Abstract
Southern Shaanxi is the water source region in the central line project of south-to-north water diversion. To protect the water resources and the ecosystem, no industrial production projects are launched in this district and the economic development is thwarted. Due to lack of fund, the loss arising from the output of water resources can be hardly compensated.
We first identify the stakeholders involved in the eco-compensation of the water source region in southern Shaanxi and the downstream regions. The property right of the water resources is defined, and an eco- compensation model based on water rights auction is described where the price of water rights is determined under the premise of benefit maximization of the bidders. It is found that (1) defining the stakeholders in the regions that output and receive the water resources as well as the beneficiaries and victims of the allocation of water resources is the first step in identifying the main participants; (2) according to the Coase Theorem, only when the water rights have the features of definiteness, exclusiveness, transferability and mandatoriness will the paid use and optimization allocation of water rights be achieved; (3) under the mechanism of water rights auction, the water rights price will constantly approach the true value of water resources if the quota of water use is limited and if the water rights is clearly defined. Meanwhile, the fund collected by the auction can be used as the compensation for the water output regions; (4) the quantitative model of eco-compensation for the water source region in southern Shaanxi is presented from three aspects: stakeholder identification, defining and auction of water rights, and water rights pricing mechanism. Through water rights trading, the paid use of water resources is realized and the fund is collected as the eco-compensation.
In the last section, we highlight the significance of the auction-based water rights pricing mechanism by which the water rights are more clearly defined, managed and sold. More importantly, the paid use and optimized allocation of the water resources are ensured by this mechanism.
