Payment schemes in Fujian are supported by classification-based forest management and influenced by the collective forest tenure reform. This section first introduces the implementation of classification-based forest management in Fujian. Then the process of collective forest tenure reform on public benefit forest is presented and its impacts on payment schemes are analyzed in detail. In addition, political willingness of Fujian provincial government is an important factor to give birth to existing payment schemes and to orient the formulation of the schemes.
4.2.1 Classification-based forest management in Fujian
Since 1995, China has adopted a strategy to manage forests based on two primary functions:
commercial forest and public ecological benefit forest14. A series of regulations were subsequently issued by the central government to direct the management of public benefit forest. These regulations relate to all aspects of governing public benefit forests, including demarcation, adjustment, requisition, management, protection, logging, payment, monitoring and inspection.
14 Following the General Outline of Forestry Economic Reform and the Notice on Piloting Forestry Classified Management Reform, issued by the former Ministry of Forestry, some provinces have started to zone forests for different functions.
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Following these national rules, Fujian Province set up its own management institutions for public benefit forests. Fujian Province’s Management Measure on Public Ecological Benefit Forest (Fujian Provincial Government, 2005) is at the core and stipulates formal rules for classification, protection, productive management, monitoring and inspection, and punishment for noncompliance. These rules require county governments to take responsibility in protecting and managing public benefit forest within their jurisdiction. Property right of forest has been restricted such that only limited selective logging is allowed with the approval of the provincial forestry department. This management measure complemented other regulations related to funding, tenure registration, logging norms, and adjustment and requisition rules, together constituting an institutional setting for the implementation of payment schemes.
4.2.2 Collective forest tenure reform in Fujian
Besides these direct management institutions set up by governments, payment policies for forest ecosystem services have been influenced by decentralization in forest governance. In China, decentralization has mainly taken place in collective forests, which account for about 60% of forestland in the country. There have been two rounds of decentralization of the ownership of collective forests. The first round started at the early 1980s, in which collective forests were allocated to farmer households as ziliushan (family plots) and zerenshan (responsibility hills)15. However, this reform was terminated by the central government once it became clear that most farmers cut the trees and sold the wood when they obtained the use rights of forest plots, without reforestation. The second round began after the central government issued Decisions regarding Speeding up Forestry Development (Chinese State Council, 2003a), in order to improve forest productivity and ecological service. This decentralization employed more flexible measures to direct tenure reform (Liu, 2008). Different forest tenure and management arrangements are provided for local farmers to choose, according to local natural and socioeconomic conditions.
The owners of forest are entitled to sell and lease their land-use rights, sell their standing trees or use them as investment share and collateral. In addition, a matching reform on forestry tax and fee are launched to reduce the cost of forestry production.
Although the main objective of forest tenure reform is to improve forestry production and increase farmers’ income, it had a complex impact on public benefit forests. The reform widened the gap between commercial forests profits and public benefit forests profits. Hence, illegal logging on public benefit forests occurred more frequently than before and the number of criminal cases in Fujian related to public benefit forests increased from 36 in 2003 to 59 in 2005 (Lu, 2007). And efforts and interest of local farmers largely shifted from public benefit forest to commercial forest.
In addition, the reform also strengthened farmers’ awareness of property rights of forestland.
As Fujian Province distributed only collective forests defined as commercial forest to farmer households, several villages appealed to the government to change their public benefit forest into commercial forest. In order to deal with the emerging crisis in the public benefit forest system, Fujian province launched a reform on the management of public ecological benefit forest in 2007.
15 The ownership of the land of ziliushan and zerenshan belong both to the collectives of villages. The owners of ziliushan have almost permanent use rights to the plots, whereas the owners of zerenshan have to renew their contract and share the profit with the collectives, and have limited control over harvest and sale of trees.
This reform extended decentralization into the domain of public benefit forest. But the reform on the public benefit forest is fundamentally different from that on collective commercial forest (Huang, 2006). Firstly, the reform left the collective ownership of public benefit forest untouched, while in commercial forest ownership was transferred to farmer households. Secondly, whereas the commercial forest reform empowered farmer households with complete management rights, on public benefit forests only limited management rights were transferred to farmer households.
These households are constrained in using forest resources without timber logging and logging for the purpose of forest tending and regeneration. Thirdly, the public benefit forest reform includes the distribution of compensation payment and responsibility of protection; obligations and benefits moved from villages to individual farmer households.
Three models have been developed by the provincial government for distributing management rights of public benefit forests, which includes the responsibility of protection and management and payment for compliance (Fujian Provincial Government, 2007). The first model distributes management rights to farmer households and organizes individual farmer households into united management teams. The payment is also distributed to farmer households, be it on an average basis.
And the revenues from restricted use of a public benefit forest are evenly shared between farmer households. This model is mainly applied in regions where farmer livelihood relies strongly on the public benefit forest. The second model, applied in regions where farmers are less dependent on public benefit forests, contracts out the responsibility of forest protection to local farmers or a third party following an open procedure. The payment by governments is distributed equally among farmer households, after paying the rangers who take care of forest protection according to contract. The distribution of revenues from restricted use is determined by a village conference or a representative conference. Not unlike the second model, the third one allows state-owned forest farms to take care of all collective forests for public benefit. This model is applied when public benefit forests are small in size and difficult to manage and protect.
4.2.3 Political willingness of government for PES
Fujian has a strong motivation and political determination to maintain and improve its environmental and ecological quality. In his report on the government’s work 2008, the governor, Mr. Huang Xiaojing, urged his administration to continuously focus on energy saving, pollution control and eco-compensation in watersheds (Huang, 2009). There are important institutional factors which facilitate agenda setting and formulation of payment schemes (especially those at provincial level) in Fujian Province. Fujian’s forestry administration plays an important role in initiating local payment schemes, negotiating with other governmental agencies, and pushing for payment policymaking. In Fujian, the provincial forestry department has a relatively high administrative status in the government, compared to its counterparts of other provinces such as Guangxi and Qinghai. Fujian provincial forestry department as one component of the provincial government has more access to policy decision of the government than provincial forestry bureaus in other provinces. It can also relatively easily influence political agenda setting. In addition, forestry is an important sector in Fujian’s rural economy. The livelihood of local farmers is still largely dependent on forestry income. This importance of forestry also increases its influence on political agenda setting and capacity to mobilize public financial resource for forest management.
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The policy process of payments from downstream to upstream areas exemplifies how the forestry department uses power and resources to mediate between demanders (downstream regions) and suppliers (upstream regions) for forest ecological services within its jurisdiction. In spite of the strong capacity of the forestry department, the process was not smooth but was accompanied with compromises and negotiations. At the beginning, the forestry department suggested a policy arrangement that would directly collect funding from industries which benefit from forest ecological services, such as dams and hydropower stations. However, water conservation and hydropower management departments strongly opposed this arrangement, because they have close relations with these industrial sectors. Facing this setback, the forestry department changed its strategy to request funding from public fiscal budget of the provincial government and downstream cities rather than from specific industries. The proposal was accepted by all provincial departments but opposed by downstream municipal governments. Then the provincial forestry department reformulated the proposal which would pool funding from all cities according to water consumption amount but distribute the payment by area of public benefit forests. As a result, upstream cities obtain a larger share of funding than downstream cities. Finally, this proposal was approved by the provincial and municipal governments and the payment scheme was established.
Another governmental agency – the Provincial Environmental Protection Bureau (PEPB) – is also involved in the policy domain of PES. Together with Fujian Financial Department, Fujian Development and Reform Commission and their local counterparts, Fujian Provincial Environmental Protection Bureau (PEPB) initiated, financed and implemented an eco- compensation scheme in Min River watershed. It started from 2005 and anticipated to integrate all PESs for watershed including forest related PESs in future. To this end, on behalf of the provincial government, Fujian PEPB drafted the Proposal on Strengthening Water Environment Protection in Min River Watershed, which was circulated among departments at provincial, municipal and county levels in March 2009 and consultation meetings were organized with these departments.
It helped to raise awareness of eco-compensation among different governmental agencies and promised to improve the sustainability and the legitimacy of the schemes in future.