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Forest Carbon Portal
Grain for Green
Country Name: Hong Kong
Author: Careesa Gee

Historically given short shrift due to the priority placed on agriculture and poverty alleviation, environmental conservation efforts in China may finally have front and center billing with China's Grain-for-Green program. The Ecosystem Marketplace investigates what this uber-ambitious program is all about.

HONG KONG—During the 6th round of the WTO Doha round talks here in China last December, much of the attention focused on the stalemate involving the elimination of agricultural subsidies. Often reduced to the simple clash of national interests versus global free trade, this depiction of the negotiations tends to obscure other levels of debate on the various forms of subsidies in place, and what to do about them.

To address the variety of subsidies, the WTO has sorted them into three "boxes"—amber, blue, and green. Amber deals with measures that distort production and trade, blue covers payments that also impose production quotas, and green is for those subsidies that do not distort trade (or do so only minimally). Since green box subsidies must be decoupled from production levels and prices, environmental protection programs feature prominently among their chosen funding targets.

The push towards green box programs thus seems positioned to fuel a shift from traditional agricultural subsidies towards green programs paying for the production of ecosystem services such as erosion control, carbon sequestration, hydrological regulation and provision of wildlife habitat. Such programs are already in place in countries such as the U.S. and throughout Europe, and also—contrary to its reputation of economic development at all costs—in China.

In fact, since the year 2000, China has actually implemented the largest environmental subsidies program in the developing world. In an attempt to reduce soil erosion while simultaneously maintaining the livelihoods of its farmers, the Sloping Land Conversion Program, commonly referred to as the Grain-for-Green program, is a nationwide cropland set aside program that has farmers replant trees on erosion-prone sloped land in exchange for both cash and grain subsidies.

Now, as the WTO spotlights the potential for green payment programs to help resolve some of the thorniest world trade issues, policy makers are looking to China for insight into how to implement huge public payment schemes for ecosystem services in the developing world.

Lay of the Land


Years of agricultural expansion to feed China's huge population meant that the design of the Grain-for-Green program needed to fight against entrenched practices and thinking, while also cleaning up the mess those policies had made of the environment.

Three periods in particular had had damaging effects: the Great Leap Forward, the Cultural Revolution, and the Opening up of Forest Products Markets in the early 80s. Forests were cleared at a furious pace and timber logging was conducted with no eye toward sustainability. As the authors of a study on China's agricultural policies noted, "policies of agro-ecological restoration have long been separated from agricultural development, and general ecological rehabilitation policies have had no continual consequences because of the concerns of grain security and farmers' income."

But, as better productivity resulted in higher yields, concerns about food security lessened. Then, devastating floods in 1998 in three major watersheds—the Yangtze, the Songhua, and the Nenjiang— brought home the serious impacts of environmental degradation as torrential storms unleashed powerful flood waters across 29 provinces, killing thousands of people, destroying millions of homes, spreading diseases, and destroying harvests.

China was also facing serious problems of desertification, deforestation, alkalization of grasslands, and a loss of biodiversity. Consequently, public interest was beginning to turn towards environmental protection and conservation. A survey done for the China State Forestry Administration in 1999 revealed strong support for sustainable economic development, rather than economic growth without limits. People, it seemed, were suddenly paying attention to environmental issues.

Recognizing the need to tackle the worsening environmental conditions while still tending to its other core provisions of basic necessities, the government came up with the "Six Key Forestry Programs," which includes the Grain-for-Green program.

Tackling the Slippery Slope


Grain-for-Green's primary aim is to convert sloping farmlands back to forest, in order to halt soil erosion. Farmers are asked to retire plots that are prone to erosion and poor for farming (ideally those with a slope of over 25 degrees). Then, in exchange for grain provisions and cash subsidies, farmers convert these areas back into forested areas. They receive the saplings to plant, and are granted the rights to benefit from the forests as long as they tend to them, for example by reaping fruit or nut crops.

With a planned life of 10 years (2000-2010), the program has a total budget of 350 billion Yuan (approximately $US 43 billion) for 1,710 counties in 25 provinces. 340 million mu (or almost 23 million hectares (ha); the mu is a traditional Chinese land measurement unit) of land are targeted for soil erosion control, and another 400 million mu (almost 27 million ha) are designated for desertification control— altogether, this is aimed at reducing the annual silt input into the Yangtze and Huanghe River by 2.6 billion tons. Besides controlling for soil erosion, forest ecosystems can also foster biodiversity and provide services such as carbon sequestration and hydrological regulation.

Grain-for-Green was first introduced into Shaanxi, Sichuan and Gansu—three provinces that had high incidences of soil erosion, as well as high levels of poverty and high population density.

The State Forestry Administration, the Ministry of Finance and the State Development and Planning Commission set out the terms of the program. The grain subsidy was set at 2250 kg per ha per year for the areas along the Upper Reaches of the Yangtze River and at 1500 kg for the areas along the Middle Reaches of the Yellow River. The cash subsidy was set at 300 yuan (approximately $US 37) per ha per year, while the seed and planting subsidy was set at 750 yuan (approximately $US 93) per ha. It also set a tentative cap of five years for cash-crop forest subsidies and eight years for ecological forest subsidies.

Now five years into the program, researchers have begun to evaluate the impact of Grain-for-Green on both the socio-economic and ecological landscape of China.

Win-Win?


The 2004 Report on the State of the Environment in China states that since the 1999 trial start, "16.8907 million ha land have been afforested, 48.0422 million tons of grain has been subsidized and RMB17.651 billion yuan (just over $US 2 billion) of allowance has been paid to farmers."

An article in the December 2004 edition of the International Forestry Review noted that the program was set to increase China's current national forest area by almost ten percent.

WWF China is in the midst of translating into English a report that looks at the policy's implementation through the use of case studies in Shaanxi and Sichuan provinces, two of the initial provinces in the program. While not yet available, a statement released by WWF China says the report shows Grain-For-Green "is a fundamental way of managing water and soil erosion in the long run and eradicating flood disasters in the Yangtze and Yellow River areas." The report also found that "in the short run…the approach is the most practical method of readjusting agricultural models and to stimulate agricultural production."

Essential to the success of the program is buy-in by the farmers. Professor Zhang Kun, Associate Professor at China's National Forestry Economics and Development Research Center, says that colleagues investigating the opinions of farmers found they "are active to return their (sloping) cropland to afforest(ed) land."

Furthermore, authors of a formal economic analysis of the program examined questions of cost-effectiveness and sustainability, and discovered that overall the subsidies had contributed to an increase in the average household income. "Not only does the program provide higher incomes," the report noted, "but the farm households have access to additional family labor that is now not needed for use on the set-aside plots."

And even with large amounts of land being enrolled, it seems that fears about food security have gone unrealized.

In 2002, Zhang Lei, Director of the Economic Development Research Center under the State Forestry Bureau, told the Xinhua News Agency that "the safety of China's national grain stocks was still guaranteed despite the Grain for Green Project being practiced during recent years," and that "the country's grain market had remained stable during this time."

Later, a 2005 study of Grain-for-Green's effect on the supply and price of grain found that it had only a very small effect on the former, and practically none on the latter, as farmers in the program largely compensated for the missing land by increasing production on their remaining plots.

No Quick Fix


Despite Grain-for-Green's noted triumphs, government officials and Chinese environmentalists say the program still faces challenges. Yu Fangzhong, author of a report on tree-planting efforts in China warns, for instance, that the survival rate of many of the planted saplings is just 20 to 30 per cent.

The statistic points to the practical difficulty of actually developing forests. Shawn Zhang, project manager of Climate Change and Conservation Program at the Nature Conservancy, says, "The major risk comes from the original design of the project…it's hard to make this type of small plantation sustainable."

As the lead of a joint project called Forest Restoration for Climate, Community, and Biodiversity, sponsored by both The Nature Conservancy and Conservation International, Shawn also noted that there were problems caused by the choice of trees to be planted. "Species are based on the local level project design. The limited funding for seedlings and planting caused the major problem."

Other groups have recognized this issue, with some noting that limitations on the number of species being planted actually reduces biodiversity and timber yields, and that it makes them more vulnerable to serious pest outbreaks.

On the other hand, the answer to another fundamental question—is the right land being targeted—is more positive. Here, Emi Uchida, Jintao Xu, and Scott Rozelle, the researchers who examined questions of cost-effectiveness and sustainability, recorded that "…the results imply that on average the program is enrolling plots with positive environmental benefits and relatively low opportunity costs."

While Uchida, Xu, and Rozelle recorded positive findings for the current levels of income and for the plots being targeted, they recognized that their investigation of sustainability hinged on whether these higher income levels can be maintained after the subsidies end. "An alarming number of farmers," they note, "expect to reconvert their set-aside land back into cultivation once the program payments stop."

The mitigating hope is that farmers will be able to diversify the ways they earn money during the program or be able to benefit directly from the trees. For example, by spending less time farming the land, the extra labor time could be spent on expanding farm activities to livestock enterprises or finding other jobs. In other cases, the tree crops could provide income through harvests of fruits or nuts.

In many cases, though, tree crops may just not be able to provide enough money on their own. Farmers are only supposed to plant 20 per cent of their land with "economic trees", with the remaining 80 per cent being "ecological trees." Some farmers interviewed expressed dissatisfaction with being unable to plant more "economic" trees, and said they would consider re-cultivating the land after the program ended if they needed to get more money that way.

Here, Professor Zhang points out that, "most of (the) tree species are economic…(and) harvest quotas usually apply for commercial (timber) forest. It is not allowed to harvest ecological forest except (for) the necessary tending cutting. Economic forest usually supplies mainly non-wood forest products, such as fruits (and) seeds…instead of timber logs."

Income maintenance, while a major factor, is not the only threat the Grain-for-Green program must face down.

Large infrastructure projects aimed at reducing the rural-urban divide in these same areas could result in erosion, landslides, and habitat fragmentation and alteration. Other industries associated with such projects, such as concrete, could also negate any positive environmental effects from conversion. Any uncertainty over land tenure could jeopardize the commitment of farmers, and weak enforcement could provide permissive conditions for over-harvesting. Over-expansion of the program at too fast a pace could also reduce the effectiveness of plot targeting, and exacerbate existing problems with the program.

Rising Policy Star?


For now though, it seems that green payment programs such as Grain for Green provide a way to comprehensively address the issues around conservation and agriculture.

"I think the program is successful, even though the ultimate goal is only partially achieved," says Shawn, before cautioning, "[B]etter project design and planning is needed for a more successful implementation…the plan and design should be more transparent and government should play a weaker role."

For policy-makers looking for any lessons that can be learned already from the Grain for Green program, it would seem to be that there is no one formula for a successful green payment program—careful analysis of the in-country situation, the possible roadblocks to successful implementation, and economic capability all need to be considered.

However, Grain for Green program's overall objectives and design are in line with much of the thinking that has been developed by policy-makers in OECD countries on green payment programs. Broadly speaking, economic efficiency, attention to targeting, and a clear link to environmental benefits are the large issues to consider, along with clear decisions about the objectives and time frame. Canada, the EU, Japan, Switzerland, and the US have all converted large amounts of land with their long-term land set-aside programs, which share characteristics with Grain for Green. So while developing countries may not be able to copy these programs verbatim, China's experience so far shows that green payment programs can be adapted successfully. Thus, more countries may just turn to these examples and find themselves checking the WTO's green box at the same time.

On balance, Grain-for-Green seems to be achieving its multiple ambitions: China is experiencing reduced soil erosion, increased forests, and improved livelihoods for farmers. However, consensus suggests that only the long-term outcomes will ultimately decide the success of the program. If farmers remain committed and their food supply remains secure, if the government keeps paying sufficient subsidies, if the trees grow and they produce hard cold cash benefits, and if other environmental threats don't intrude too much, then perhaps this program really will see the triumph of a new era of green payment policies.

Careesa Gee works in sustainable development, and is currently based in Hong Kong. She can be reached at careesa.gee@gmail.com.

First published: February 24, 2006