Environmental and Ecological Fiscal Transfers in China: Design, Performance, and Lessons for Global Environmental Governance

Abstract

This paper examines the design, implementation, and impact of intergovernmental fiscal transfers for environmental protection and ecological conservation in the People’s Republic of China. It provides a conceptual overview of conditional fiscal transfers, distinguishing between traditional input-based and performance-oriented output-based grants. China’s environmental and ecological transfers constituted 3.9% of total central transfers in 2024. China’s approach—featuring well-structured specific-purpose and performance-oriented grants with clear accountability mechanisms—is compared with limited international experience from countries like Brazil, France, and India. The paper concludes that China’s system represents a significant and relatively advanced experiment in using fiscal incentives to achieve environmental quality targets, granting local autonomy while maintaining results-based accountability. Key limitations include the risk that central oversight may undermine local innovation, and the current absence of incentives for broader green economic transformation.