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Ecosystem Planning in China

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Through investments of more than US$150 billion in conservation and development initiatives since 2000, China has established the highest rate of reforestation worldwide, while alleviating poverty in rural inland regions. In 2012, the Communist Party declared China’s Dream of harmonizing people and nature to build “the Ecological Civilization of the 21st Century.” This vision is steering the country into a new phase of investment, with leaders laying groundwork to limit development within nearly half (49%) of its total land area, and paying over 200 million residents to perform restoration and conservation activities.

Project Category: Sustainable Development Planning 
Project Status: Current 
Research Area: Sustainable Development

The Challenge

China has recognized that investing in natural capital is essential to long-term security and prosperity, and its approach is unparalleled anywhere in the world. This shift towards systematically restoring and valuing China’s lands, waters, and biodiversity is rooted in a growing sense of urgency over the natural environment, which has been severely degraded as the economy has boomed. Massive deforestation and subsequent erosion contributed to disastrous flooding along the Yangtze River and other rivers in 1998, triggering landslides that killed thousands and rendered 12 million homeless. This crisis prompted the creation of the largest payment for ecosystem services program in the world, involving 120 million households restoring forest and grassland to reduce risk of natural disasters while alleviating poverty.

Now implementing an even more ambitious and comprehensive approach, China is re-zoning the entire country to account for ecosystem service importance and ecological sensitivity, and is limiting human impacts and targeting investments in more sustainable livelihoods on about half (49%) of its total land area. The target areas are vital to the provision of five classes of services, all national priorities:  mitigating flooding, securing water supplies (for drinking, irrigation, and hydropower), renewing soil resources, reducing the risk of dust- and sandstorms, and conserving biodiversity (as an input to many vital benefits). These Ecosystem Function Conservation Areas (EFCAs) are mapped using data and analytics that show where important ecosystem services originate, based on the first China Ecosystem Assessment (reporting nationwide change over 2000-2010).

The designation of EFCAs is potentially transformative in that it provides an important scientific basis for ecological transfer payments from the Central Government to EFCAs.  These transfer payments are now underway, engaging local people in conservation and restoration, building capacity and the economic structure for more sustainable livelihoods.  In 2014, the payments amounted to 48 billion yuan RMB (1 USD = 6.37 yuan as of September 12, 2015). The EFCAs are focusing conservation in areas with high return-on-investment for public benefit, and zoning high-impact human activities so as to minimize reduction of natural capital values.

Using a Natural Capital Approach

To develop a plan that would achieve the government’s vision, researchers needed to identify where nature’s benefits were originating. For instance: ‘Where are the areas throughout the country that are important for providing clean water and stable hydropower, for controlling flooding, and for securing biodiversity?’ Once these were identified, they also needed to know: ‘How many people were living in each place, and were they engaging in harmful livelihood activities?’ and ‘What investments could open more sustainable livelihood options for rural households and inspire people to shift their activities, to provide the greatest ecological and economic benefits to society at large?’

NatCap supports the leaders of this work, in the Research Center for Eco-Environmental Science of the Chinese Academy of Sciences (CAS) and at the School of Public Policy and Administration, Xi’an Jiaotong University, and the Ministry of Environmental Protection.  Other collaborators in this endeavor include Michigan State University, the University of Minnesota, and Stanford University.  Together, we are:

1. Informing the design of compensation mechanisms in three priority EFCA demonstrations: (i) the primary local surface water source for Beijing, Miyun Reservoir; (ii) a primary distant water source for North China (through the South-to-North Water Transfer Project), Ankang Municipality, Shaanxi Province; and (iii) in Hainan Island, China’s first Ecological Province where new policies are being tested.  In all cases, major investments are going into policy evaluation for biophysical and social impacts, with a major focus on improving livelihoods of poor and vulnerable people.

2. Supporting the China Ecosystem Assessment (2000-2010, and ongoing), engaging more than three thousand scientists in natural capital approaches to (a) systematize and interpret ecosystem data (much of it distributed across agencies and not readily accessible); (2) implement InVEST (for Integrated Valuation of Ecosystem Services and Tradeoffs) and other new tools for quantifying the provision of ecosystem goods and services across the nation today; (3) identify the most important source areas of goods and services; and (4) project provision under alternative scenarios of future change.

3.  Supporting development of a new accounting system, Gross Ecosystem Product (GEP), to be reported alongside Gross Domestic Product.  GEP is a system of accounts that will report the total values of ecosystem goods and services for human well-being and sustainable development, in a wide array of metrics and across scales.  GEP methodology is being tested at three scales, provincial, city, and county.


While the long-term outcomes remain to be seen, China has already achieved a major reversal in forest cover and opened new income streams to help lift people out of poverty.

Through careful monitoring and study as these eco-compensation schemes are implemented, China is providing a case study for the world, showing how with government leadership and funding, ecosystem services can be restored, while also improving people’s livelihoods and creating greater security for businesses who operate there.

The work is happening at both large scales and the community level, where funds are being dispersed. The current and potential future impacts of ecosystem service investments in China are enormous, both within the country and globally, showing how serious investments in natural capital improve human well-being everywhere.