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PES-CHINA aims at exploring the feasibility of using innovative environmental management policy tools in China, starting from a pilot application and drawing general lessons and guidelines. The project explores the potential benefits of using Payments for Environmental and Ecological Services (PES) mechanisms, drawing on both international experiences and a specific pilot study in the Lashihai Nature Reserve in the Yunnan Province of China.

PES-CHINA is a research project financed by the World Bank and carried out in cooperation with Conservation International-China. It aims at exploring the feasibility of using innovative environmental management policy tools in China, starting from a pilot application, and drawing general lessons and guidelines. The focus is on the constraints and opportunities in using market-based instruments and demand side management for the implementation of Integrated Water Resource Management, with particular attention to the maintenance of the environment and ecological services offered by water resources. More specifically, the project explores the potential benefits of using Payments for Environmental and Ecological Services (PES) mechanisms, drawing on both international experiences and a specific pilot study.

The selected area for the pilot study is the Lashihai Nature Reserve in the Yunnan Province of China. Established in 1998 with the main purpose of protecting the Lashihai wetland, it is an area of special interest for migratory birds, listed under the Ramsar Convention. Farming activities around the watershed provide ecological services of economic value to a wide range of stakeholders, such as the protection of biodiversity (protected migratory birds species feed on farmlands surrounding the wetland), and landscape services (the Lashihai lake supplies water to the old town of Lijiang, a well known tourist destination, which is used to fill in the traditional water system). The pilot study will estimate the suitable level of compensation to farmers for the services they provide through their farming activities; propose guidelines and recommendations for the local implementation of PES schemes in the specific pilot study area; and draw more general conclusions on the usefulness of PES mechanisms in China, and how they could be implemented locally.

FEEM’s main responsibilities include the review of PES theory and international practices, and the economic analysis underlying the design of the PES scheme in the selected pilot site.