What Price for Ecosystem Services in China?: Comparing Three Valuation Methods for Water Quality Improvement

What Price for Ecosystem Services in China?: Comparing Three Valuation Methods for Water Quality Improvement

Haixia Zheng (Chinese Academy of Agricultural Sciences, China), Stale Navrud (Norwegian University of Life Sciences, Norway) and Shiran Shen (Stanford University, USA)
DOI: 10.4018/978-1-5225-3427-3.ch007
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Payment for Environmental Services (PES) in the watershed has been widely adopted as an important policy instrument to compensate upstream water users for providing water quality improvement for the whole river basin. In this paper, we use three independent valuation methods to determine the price of ecosystem service (ES), particularly water quality, in Miyun Reservoir, the main surface water source for Beijing. We find that the value of water quality is lowest using opportunity cost of limitation of development rights (OCLDR), highest with contingent valuation method (CVM), and water resources benefits assessment (WRBA) gives an in-between value. OCLDR determines the size of subsidies from those that benefit from water quality improvement from upstream. WRBA is a reference for compensation criteria to the upstream government and farmers when water resources are transferred across jurisdictional boundaries. CVM not only captures the direct value of water quality improvement, but also the indirect value of improvement in other ecosystem services as a result of improvement in water quality. Based on the results, we propose a multi-level ecological compensation system for the Miyun Reservoir river basin. We use OCLDR to determine subsides/ compensation to upstream farmers and other suppliers of the ES; WRBA set the price of water transfer; and CVM to figure out the size of payments for integrated water quality improvement.
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Literature Review

Examples of PES practices are ample in China, including the national South-to-North Water Transfer Project and regional projects in the Thousand Island Lake, the Xin’an River Reservoir, the Jinhua River, all of which are located in Zhejiang Province on the east coast of China, and Ziya River in Hebei Province. Case studies of PES utilize valuation methods such as the contingent valuation method (CVM), replacement cost, opportunity costs, travel costs, choice experiments, and hedonic pricing (Costanza et al,1997; Daily, G. C, et al., 1997; Blaine, T. W., Lichtkoppler, F. R., Jones K. R., et al, 2005; Carson R., Richard T., and Mitchell R. C., 1993; Li et al., 2007; Jiang, 2008; Zhong et al., 2008; Mao et al., 2008; Zhang et al., 2008; Zhang et al.,2009) and the concept of cost-benefit sharing coefficient of ecosystem services to estimate PES (Liu 2007; Jin 2010).

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