Watershed ecological compensation is an important economic tool for solving the protection–development conflict. However, establishing a sound ecological compensation plan for rational water resource use at the watershed scale remains challenging. Monthly water samples were collected between April 2019 and July 2020 at 28 points to analyze the spatiotemporal variation in water quality in the Taoxi Creek watershed, which is important for local water security. The Soil and Water Assessment Tool was used to simulate water supply, demand, and spatial flow at the watershed scale. Water quality restoration cost was integrated with ecosystem service flow to quantify the watershed ecological compensation. The ecological compensation using water quality restoration cost based on pollutant treatment cost and water quality target level was CNY 11.9 million (USD 188 million). Taoxi Creek was identified as the major supplier of water ecosystem services for downstream residents, and the ecological compensation based on ecosystem service flow was CNY 18.9–47.2 million (USD 3.0–7.5 million). Combining both calculations, the watershed should annually receive CNY 30.8–59.1 million (USD 4.9–9.3 million) of economic compensation from downstream ecosystem beneficiaries. This study provides a scientific basis for improving the ecological compensation scheme in the Taoxi Creek watershed and a reference for ecological compensation formulation in other watersheds.

Cascade damming can shape land surfaces; however, little is known about the specific impacts of dam construction on watershed land cover changes. Therefore, we developed a framework in which remote sensing, transition patterns, and landscape metrics were coupled to measure the impact of dam construction on watershed land cover changes and landscape patterns in the Longmen–Su (L–S) Creek, a small headwater watershed in Southeast China. During the transition and post-impact periods of dam construction, the land cover in the L–S Creek watershed underwent dynamic changes within the affected area. Changes in land cover were dominated by a surge in water and buildup and a decrease in woodland and cropland areas; bareland also increased steadily during construction. Woodlands and croplands were mainly flooded into water areas, although some were converted to bareland and built-up areas owing to the combined impact of dam construction and urbanization. By linking land cover changes with landscape patterns, we found that land use changes in water were significantly associated with landscape fragmentation and heterogeneity in the impacted zone. Our research demonstrates how damming can change land cover locally and may provide a basis for sustainable land management within the context of the extensive development of cascade hydropower dams.