and Sciences, Qatar University, P.O. Box: 2713, Doha, Qatar e Environmental Science Center, Qatar University, P.O. Box: 2713, Doha, Qatar f University of Maryland, 1124 Lefrak Hall, 7251 Preinkert Dr., College Park, MD, 20742, USA g School of Land Economics, University of Cambridge, Cambridge, CB2 1TN, UK h Center for Integrative Conservation, Xishuangbanna Tropical Botanical Garden, Chinese Academy of Sciences, Menglun, 666303, China i Center of Conservation Biology, Core Botanical Gardens, Chinese Academy of Sciences, Mengla, 666303, China article info abstract Article history: Basin eco-compensation (BEC) helps balance development opportunities and ecological protection. With Received 1 May 2020 rising demand for water and severe ecological problems driven by rapid economic growth, an appro- Received in revised form priate BEC standard is urgently needed for basins in China. The BEC standard should comprehensively 3 August 2020 cover ecosystem services flow and ecological protection cost. This study proposes a BEC valuation Accepted 4 August 2020 method developed by combining gross ecosystem product (GEP) accounting with total cost accounting Available online 12 August 2020 (TCA). The method was applied to the cross-regional water transfer project involving Shanxi province, Handling Editor: Cecilia Maria Villas Boas^ de Beijing city, and Xiong’an new district, which requires a BEC mechanism to coordinate payers and ac- Almeida ceptors. The results revealed that water-related ecosystem services (WESs) received a minor proportion (<3%) of the compensation, owing to deficiencies in the current WESs pricing standard, and that Keywords: stakeholder interests may be infringed by the imperfect profit distribution system. Multi-agent joint Eco-compensation bargaining, a BEC fund, and hydrological monitoring should be implemented to improve BEC valuations. Water retention © 2020 Elsevier Ltd. All rights reserved. Water purification GEP TCA 1. Introduction for maintaining guaranteed water quantity and quality, but up- stream areas have to bear many extra costs (including ecological Eco-compensation is a typical marketable environmental solu- protection, environmental investment, poverty issues, and resi- tion which regulates the relationships between stakeholders to dents’ wellbeing), which are often downplayed by downstream’s promote harmonious development of humans and nature (MNRC, interest (Jia and Meng, 2014). In essence, the externality of BEC 2019; Ouyang and Jin, 2018). In river basins, water is regarded as leads to high transaction cost among participants and ultimately the key carrier for generation and transmission of ecosystem ser- results in the occurrence of “market failure” (Shen et al., 2010; vices (ESs) (Geng et al., 2018; Wang, Y. et al., 2011). Thus, basin eco- Wang, J. et al., 2011). Moreover, information asymmetry between compensation (BEC) mostly refers to compensation for provision of the downstream beneficiaries (BEC payers) and upstream pro- water-related ecosystem services (WESs) and the cost of basin tectors (BEC acceptors) may intensify feelings of unfairness, ecosystem protection projects (Liu, G. et al., 2011; Shen et al., 2010; resulting in the relationship between participants tending to be Zhong et al., 2020). Downstream areas usually pay upstream areas antagonistic, rather than cooperative (Bellver-Domingo et al., 2016). The essential problem faced by all BEC is how to establish reasonable accounting standards to coordinate the interests of upstream and downstream areas and reach consensus, so as to * Corresponding author. stimulate the enthusiasm of BEC participants (Geng et al., 2018; ** Corresponding author. E-mail addresses: [email protected] (G. Liu), [email protected] (H. Wang). Wang, Y. et al., 2011). 1 Zhou Fang and Junyu Chen contributed equally to this paper. Existing BEC practice in various countries provides a possible https://doi.org/10.1016/j.jclepro.2020.123630 0959-6526/© 2020 Elsevier Ltd. All rights reserved. 2 Z. Fang et al. / Journal of Cleaner Production 279 (2021) 123630 answer: a BEC mechanism combined with government regulation. designated a cross-regional water source to address water short- The BEC systems applied in the Tennessee Valley in the USA, the ages in Beijing and XNA. For both Beijing and XNA, security of water Murray Darling river basin in Australia, the Rhine river basin in resources is critical to their continued development (Liu, D. et al., Europe, the Elbe river basin in Germany, and the Xin’anjiang and 2011). Further, due to the unique importance of Beijing and XNA Taihu basins in China are widely regarded as successful examples. In in China, stable development of these two cities is of great signif- these cases, BEC were not formed spontaneously by the market icance for political security in the country. players, but rather government regulation played an important role The main aim of this study was to establish a reasonable BEC (Wang,J.etal.,2011). The government, together with relevant min- framework that compensates for the foregone development op- istries and research organizations, guided determination of portunities for ensuring ecological protection in upstream regions, compensation standards, built information exchange platform, and and which could also help form a complementary economic mode coordinated the interests of all parties, which is conducive to for- acting on upstream and downstream regions in BEC. Specific ob- mation of an adaptive BEC mechanism (Li and Jin, 2007). In China, jectives of the study were to: (i) integrate the GEP accounting BEC guided by government could solve problems including: unbal- system and total cost accounting (TCA) into BEC standard evalua- anced development, unsustainable outputs from ecological or eco- tion; (ii) set the allocation coefficient of compensation for multiple nomic systems, unreasonable allocation of ecological assets, etc. (Sun agents involved in BEC; and (iii) improve the BEC framework for et al., 2017). However, the majority of existing BEC projects in China cross-regional water supply. The following chapters are arranged as focus mainly on socio-economic benefits and neglect ecological follows: after introducing the case area and the technical frame- benefits, which is mainly because: (i) decision makers (especially work of this paper (Chapter 2), BEC assessment of the case area and government) setting BEC underestimate regulating services and results feasibility were discussed (Chapter 3). We discussed the supporting services (Han et al., 2010); (ii) rough valuations of importance of the BEC standard formulation in China and its ecological functions cannot support compensatory activity (Kosoy implementation measures (Chapter 4), and gave the final conclu- et al., 2007); and (iii) there is no standard method for integrating sion of this paper (Chapter 5). WESs and basin ecosystem protection in BEC schemes in China. Ecosystem services theory provides a way to improve BEC in 2. Materials and methods China, where ESs are defined as the direct or indirect contributions of ecosystems to human wellbeing (MEA, 2000; TEEB, 2010). Many 2.1. Case summary studies using ‘payment for ecological/environmental services’ in BEC assessments have shown that it can be beneficial to include ESs The system requiring eco-compensation in this study was cross- assessment (Boisvert et al., 2013; Kallis et al., 2013). However, the regional water supply. The Sanggan river basin (SGB) is an impor- externality of ESs poses difficulties in identifying actual users of ESs, tant water source for the capital and the Daqing river basin (DQB) is which makes it difficult to allocate BEC claims to relevant stake- the water source for XNA (Han et al., 2020). The quantity and holders (Bruel et al., 2016; Kosoy et al., 2007). The demands of quality of water resources in SGB and DQB have profound in- stakeholders involved in BEC can be assessed based on water flows fluences on the socio-economic development of Beijing and XNA. (Bellver-Domingo et al., 2016), where WESs (e.g. water retention, Over the years, Shanxi province has actively taken protective water purification, sediment retention, etc.) are the main basin ESs measures and suffered loss of development opportunities to ensure related to generation and flow of water (Bai et al., 2019; Chen et al., water safety in Beijing and XNA, by investing much labor, material, 2018, 2019). This suggests that WESs assessment can be incorpo- and financial resources in ecological projects. Therefore, local offi- rated into BEC standard valuation (Zhong et al., 2020). cials are trying to build a cross-province horizontal compensation Gross ecosystem product (GEP), i.e., the total economic value of framework to resolve the contradiction
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