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 important policy instrument to compensate upstream water users for providing water quality improvement for the whole river basin. In this paper, we use three independent valuation methods to determine the price of ecosystem service (ES), particularly water quality, in Miyun Reservoir, the main surface water source for Beijing. We find that the value of water quality is lowest using opportunity cost of limitation of development rights (OCLDR), highest with contingent valuation method (CVM), and water resources benefits assessment (WRBA) gives an in-between value. OCLDR determines the size of subsidies from those that benefit from water quality improvement from upstream. WRBA is a reference for compensation criteria to the upstream government and farmers when water resources are transferred across jurisdictional boundaries. CVM not only captures the direct value of water quality improvement, but also the indirect value of improvement in other ecosystem services as a result of improvement in water quality. Based on the results, we propose a multi-level ecological compensation system for the Miyun Reservoir river basin. We use OCLDR to determine subsides/compensation to upstream farmers and other suppliers of the ES; WRBA set the price of water transfer; and CVM to figure out the size of payments for integrated water quality improvement.