Shandong and Henan provinces recently signed an ecological protection compensation agreement. According to the agreement, as reported by Xinhua News Agency, if the quality of water in the Henan section of the Yellow River improves by one level from category-III over the course of one year, Shandong, which lies in the lower reaches of the Yellow River, will pay Henan 60 million yuan ($9.32 million) as a reward, and if the water quality worsens by a level, Henan will pay 60 million yuan to Shandong as compensation.

Also, Shandong will pay Henan 1 million yuan for every 1 percentage point decrease in the annual key pollutant index at Liuzhuang, which is on the Henan side of the Shandong-Henan border, and Henan will pay Shandong 1 million yuan in compensation for every 1 percentage point increase in annual pollutant index, with a ceiling of 40 million yuan.

The 100 million-yuan agreement shows the two provinces' determination to work together to improve the Yellow River's water quality. For the two provinces, 100 million yuan is not a staggering amount, yet it shows their commitment to improve their ecological governance.

The deal will help explore and develop better ways to promote the sharing of responsibilities and benefits in ecological protection. Since the 18th National Congress of the Communist Party of China in 2012, the authorities have prioritized the construction of eco-friendly environments, leading to the introduction of ecological protection plans for the Yangtze and Yellow rivers.

The need to provide ecological safeguards for some rivers across provinces is behind this trans-provincial ecological compensation agreement. The pilot Xin'an River ecological compensation project (in Anhui and Zhejiang provinces) launched in 2012 was the first of its kind in China to promote ecological protection of a river's upper and lower reaches, and it has helped improve the water quality of the Xin'an River.

To protect the water conservation area of the Chaobai River Basin in the upper reaches of the Miyun Reservoir in Beijing, Beijing and Hebei province have established a watershed ecological compensation mechanism based on cost-sharing, benefit-sharing and cooperative governance.

The first inter-provincial ecological compensation agreement for the Yellow River Valley between Shandong and Henan, which defines specific compensation standards, will enable people to recognize the operation mode of inter-provincial ecological compensation and the necessity of trans-regional governance of rivers.