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Xin'an River Basin Ecological Compensation — China's First Cross-Provincial Watershed PES

China · Huangshan · See the China profile

China's first trans-provincial watershed PES: downstream Zhejiang pays upstream Anhui to protect Xin'an River water quality; CNY 2.2 billion exchanged 2012–2020, reducing COD by 13–21% and total phosphorus by 9–18%.

2.2 CNY billion
Total compensation received by Huangshan (2012-2020)
~500 CNY million/year
Annual compensation fund (per pilot round)
13-21 % reduction
COD reduction in non-point source runoff (2012-2020)
17-18 % reduction
Total nitrogen reduction (2012-2020)
9-18 % reduction
Total phosphorus reduction (2012-2020)
100+ river basins
River basins where the model has been replicated
Xin'an River Basin Ecological Compensation — China's First Cross-Provincial Watershed PES

Details

Maturity
Established
Promoter
Ministry of Finance of China / Anhui & Zhejiang Provincial Governments
Period
2012–present
Keywords
watershed, government, water quality, inter-provincial, drinking water

Context

Launched in 2012, the Xin'an River (Xinanjiang) Basin Ecological Compensation Programme is China's first pilot cross-provincial, horizontal water-quality payment scheme. Upstream Huangshan City in Anhui Province is the source of the Xin'an River, which feeds Qiandao Lake (Thousand Island Lake) in Zhejiang Province, a key drinking water supply for tens of millions downstream.

Objectives

The mechanism is bidirectional: if upstream water quality meets an agreed threshold, downstream Zhejiang pays upstream Anhui; if it falls short, Anhui pays Zhejiang, creating direct accountability between conservation effort and downstream benefit.

Activities

Three pilot rounds ran from 2012 to 2020, each three years in length, with an annual compensation fund of approximately CNY 500 million co-financed by both provinces and the central government. Compensation receipts funded relocation of riparian farms, sewage treatment upgrades and enhanced watershed forest conservation.

Results

Huangshan City received CNY 2.2 billion in total over the three rounds. Peer-reviewed SPARROW water-quality modelling and difference-in-difference analysis found that COD (permanganate index) in non-point source runoff decreased by 13-21%, total nitrogen by 17-18%, and total phosphorus by 9-18% between 2012 and 2020, with significant improvements attributable to the compensation policy.

Conclusions

A fourth round launched in 2021. The model has been replicated in more than 100 Chinese river basins and is cited by the World Bank and ADB as a scalable template for inter-jurisdictional watershed governance globally.

Implementation
Indicative cost
High (€500k–€5M) — Annual compensation fund of approximately CNY 500 million per pilot round, co-financed by both provinces and the central government; Huangshan City received CNY 2.2 billion in total across three rounds (2012-2020).
Time to results
Long (> 3 years) — Three pilot rounds ran 2012-2020 (each three years); a fourth round launched in 2021, and the model has been replicated in over 100 Chinese river basins.
Staffing & skills
provincial government administration (Anhui & Zhejiang), central government co-financing and oversight (Ministry of Finance of China)

Conditions for success

  • bidirectional payment mechanism creating direct accountability tied to a measurable water-quality threshold
  • central government co-financing alongside both provinces
  • independent water-quality modelling (SPARROW) used to verify outcomes
  • compensation earmarked for riparian farm relocation, sewage upgrades and forest conservation

Common failure modes

  • outcomes rely on modelled water-quality metrics rather than direct ecological/biodiversity monitoring upstream

Where it fits

Governance type
inter-provincial government-to-government mechanism
Scale
river basin (cross-provincial)
Income level
upper-middle-income (China)

Data sources

Where this practice's information was retrieved from, and when.

Attachments

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