Collaborative models and uncertain water quality in payments for watershed services: China’s Jiuzhou River eco-compensation

Jichuan Sheng and Hongqiang Yang

Ecosystem Services, 2024, vol. 70, issue C

Abstract: As Payments for Watershed Services (PWS) schemes are widely implemented around the world, determining downstream payment rates based on expected water quality is critical to designing efficient PWS schemes. Combined with a case study of the Jiuzhou River Horizontal Eco-compensation (JRBHE) in China, this study builds a stochastic differential game model of PWS considering water quality uncertainty. Using this model, this study explores how water quality uncertainty affects the decision-making of watershed protection behaviors of various stakeholders in PWS. In comparing changes in stakeholder watershed protection behaviors in multiple JRBHE scenarios, this study argues that the collaborative eco-compensation model in the PWS can achieve social optimality as it can coordinate multi-stakeholder goals regarding watershed services and water quality. In addition, this study also emphasizes that the collaborative eco-compensation model is riskier than the existing horizontal eco-compensation model due to water quality uncertainty, and penalties aimed at reducing risk are often necessary for the collaborative eco-compensation model. Finally, this study highlights that designing incentive-compatible PWS schemes remains challenging because both water quality uncertainty and stakeholders’ risk preferences influence their ultimate watershed protection behavior.

Keywords: Water quality uncertainty; Payments for watershed services; Collaborative eco-compensation; Jiuzhou River Basin; Horizontal eco-compensation (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecoser:v:70:y:2024:i:c:s2212041624000780

DOI: 10.1016/j.ecoser.2024.101671

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