Compensating for the socioeconomic costs of catchment protection: The case of China’s South-North Water Transfer

Abstract

China’s government has launched a number of policies over recent years to tackle the country’s worsening water pollution crisis. Implementation of pollution control policies can have deleterious effects on the livelihoods of upstream communities, often poorer and less resilient to change than downstream beneficiaries. The distinctive Chinese concept of ‘ecological compensation’ – a blend of payments for ecosystem services and the polluter pays principle – has been developed to enable compensation for the direct and indirect costs associated with pollution reduction. This paper examines the distribution of indirect socioeconomic costs associated with protecting the Danjiangkou reservoir catchment, which provides water for 50 million people – mostly, city dwellers – in North China via the South-North Water Transfer (Middle Route). Mass closures of turmeric processing plants and a ban on cage aquaculture in the catchment have generated considerable indirect costs for individuals, communities and local upstream governments.