Imagine a river flows across two neighboring provinces. The upriver province will be financially rewarded if it ensures quality river water for the lower province; otherwise, it will pay the lower one as compensation.

This kind of trans-provincial mutual ecological compensation trial is now taking place between Anhui and Zhejiang, China.

The two provinces on Sunday jointly kicked off a project to monitor water quality in the Xin'an River, which originates from the city of Huangshan, Anhui province, and runs into Qiandao Lake in Zhejiang, the main source of drinkable water for Zhejiang province and the strategic reserve reservoir for the lifeline Yangtze River Delta.

The move marks the first time a cross-provincial water protection mechanism has been in actual mechanical operation, said Lie Weiping, head of the bureau for protection of Xin'an River.

"If the water offered by upper Anhui has a quality higher than the basic standard, Zhejiang should render compensation for Anhui, while Anhui should pay compensation to Zhejiang if the water quality is lower than the standard," Lie explained.

In order to protect the Xin'an River water environment, Huangshan city and other regions in Anhui had been wary of accepting new industry, paying a heavy price in terms of slow development with delayed industrialization and urbanization.

In recent years, Huangshan refused entrance to more than 40 firms whose investments totaled over 4 billion yuan (633 million U.S. dollars), and permanently shut down dirty factories concerning paper printing and cement production, according to a report released last year by the Committee of Population, Resource and Environment with the top national political advisory body.

The basins of big rivers take up nearly 30 percent of China's territory and traverse many different administrative regions.

So far, eight provinces have introduced rules concerning ecological compensation, but local protectionism and uncertainties as to the environmental and financial benefits had prevented a trans-provincial mechanism from coming into being.

Huangshan mayor Song Guoquan said the mutual compensation mechanism will not only ensure water quality for the lower regions but will ease the capital scarcity of the upper province and alleviate the contradiction between economic and social development and environmental protection.

The compensation funds were set up jointly by Anhui, Zhejiang and the central government.

With the 50 million yuan start-up fund allocated by the central government, the local government of Huangshan will further strengthen the treatment of industrial pollution sources, intensify the comprehensive treatment of major watercourses and deepen environmental betterment in major villages and towns, said Lu Haining, vice director of the Huangshan Environmental Protection Bureau.

By 2015, Huangshan will invest more than 40 billion yuan into 521 projects for the comprehensive treatment of the Xin'an River river basin, Lu said.

The Huangshan environment protection official added that the compensation mechanism has limitations. "The compensation should not only be directed at pollution treatment costs. It should also cover the cost of the development opportunities lost (by the upper province) in the process of protecting the environment," said Lu. "That's the ecological compensation in its true sense."