Authority of the Basin of Lake Titicaca (Bolivia, Peru). Asian countries have also worked closely together to develop a regional approach to improve urban air quality (Schwela, 2006). Programs in Asia include, for instance, the Acid Deposition Monitoring Network in East Asia (EANET, 1999) and the ASEAN Agreement on Transboundary Haze (ASEAN, 2002). More detailed research on best governance structures of these organizations would be useful and could guide the establishment of similar organizations within China to better manage natural resources across administrative units.

# _Financing tool - Horizontal fair exchange mechanisms_

Horizontal fair exchange mechanisms are another method to address different environmental priorities and interests of neighboring administrative units. To address transboundary pollution, localities could raise finances for transfer payments that can be allocated to those localities where higher environmental standards occur additional costs. Under such horizontal exchange mechanism, cities that benefit from cleaner air or other “ecological products” generated in neighboring localities make direct compensation payments to the people living and working in neighboring localities (Shue, 2012).

The example of the Dongjiang Lake in Chenzhou discussed previously ( _Box 1_ ) showed that environmental protection priorities among counties can differ substantially. One county is poor and cannot afford to close mining enterprises at the Dongjiang Lake, while the remaining three counties have committed to limiting pollution since they perceive the lake as an asset for tourist promotion. One possible solution to incentivize the fourth county to cooperate would be to introduce a horizontal fair exchange mechanism. Under such a scheme, the three counties that benefit from the cleaner lake and the closing of mining enterprises would make direct compensation payments to the neighboring county, according to the principle of “the beneficiary pays”.

# _5.3 Policy Options_

_Table 3_ summarizes a number of policy options to address existing institutional and socioeconomic and behavioral barriers.

**Table 3: Policy options to overcome obstacles**

|**Barriers**|**Policy Options**|
|---|---|
|**Environmental**<br>**planning**<br>**system**|• Address shortcomings of target-based implementation approach:<br>- _Selection of targets:_give more flexibility to cities to pick own targets (type and<br>level) to avoid rigid or inappropriate targets<br>- _Allocation of targets:_formalize bargaining process and be more transparent in<br>terms of how targets are allocated; discourage inflation of targets as they get<br>passed down the administrative hierarchy<br>- _Implementation of targets:_focus on annual targets rather five-year targets to<br>minimize cyclical cadre behavior; address conflicts between contradictory<br>targets and between environmental and non-environmental responsibilities of<br>implementing agencies<br>- _Verification of targets:_move away from self-reporting practice for difficult<br>measureable environmental indicators such as energy efficiency - instead create<br>triangulationofchecksand balances, e.g.,a mixof investigation teams;|

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