Is RightsBased Compensation Important for Land Use Policies in China Universities of Peking, Cambrid

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Is Rights-Based Compensation Important for Land
Use Policies in China?Universities of Peking,
Cambridge and London
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Research Question

• Should the NFPP include compensation for
  households affected by the logging ban?
• Depends on three factors
• i) Have physical or regulatory takings occurred?
• ii) What is the extent of the economic impact,
  and have households lost all viable uses of their
  land?
• iii) Does the NFPP solve local market failures or
  provide national public goods?

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Structure

• Background to NFPP
• Literature on compensation
• Description of survey
• Type of impact
• Extent of impact
• Purpose of programme
• Conclusion

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NFPP Background

• Policy introduced in 2000 in 17 Provinces and
  Autonomous Regions
• Aims restore natural forests protect
  biodiversity protect soil and water increase
  timber production
• Programme
• Ban on logging in natural forests
• Measures to encourage new plantations
• Compensation for unemployed state forest workers
  and pensions for retired workers

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Literature on NFPP (2)

• Programme found to be successful in environmental
  aims of reducing soil erosion increasing
  biodiversity and increasing supply of timber.
• But with some negative impacts
• Impacts on state forest sector loss of
  employment, sector closed down.
• Impacts on local governments loss of revenue
• Impacts on households in state forest areas
  loss of income from providing services to forest
  sector
• Impacts on households in collective forest areas
  loss of employment from forest enterprises
  loss of forest products loss of property rights
• Existing studies of NFPP call for compensation
  for loss of property rights, or for economic
  losses resulting from restrictions on property
  rights

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Literature on compensation (1)

• Physical takings
• Compensation generally paid for physical takings,
  but questions over whether this is economically
  efficient
• Regulatory takings
• Ongoing debate about whether compensation should
  be paid
• e.g. Endangered Species Act in US
• All regulations affect rights in some way -
  depends where the government action lies on
  continuum between physical taking to provide
  public goods and regulation to correct negative
  externalities

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Literature on compensation (2)

• Taking under NFPP?
• Type of impact physical or regulatory taking
• Extent of impact size of economic impact and
  whether all economically viable uses lost
• Purpose of taking providing public goods for
  wider population or correcting local market
  failures

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Nature of Right and Takings

• Important question remains
• Real Right/Right in Rem (??)
• or Contractual/Creditors Right (??)
• or neither
• ? Taking may depend on whether right is
  contractual or property in nature

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Real Right / Right In Rem

• Right in property
• Enforceable against all persons
• Private use rights have been strengthened by RLCL
  2002 use period extended disposal right
  (especially land contracted under the four
  wasteland policy) land reallocation controlled
  and limited
• Government policy supports and protects private
  use right e.g. Article 15 of Forest Law
• Registration of right

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Contractual / Creditors Right

• Right in personam
• Though not created by contract, recent law
  requires embodiment of rights in contracts,
  especially under the four wasteland policy
• But farmers do not choose whether or not to enter
  into contracts, and which type mere
  administrative land allocation decision
• RLCL 2002 sets out general rights and duties of
  the parties, i.e. collective and households
• terms are usually vague and subject to
  discretionary power

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Nature of Collective Authority

• Law and policy does not provide enforceability of
  private use right vis-a-vis state power and
  remedies state not a party to contract
• Collective ownership is subject to discretionary
  and overriding power of the state
• However, may collective act as an agent of the
  state?
• Some argue that they may not even amount to
  contractual rights problem that collective
  lacks a clear definition

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Progressive Erosion of States First Right
State Ownership of Land
Transfer right
Use right
Resource Right
Inheritance Rights
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Regulatory Taking?

• Depends on Extent of Impact on Uses
• ? Does Regulation Remove Most or All Uses?
• Depends on Whether Use Restriction was for
  purpose of eliminating local externalities or
  for providing more distant public good
• Does it primarily remove negative externalities?

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Household Survey to Assess Regulatory Impacts

• Survey in Summer 2005 carried out by Professor
  Zhang Shiqiu and students from the School of
  Environmental Sciences, Peking University
• Face to face survey of 285 households in Guizhou
  Province
• 40 villages in 3 counties of Qiandongnan Province
  (south of Guizhou Province) Jinping and Liping
  had NFPP Congjiang did not have NFPP
• Questions about property rights income from all
  sources in 1997 and 2004 views on logging ban
  stated preference questions about welfare losses
  from ban

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Map of Forest Cover
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Types of Regulatory Impacts

• Has regulatory taking occurred?
• NFPP has infringed on households rights to cut
  timber on their land
• Majority believe this is a temporary loss of
  rights
• NFPP has not changed the property rights
  arrangement for forest land in title or in
  nature
• Households do not think that their land or trees
  have been taken

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Extent of impact (1)

• Look at extent of impact in three ways
• Impact on incomes
• compared change in income for those in NFPP with
  change in income for those not in NFPP
• ? incomes from timber reduced by around 500
  yuan between 1997 and 2004
• total incomes not significantly affected

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Extent of Impact (2)

• Remaining economic uses
• No change in income from non-timber forest
• Possibility of future use (assumed by most HH)

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Extent of impact (3)

• Impacts on overall welfare
• used stated preference questions to determine
  overall monetary and non-monetary impacts
• Conclude that impacts are small on average
• gt Various possible explanations (rotation,
  cutting)

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Purpose of Progamme (1)

• Question Does NFPP corrects local market
  failures?
• If so, then non-compensable regulation
• Are welfare impacts affected by whether
  households think there are local benefits?
• Other potential determinants of welfare impacts
  also included
• - household characteristics
• - previous forest activity
• - expected future forest activity

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Purpose of Programme (2)

• Results

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Purpose of Programme (3)

• Welfare impacts are affected by whether the
  household believes that the purpose of the ban is
  to relieve local problems and by whether they
  have experienced benefits from the ban
• Indicates that part of the reason for low
  valuations of welfare impacts is that the ban
  provides benefits as well as costs
• Supported by comments of those who are not
  willing to pay to avoid ban
• Ban appears to address local market failures,
  increasing the welfare of some households
• Also looking at other externalities e.g. race to
  harvest

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Conclusion

• Should the NFPP include compensation for
  households affected by the logging ban?
• Is there a compensable right in land?
• Contract or right in rem?
• Contract with Collective as Right from State?
• ii) Have households lost all economically viable
  uses of their land?
• Impact on income from timber
• No impact on income from NTFPs or total income
• iii) Does the NFPP solve local market failures or
  provide national public goods?
• Welfare losses lower for those who think NFPP
  corrects local externalities
• Some benefits in kind
• gt No strong case for compensation although some
  losses experienced, not very significant relative
  to total income, and local benefits for most HH
  from correcting market failures