Green Development and Grassland Conservation: Assessment of Grassland Ecological Compensation Policy

Ecological imbalances and resource depletion are escalating, and thus the urgent need to implement strategies to facilitate green development and ecological preservation cannot be overstated. In this context, China's Grassland Ecological Compensation Policy (GECP) aims to protect extensive grasslands while supporting socioeconomic development. Using county‐level panel data for 1010 counties in 11 provinces from 2004 to 2021, we estimate difference‐in‐differences models to evaluate the GECP's effects on grassland ecological restoration. To analyze a potential mechanism, we estimate moderating effect models that use baseline pastoral sector intensity (proxied by the log of livestock value added) as the moderator. We also conduct heterogeneity analysis to explore the variations in the effects of the policy across different regions. The results showed that the GECP has a significant positive effect on grassland ecological restoration, but the effect was characterized by a certain time lag. Phase I (launched in 2011) peaks in years 2–3 and then declines more quickly, while Phase II (launched in 2016) peaks later at a lower level but lasts longer and remains more stable. The pastoral sector intensity had a significant negative moderating effect on the ecological effectiveness of the GECP. Higher baseline pastoral sector intensity is associated with smaller marginal policy effects. The effects of the policy were more pronounced in economically underdeveloped counties with smaller population densities and lower altitudes. These findings provide robust evidence on the ecological benefits of the GECP and its contribution to green‐development objectives.