Can China’s Cross-Regional Ecological Fiscal Transfers Help Improve the Ecological Environment?—Evidence from Hubei Province

Abstract

As an important incentive and constraint system to coordinate the contradiction between ecological resource protection and regional economic development, the ecological and environmental protection effect after its implementation deserves special attention, especially for China, which involves the widest scope of payment and the largest transfer and has become the largest governmental ecological compensation program in China and even in the world. Starting from the evolution of China’s eco-financial transfer system, this study conducts an empirical investigation of the ecological and environmental protection effect of the eco-financial transfer system. Such an undertaking is based on the theoretical exploration of the impact mechanism of the eco-financial transfer system to improve the ecological environment quality and based on the panel data of 40 counties in Hubei Province from 2010 to 2020. Results of the study show that the ecological financial transfer system can promote the improvement of regional ecological environment quality, but the promotion effect is insignificant. The financial funds reflect more of a financial compensation effect than a system incentive effect. The increase in the scale of ecological transfer payments is conducive to strengthening the incentive function of the system, promoting local governments to increase environmental protection expenditures and environmental regulation efforts to improve the quality of the ecological environment. Therefore, in the process of implementing ecological financial transfers from the province to the counties, the concept of ecological value contribution should be incorporated into the fund allocation process. In addition, the current ecological transfer payment fund allocation method should be reconstructed on the basis of the ecological value contribution to enhance the guiding role of “high quality and high price, more work and more gain.” The goal is to effectively stimulate the enthusiasm of local governments for ecological environmental protection. Findings have significant guidance for developing countries that are currently seeking to formulate and implement such policies.