Payments for Watershed Services

Author: Guido Sabatini has obtained a Bsc degree in Environmental Engineering in Florence (Italy) before moving to Sweden, where he is currently enrolled as a Masters student of Water Resources Engineering at Lund University. He has joined CliMates’ Research Team in November 2013, right after his internship experience at the UNFCCC Secretariat in Bonn (Germany). Next March 2014, he is going to join the UN-SPIDER program where he will support disaster risk management activities for a 6-months period.

Payments for Watershed Services

When joining CliMates 4 months ago, I had been offered the chance to participate in the Agriwaterpedia contest, being part of CliMates’ research project on water and climate change. Agriwaterpedia.info is a wiki which focuses on agricultural water management and food security in developing countries with a particular emphasis on climate change. In this context, they organized a competition for the best article among a range of offered subjects, in order to share knowledge and engage those who work in agricultural water management to enhance their capacity to implement innovative solutions.

We thought it was interesting to participate because the suggested themes are deeply linked with CliMates’ activities and our commitment in gathering this generation around the issues of climate change. To enter the competition, we decide to write an article about Payment for Watershed Services. Although there is no golden rule in evaluating PWS benefits for stakeholders, the article provides with a brief overview of the different PWS schemes and highlights the connections between water, food security and climate change.

The role of watershed services such as water purification and regulation, erosion control, and river banks stabilization is going to be decisive as water quality and quantity become globally critical issues, and in some places will worsen due to climate change (USDA, 2009). In this regard, we are convinced that the voluntary, transaction-based instrument known as Payments for Watershed Services has potential to enhance resilience to risks such as climate change, water stress and food scarcity.

PWS aim at achieving economic optimum in watershed management by reducing external costs (e.g. the ones associated with having many suppliers and intermediary organizations) for the beneficiary/buyer, while promoting new, more sustainable practices among upstream landowners or land managers. This system has already proven its efficiency in Colombia (Cuencas Andinas Project) where reducing eutrophication caused by nutrient loads was a major issue, and in Kenya where, for over the last two and half decades, the population has doubled, boosting demand for power and water supply. These examples can give an idea of the range of PWS programs, which deeply vary in nature, size, context, location, final objectives and methods.

PWS are an interesting solution to protect watersheds because in contrast to traditional administrative instruments (e.g. ‘hard’ legislation and regulation known as ‘Command & Control’), they seek a Pareto-optimal improvement through a transaction-based model: in other words, no side (buyer or seller) should, in theory, be worse off. Today, PWS schemes are implemented by public authorities, international organizations and development agencies, NGOs and even private companies such as water bottlers or hydropower generation utilities.Although proponents of PWS and PES usually claim their potential to enhance resilience to risks such as climate change and food scarcity, one of the key challenges for PWS schemes, and for PES in general, is to demonstrate additional benefits. While numerous case studies worldwide claim the successful impact of PWS schemes in achieving desired outcomes, the question of additionality is often left unproven: how can one be sure the results obtained (for example improved food security, revenue, carbon sequestration, water security etc.) were in fact caused by the scheme? Or would the evolutions observed have occurred regardless of the project? These questions often remain opened. Empirical reviews have suggested a number of solutions to palliate the lack of demonstrated additional benefits including constructing simple control groups or identifying ecological and socioeconomic factors which might influence the outcome measure. Integrating these quasi-experimental elements into PWS project design can not only improve management of the mechanism in order to achieve better results, it can also provide enhanced credibility of the project, thereby attracting publicity and potential funding, but also help determine where and how the design could be replicated.

PWS have still a long way to go, more impacts to generate, and improvements to be made. We believe that quantifying the opportunity cost of providing services is often essential during the initial step of project design.

We are convinced more collaboration among various entities is needed as a way to create a positive market environment. Increasing cooperation can be achieved by identifying buyers who have an incentive to invest in local watershed and land management practices and sellers who need to be incentivized to adequately implement sustainable actions (Porras et al., 2008).

Finally, we are convinced that because PWS schemes are complex and intertwined, they need to involve a variety of profiles and skills in order to prove themselves efficient. For example they should involve project managers to lead the process, economists and/or social scientists to determine opportunity costs and model how modifying incentives could alter behavior, or evaluators to determine successes and shortcomings of the intervention and induce iterative learning.

We are glad to invite you all to the reading of the article on the Agriwaterpedia portal.

by Guido Sabatini


Related readings

Sabatini G., Ter-Minassian Z., 2013. Payment for Watershed Services. Online available at: http://agriwaterpedia.info/wiki/Payments_for_Watershed_Services

International Institute for Environment and Development, 2004. Cuencas Andinas Project, Colombia. Online available at: http://www.watershedmarkets.org/casestudies/Colombia_Fuquene_E.html

IFAD, 2012. Payments for watershed services, Green water credits in Kenya. Online available at: http://www.ifad.org/english/water/innowat/topic/payments.htm

References

Porras, I., Grieg-Gran, M., & Neves, N., 2008. All that glitters: A review of payments for watershed services in developing countries. Natural Resource Issues (Vol. 11, p. 138). London, UK. Retrieved from: http://pubs.iied.org/13542IIED.html

USDA, 2009. Watershed Services: http://www.fs.fed.us/ecosystemservices/watershed.shtml

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