Development Planning Unit

University College London

DEVP0012 Society & Market: Private Agency for Development
CASE STUDY: (New) Sloping Land Conversion Programme, China - Payment for
Ecosystem Services
Exercise
Please use the following questions to guide your group response (there is no need to answer each explicitly;
use whatever approach that makes most sense to you, but please consider each in some way):

o How did the roles played by central and local government change between the SLCP and
NSLCP?
▪ Could either SLCP or NSLCP have occurred had the central government played a
less prominent part?
o Analyse the approach of SLCP in terms of effectiveness, efficiency and equitability (using
the definitions of each outlined in the case).
▪ How does your analysis of NSLCP differ for the same criteria?
o In your opinion, what does the assessment that neither SLCP nor NSLCP achieved the ‘gold
criteria’ standard tell us?
▪ Is it possible to meet environmental and poverty reduction objectives in the same
PES scheme?
▪ If not, why not …. And if so, what should (N)SLCP have done differently?

Background: Sloping Land Conversion Programme (SLCP)

The SLCP is a Payment for Ecosystem Services (PES) scheme introduced by the Chinese government in
response to a series of natural disasters in 1997 and 1998 (Howell, 2022 & Ren et al, 2020).
After an almost year-long period in which the Yellow
River (Huang He) experienced a significant dry-out,
followed by severe flooding in the Yangtze River
(Chang Jiang) area, analysis indicated that this series
of events was significantly exacerbated by, and
possibly caused by, upstream deforestation and soil
erosion. This conclusion prompted the central
government to act with urgency, with the SLCP being
the most significant and tangible component in that
response (Xu et al, 2010).
A pilot commenced in 1999 in Shaanxi, Gansu and
Sichuan provinces, before being rapidly scaled up to
nationwide coverage in 2002 (Bennett & Xu, 2005).
The SLCP represents the point at which early
Chinese approaches to ecosystem service provision
(Eco-Compensation Mechanisms or ECMs) were
formally merged with the framework of Payment for
Ecosystem Schemes (Wang et al, 2020: 654).
However, the Chinese government version of the
PES approach explicitly places the state at the centre,
Location of Yellow and Yangtze Rivers and spatial distribution in contrast to earlier conceptualisations of PES as a
of natural forests in China. market-led approach.
SOURCE: Yang, 2004: 510

Operation and Early Results

The SLCP was designed to compensate farmers for converting farm land into forest area (ie ‘retiring
croplands’), with the dual objective of improving environmental conditions and thus reducing the risks of further
extensive flooding while also increasing rural livelihoods for the poorest communities (Howell, 2022: 1218).
These combined objectives cover effectiveness (the overall impact on environmental conditions), efficiency
(the ratio of costs needed to achieve effectiveness to the value generated by that environmental improvement)
and equitability (the impact on reducing poverty). These three combined impacts are sometimes described as
the ‘gold criteria’ for ‘targeting’ in PES schemes (Ren et al, 2020: 2-3).

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The primary mechanism for compensation was conditional cash transfers coupled with in-kind provision of
grain and tree seedlings in return for demonstrated activity on the part of the recipients to reforest farmlands
on hill-sides. Cash transfers and in-kind compensation were provided by the central government, with village
administrations charged with managing enrolment, distribution and monitoring (Ren et al, 2020: 4). It wasn’t
until the end of the pilot programme and scaling up to national coverage in 2002 that funding was made
available to local governments to cover the costs of management of the scheme (Xu et al, 2010: 6).
By the end of 2003, the SLCP had been implemented in 2000 counties across 25 of China’s provinces, involved
tens of millions of rural households and resulting in over 7.2 million hectares of cropland being ‘retired’. At that
stage, SLCP had a total budget through to 2010 of more than US$40 billion (RMB 337 billion). This made it
the biggest land retirement programme in the developing world, with a goal at that stage of converting 14.67
million hectares of cropland to forests by 2010. That would have represented an increase of between 10% and
20% in China’s national forest cover and a 10% decrease in cultivated area (Bennett & Xu, 2005 and Xu et al,
2010).

Concerns over Food Security and Cost, Extension and the New SLCP
However, despite impressive early results, by 2007 there was increasing concern on the part of the central
government that the programme was placing an unsustainable financial burden on village administrations
charged with running the scheme and was increasing food insecurity as croplands were retired. This led the
government to suspend enrolment of new participants, to halve the level of cash payments to farmers and to
suspend a job training programme, redirecting the savings to local government in an effort to alleviate the cost
of managing the scheme (Howell, 2022).
In spite of the suspension of new enrolments, the government were concerned that the benefits achieved to
date would be lost once the scheme concluded in 2010. They feared that landholders would revert to cutting
down trees in order to reconvert forest to cropland once cash transfers were withdrawn (Howell, 2022: 1219).
They therefore decided to extend the projected conclusion of the scheme to 2015, albeit with enrolments still
suspended and cash payments to landholders remaining at their significantly reduced levels (Ren et al, 2020
and Howell, 2022).
The New Sloping Land Conversion Programme (NSLCP) was launched in 2015, aiming to revegetate a further
2.9 million hectares of degraded hillside land by 2020 but with significantly tightened rules to improve poverty
reduction by targeting the poorest rural communities while also addressing food security problems by
introducing much stricter rules on the land that was eligible for compensation. The new approach also gave
local (village-level) administrations and participating rural households much more autonomy over
implementation of the scheme at a local level (Ren et al, 2020).

Overall Results
The most recent analyses show strong results in targeting appropriate degraded land and thus in improving
reforestation. There was some deficiency identified in targeting, with landholders in a minority of cases
managing to secure support for fertile, flat land. Also, while the reforestation that resulted can be seen as
positive, this occurred in areas not considered appropriate for that activity, not least as the removal of fertile
land from the food production chain exacerbated food insecurity (Ren et al, 2020). While these deficiencies
were of concern, they were relatively limited, so didn’t significantly compromise environmental impact.
However, impact on poverty alleviation (the equitability target of the ‘gold criteria’) was much less satisfactory
(Ren et al, 2020). These issues arose early, with initial failures to provide sufficient funding for management
of the scheme leading to the decision in 2007 to halve cash transfer rates, resulting in a substantial shortfall in
the rate of compensation in relation to the loss of productivity arising from the ‘retirement’ of croplands (Xu et
al, 2010). The cancellation of job training was also found to have hindered the ability of households to make a
transition from farm-based work to non-agricultural employment, again undermining their ability to achieve
alternative livelihoods to compensate for shortfalls in subsidies (Howell, 2022: 1222). This combination of
factors effectively exacerbated poverty in the middle stages of the scheme.
These problems were further worsened by the lack of autonomy accorded to landholders and village
administrations to decide on how to implement the scheme locally - having enrolled, they were compelled to
meet their commitments even where compensation was inadequate to cover losses and with little ability to
adjust the terms to mitigate those losses (Xu et al, 2010: 7-12).
In the final analysis, the scheme was not assessed to have met the ‘gold criteria’ standard. While it had proven
relatively effective in targeting for environmental impact and efficiency, the programme fell well short of
achieving poverty reduction objectives (Ren et al, 2020).
Policy recommendations are that greater localised autonomy, stronger land use rights and more job training
opportunities were needed throughout in addition to adequate funding for management if the gold standard
was to be achieved (Howell, 2022 and Ren at al, 2020). Critically, also, compensation levels - and most
particularly in cash transfers - need to be sufficient to more than compensate for the loss of income arising
from ‘retirement’ of productive farm land if poverty levels are to fall (Wang et al, 2020).

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References
Bennett, M.T. and J. Xu, 2005, “China’s Sloping Land Conversion Program: Institutional Innovation or Business as
Usual?”, Workshop on Payments for Environmental Services (PES) – Methods and Design in Developing and
Developed Countries [https://www.cbd.int/financial/pes/china-pessloping.pdf] (accessed 07/11/23).
Howell, A., 2022, “Socio-economic impacts of scaling back a massive payments for ecosystem services programme
in China”, Nature Human Behaviour 6 (September): 1218-1225 [https://rdcu.be/cYtdS] (accessed 07/11/23).
Ren, L., J. Li, S. Li, C. Li and G.C. Daily, 2020, “Does China’s major Payment for Ecosystem Services program meet
the ‘gold criteria’? Targeting strategies of different decision-makers”, Journal of Cleaner Production 275 [https://doi.org/
10.1016/j.jclepro.2020.122667] (accessed 07/11/23).
Wang, R.Y., C.N. Ng and X. Qi, 2020, “The Chinese characteristics of payments for ecosystem services: a conceptual
analysis of water eco-compensation mechanisms”, International Journal of Water Resources Development 36(4):
651-669.
Xu, J., R. Tao, Z. Xu and M.T. Bennett, 2010, “China’s Sloping Land Conversion Program: Does Expansion Equal
Success?”, Land Economics 86(2): 219-244 [https://doi.org/10.3368/le.86.2.219] (accessed 07/11/23).
Yang, H., 2004, “Land conservation campaign in China: integrated management, local participation and food supply
option”, Geoforum 35(4): 507-518.

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