Optimizing Forest Ecosystem Service Compensation Using Spillover Analysis: Evidence from Linyi’s Indicator Trading Policy, China

Ecological compensation is an important policy tool for coordinating ecological protection and economic development and narrowing regional disparities. In China, Linyi, for the first time, applied a cap-and-trade policy to the forestry sector by implementing the Intergovernmental Forest Ecological Indicator Trading Policy (IFEITP)—a new ecological compensation policy—to increase the city’s overall forest coverage. However, the compensation standard for this policy was formulated solely by referring to provincial afforestation subsidy standards, resulting in excessively low indicator trading prices and making the policy difficult to sustain. This paper proposes a technical framework for ecological compensation based on the ecosystem service spillover value (ESSV), aiming to optimize the IFEITP. The results revealed that during the policy implementation period, Linyi’s total ecosystem service value (ESV) increased, and the proportion of ESV provided by forests in each district and county also increased. Under the new framework, there were minor changes in the ecosystem service supply zones and payment zones. The compensation received by supply zones increased by 116.2%, whereas the payments made by payment zones accounted for less than 0.2% of local fiscal revenue. The newly calculated indicator trading price under this framework not only reflects the value of ecosystem services but also remains within the acceptable range of government finances, demonstrating high operability and providing a basis for optimizing the IFEITP. This study offers broader insights for regions with similar ecological and socioeconomic conditions, enabling the application of analogous ecological compensation policies to maintain environmental justice and promote sustainable development.