A pilot scheme introducing the idea of an ecological compensation mechanism will force companies and individuals that damage the environment to pay for their actions.

The mechanism will be introduced to cover nature reserves, key environmental areas, mines and river basins, the State Environmental Protection Administration (SEPA) announced yesterday.

"The pilot schemes in these four areas will explore standards for ecological compensation and push forward related legislation," said a document on the environmental watchdog's website.

"These pioneering practices will be launched in preparation for the mechanism to be adopted nationwide," the document said.

The principle of ecological compensation is that those who have adversely affected the environment will be punished monetarily.

The intention is to further improve the construction of infrastructure projects, guide local residents to become more ecologically friendly and diminish the adverse effects of industrial projects.

In mining areas, for instance, the mechanism is intended to improve the management of mineral resources and prevent harm to the environment.

As for river basins, a special fund will be set up to protect the water quality of rivers by preventing dumping upstream.

SEPA Vice-Minister Pan Yue said at a recent forum that given the serious problems the country faces in terms of its water sources the mechanism would be helpful.

Environmental expert Zhang Jianyu said, "an ecological compensation mechanism needed to be clearly defined and required strict law enforcement".

For instance, he said, Hebei provides water for Beijing, but it needs to be made clear to the province what quality of water is acceptable before it is asked to pay for any shortfall.

Pan said over the weekend at a forum that economic compensation could include green loans, insurance and emission trading.

"Experience shows that administrative solutions we relied on before will not work effectively in the long term."

(China Daily September 12, 2007)