Payments for watershed ecosystem services: mechanism, progress and challenges

Introduction: Payment for watershed ecosystem services (PWES), a policy instrument for compensating for the externality of watershed ecosystem/environmental services, has gained in policy importance in China over the past two decades. Many scholars and researchers have contributed to the conceptualization of this policy framework by developing operational mechanisms as well as compensation standards for PWES. Outcomes: This article reviews 27 PWES schemes piloted in China and in 10 other countries, with a particular emphasis on successful cases of land-use conversion programs, such as the Paddy Land to Dry Land Program and Sloping Land Conversion Program that have been implemented in China. Discussion: By comparing different cases, the authors attempt to answer the following questions: what were the ecological and institutional contexts in which these schemes were established and how did they work? What were the actual efficiencies and impacts of these piloted schemes? Which scheme worked better in certain ecological, socio-economic, and institutional contexts? Conclusion: Based on case studies, the authors draw the following conclusions about Chinese PWES: (1) to establish an acceptable standard for a PWES program, it is necessary to estimate the economic and social costs regarding the livelihoods of households; (2) multi-stakeholder negotiation mechanism for PWES, including intermediaries, such as the local government, NGO/NPOs, village committees, and user associations, should be used; (3) ES, non-market services, should acquire positive externalities to accomplish an optimal win-win pattern concerning both environmental goals and the livelihoods of local resource users.