What price for ecosystem services in China? Comparing three valuation methods for water quality improvement

Payment for Environmental Services (PES) in the watershed has been widely adopted as an importantpolicy instrument to compensate upstream water users for providing water quality improvement for thewhole river basin. In this paper, we use three independent valuation methods to determine the price ofecosystem service (ES), particularly water quality, in Miyun Reservoir, the main surface water source forBeijing. We find that the value of water quality is lowest using opportunity cost of limitation of developmentrights (OCLDR), highest with contingent valuation method (CVM), and water resources benefitsassessment (WRBA) gives an in-between value. OCLDR determines the size of subsidies from those thatbenefit from water quality improvement from upstream. WRBA is a reference for compensation criteriato the upstream government and farmers when water resources are transferred across jurisdictionalboundaries. CVM not only captures the direct value of water quality improvement, but also the indirectvalue of improvement in other ecosystem services as a result of improvement in water quality. Basedon the results, we propose a multi-level ecological compensation system for the Miyun Reservoir riverbasin. We use OCLDR to determine subsides/ compensation to upstream farmers and other suppliers ofthe ES; WRBA set the price of water transfer; and CVM to figure out the size of payments for integratedwater quality improvement.