Fiscal Incentives and Collaborative Governance in Green Transformation and Development:A Case Study of the Shan-Shui Initiative
Chinese modernization is the modernization of harmony between humanity and nature.The Third Plenary Session of the 20th Central Committee of the Communist Party of China proposed that"We must work to improve eco-logical conservation systems and make concerted efforts to cut carbon emissions,reduce pollution,pursue green develop-ment,and boost economic growth;We must actively respond to climate change and move faster to improve the institu-tions and mechanisms for applying the principle that lucid waters and lush mountains are invaluable assets".It further pro-posed that"We will implement the management system for ecological conservation redlines,improve the mechanisms for integrated protection and systematic governance of mountain,water,forest,farmland,grassland,and desert ecosystems,and develop multiple funding mechanisms for ecosystem protection and restoration".Evidently,green transformation and development must consider both the holistic enhancement of the ecosystem and the pursuit of high-quality development achieved through high-level protection.How to incentivize local governments to consistently advance environmental gov-ernance,how to achieve multi-factor linkages,multi-step coordination,and multi-region(and sector)cooperation,and how to promote the realization of ecological product value are key challenges in environmental governance and green transformation and development.The incentive mechanisms and coordination functions of fiscal governance align with the need to address incentive challenges and promote cooperative governance in the process of environmental gover-nance,becoming the foundation and an important pillar in constructing a modern environmental governance system.This paper uses the case study of the"Integrated Conservation and Restoration Project of Mountains,Rivers,For-ests,Farmlands,Lakes,Grasslands,and Deserts"in China(referred to as the Shan-Shui Initiative)to illustrate how fiscal governance under the framework of central-local government contracts addresses the issues of insufficient incentives and coordination in local environmental governance through the"matching of powers and expenditure responsibilities"and the"project system"approach.Drawing on a comprehensive and distinctive dataset constructed from the ecological envi-ronment status indicators published by China's environmental monitoring stations,this study employs a difference-in-differences method to identify the critical role of the fiscally-based systematic governance model embedded in the Shan-Shui Initiative in advancing green transformation and development.Empirical findings reveal that the Shan-Shui Initia-tive has initiated a trend of comprehensive enhancement in the ecological environment within the short term,showcasing positive effects in terms of incentives and coordination.Specifically,the ecological environment status in experimental counties improved by an average of 0.064 levels relative to control counties,equating to an average annual increase of 90.75%in the ecological condition index.The probabilities of achieving"good"and"excellent"ecological environment status rose by 1.8%and 9.7%,respectively.These results remain robust across a series of robustness checks.Heterogene-ity analysis reveals differences in policy effects based on collaboration models,fiscal capacity,and environmental base-lines.Effective cooperation between regions and across government levels supports better environmental governance out-comes,with more significant improvements observed in regions with stronger fiscal capacity and better baseline environ-mental conditions.Further analysis shows that the success of the Shan-Shui Initiative stems from its ability to provide positive political,green synergy,and economic incentives for local governments.Specifically,the project heightened lo-cal governments'attention to environmental governance,alleviated fiscal pressure,and increased land transfer revenue.Additionally,the project has effectively advanced the concerted efforts to pursue green development,cut carbon emis-sions,reduce pollution,and boost economic growth,fostering a coordinated approach between high-level protection and high-quality development.Based on a simple cost-benefit analysis,the Shan-Shui Initiative can generate benefits suffi-cient to offset costs in 7.5 years after implementation.Overall,this study confirms the unique role of the fiscally-based systematic governance model embedded in the Shan-Shui Initiative in advancing green transformation and development.It makes a significant contribution to the litera-ture on environmental decentralization,environmental governance collaboration,and project-based approaches.Addition-ally,it provides policy insights for further promotion of comprehensive green and low-carbon transformation of the economy and society,as well as the realization of ecological product value:firstly,appropriately increase the central gov-emment's powers and expenditure responsibilities in environmental governance and green transformation;secondly,em-phasize enhancing the"green content"of ecological products through foundational and public ecological protection and restoration,forming a"turning green into gold"mechanism for realizing ecological product value;thirdly,properly man-age the relationship between government and market in the process of green transformation,promoting the interplay and alignment of a well-functioning government with an efficient market.
Green TransformationFiscal GovernanceIncentives and CoordinationShan-Shui Initiative