Spatial heterogeneity and transboundary pollution: a contingent valuation study on the Xijiang River drainage basin in south China

This article examines whether and how transboundary river water pollution spillover may affect resident’s Willingness to Pay (WTP) for a river water quality improvement project. Based on a CVM survey conducted in 20 cities located in the Xijiang river basin located in south China, our study demonstrates that the downstream city respondents report lower WTP when the water quality in the immediate upstream city is more polluted. This negative externality decreases with distance and relative bargaining power of downstream city. The simulated potential gain in social benefit if an integrated river basin management (IRBM) were installed, which is supposed to remove respondents’ concerns about negative externality of transboundary river pollution is found to be significant. We can consider this social benefit as upper bound for the transfer from downstream to upstream regions to ensure the reduction of transboundary river pollution spillovers in the Ecological Service Payment (ESP) regime, a hotly debated market-based environmental policy which is under polit project in some regions in China.