Abstract

This study explores the incentive instrument to avoid overuse of nitrogen Overuse of nitrogen typically in the form of fertilizers and pesticides causes Non-point source pollution NPS This study therefore attempts to identify and discusswhat the mechanism and reasonthat results in this nitrogen over-use It also assesses how to introduce market tools that would provide the right incentives to stop its overuse Thepaper compares thecurrent water pollution management systemsin the Chesapeake Bay USA where payments forcapital costsat the farmandabatement programsof agricultural measureshave been undertaken with the current systemsof Dianchi LakeinChina The methodology used involves a comprehensivereview ofthe relevantdefinitions of terms used in Payment for Ecosystem Services PES by theChineseand the international community It discusses implementation of PES for managing farmers use of fertilizer in China and includesthe steps neededto determine appropriate compensation levels in these PES systems The analysis uses interviews conducted with farmers in Yunnan Province and an economic analysis of current subsidy policies taxes and grants used domestically and internationally to determine the best PES measures needed The findings suggest that one of the mainways to reduce the overuseof nitrogen and thusreduce run-off pollution NPS isto change the current Chinesesubsidy programsby creating new directsubsidies that will promote and rewardbehavior change This will give incentives to farmers to curb their overuse of chemical fertilizers