Payment for forest ecosystem services in Fujian province comes from four sources: the national payment scheme, the provincial payment scheme, payments from downstream to upstream areas, and local payment schemes. The four schemes provide payments for the owners of all so-called Public Benefit Forest in the province. I will give a brief introduction on these schemes below.
The Forest Ecological Benefit Compensation Fund program (FEBCFP) is the only national payment policy carried out in Fujian Province. Before 2001, Regulation on the Implementation of the Forest Law (Chinese State Council, 2001) stipulated already that
the area of a key shelter forest or special-purpose forest [these two types of forests have been classified into public benefit forest] within the administrative area of a province, autonomous region, or municipality directly under the Central Government shall not be less than 30% of the total forest area of the said administrative area.
But the central government did not provide special funding for public benefit forest management, let alone compensate economic loss of forest owners following logging restrictions.
To encourage forest owners to protect and restore forest ecosystems, the central government experimented with FEBCFP in 2001 and extended the coverage of the program and increased the payment standard gradually. As one of the pilot provinces, Fujian province delineated 2.86 million ha as public benefit forest in 2001 (30.7% of its forestland). And the central government and provincial government shared the responsibility to provide financial support for the public benefit forest. From the start the central government supplied 65 million Yuan for 8,666.67 km2 of public benefit forest annually (see Table 4.1). Generally, for centrally financed public benefit forest, the payment standard is 7,500 Yuan per km2: 6,750 Yuan for forest owners and 750 Yuan for public expenditures such as fire and pest control.
Parallel to the central payment which only covered 30.27% of the public benefit forest, Fujian provincial government provided initially 57.20 million Yuan annually for the payment for the rest of the public benefit forest. Although the standard of the provincial fiscal payment for public benefit forest was only 2,025 Yuan per km2 in 2001, it rose to 7,125 Yuan per km2 in 2007, close to the central payment level. According to the “Measure on the Management of the Central Forest Ecological Benefit Compensation Fund” (Ministry of Finance and State Forestry Administration,
Table 4.1. Funding sources for forest payment schemes in Fujian Province, 2001-2007.a
Year Central government Provincial government Downstream
to upstream (million Yuan) area (km2) payment
(million Yuan) area (km2) payment (million Yuan)
2001 8,666.67 65.0 19,933.33 57.2b -
2002 8,666.67 65.0 18,600.00 30.0 -
2003 8,666.67 65.0 16,666.67 34.0 -
2004 8,666.67 65.0 16,466.67 50.1 -
2005 8,666.67 64.5 16,600.00 65.2 -
2006 13,800.00 103.4 14,866.67 110.2 -
2007 13,800.00 103.4 14,866.67 121.3 85.9
a Provided by the Planning and Financial Division, Fujian Provincial Forestry Department.
b It is quite general for national forestry projects to set a local matching requirement for provinces in China. The purpose is to strengthen the responsibility of local governments to implement the projects and control their desire to include too many forestlands into the projects in order to acquire more funds from the central government. Therefore, in 2001, Fujian Province contributed a high provincial fund to match the national fund, in order to compete to apply for larger public benefit forest in its own jurisdiction. At that time, the central government also showed the will to raise the standard for compensation, but the promise has not been realized until 2009. After 2001, with the transfer of policy focus, the provincial government reduced its contribution for the local fund.
4. Emergence of local payment schemes for forest ecological services in Fujian Province 79
2004), local forestry departments are required to make a contract with state-owned forest farms and villages, concerning forest management responsibility and payment distribution. Also villages have to enter into a contract with forest rangers in case the forest is collectively owned or with farmers who own the forest individually. Moreover the province promoted two rules for public benefit forest management: the owners of the public benefit forest have the rights to obtain payment for the ecological service they supply; and local governments should share the payment responsibility with the central government.
In 2007, a new payment scheme “Forest Ecological Compensation from downstream regions to upstream regions” emerged to create a new financial source for supporting the public benefit forest. Under this payment scheme, nine cities contributed to a common compensation fund, mainly based on the amounts of their urban and industrial water in 2005. The contribution will be measured each three years. The provincial government collects all contributions from municipal governments and redistributes the funds to them according to the area of public benefit forest within their jurisdictions. In 2007, this scheme collected 85.90 million Yuan and provided a payment of 3,000 Yuan per km2 for all public benefit forests within the province (see Table 4.1).
Besides these central and provincial initiated payment schemes, municipal and county governments also began to facilitate diverse payment schemes for forest ecosystem services at a small scale. These payment schemes fall into three types: public fiscal support, payment from direct beneficiaries, and ecological fees on timber production. Some counties in Fujian province have arranged funds from their county fiscal budget to complement the central and provincial payment. For example, Shaxian County’s finance department provides 200,000 Yuan for the payment for public benefit forests from its own fiscal budget. Apart from public fiscal support, the county governments also raise money from companies and individuals who directly benefit from ecological services provided by public benefit forests. In Yongtai County (our case study area), 1% revenue of hydroelectric power stations and 3% of forest related tourism revenue have to be contributed for the payment fund. In addition, in counties with a large wood processing industry part of the timber production fees flows into payment fund.
In addition, the eco-compensation scheme for Min River watershed was initiated by Fujian Provincial Environmental Protection Bureau (PEPB). This scheme sets targets for water quality from 2009 at river sections along the main stream and the tributaries of Min River and the functional zones. For instance, over 95% of the sections monitored by Fujian PEPB should meet class III, and over 95% of the drinking water sources for cities should meet the quality standard.
To achieve these targets, tasks ranging from drinking water sources protection, animal waste treatment, household waste treatment, industrial pollution control to watershed ecology protection are listed and assigned to relevant departments. It calls for the establishment of Leading Group for Water Environment Protection in Watersheds by the provincial government to be responsible for overall coordination and supervision. Fujian PEPB and Fujian Financial Department are called to formulate concrete measures for PES schemes. This scheme just started in 2009 and has not yet included forest-related components. Our investigation in this province does not include this scheme.
The diversification in funding payment schemes from 2007 onwards came with controversies.
For instance, the leader of the General Management Station for Forest Resources in the Fujian Provincial Forestry Department (PFD) stated that beneficiaries of forest ecological services, such
as downstream regions, should contribute much more to the payment schemes. Local officials from the Sanmin Municipal Forestry Bureau (MFB) saw central and provincial governments as mainly responsible for funding the schemes and they expressed their worry that, if municipal and county governments developed local payment schemes, the central government would severely reduce funding support.