Payments for Watershed Services

Deepening understanding and PWS sharing lessons with implications for

east and southern Africa

What are the key problems?• Landuse

Severe degradation of ecosystemsLoss in goods and servicesMassive land use change

• WaterSpecific MDG –reduce by 50% by 2015Basic need of 20 to 50 litres a dayDirectly related to public health1.1 billion no access to safe waterClimate change will exacerbate

What is the big idea?

Current land uses cause external costs

Landuse systems

Fina

ncia

l ben

e fits

Agriculture

Other

landuses

Environmental

Costs

Source: Pagiola (2003)

Soci

al c

osts

Internalising the costs

Landuse systems

Fina

ncia

l ben

e fits

Agriculture

Other

landuses

Source: Pagiola (2003)

Soci

al c

osts

Other

landuses

Maintenance of existing natural habitats (reduce extensification)

Agriculture with conservation measures

Re-afforestation

Who is doing what in the watersheds market?

• What is being bought?Changes in water quantityChanges in water quality

• Who is buying watershed servicesPrivate sector buyersGovernments in national programmes

• Who is selling watershed servicesLand holders and managers

Developing markets for watershed protection services and improved livelihoods• Purpose: “to increase understanding of the potential role

of market mechanisms in promoting the provision of watershed services for improving livelihoods in developing countries”

• Action-learning methodology• Bolivia, Indonesia, India, South Africa and Caribbean• Approximately 10 sites, 3 years

Outline• Technical Challenges – Chetan Agarwal,

Winrock India

• Poverty and livelihood impacts – Nigel Asquith, Natura Bolivia

2. PWS – the technical challenges• Hydrology - land management & watershed services: complex

relation makes definition of the core problem very difficult– Impacts of protection, planting, organic farming on quality and

quantity of water– Relative infiltration, runoff and erosion rates

• Many myths particularly with water quantity and regulation– Trees bring rain– Trees can increase dry-season flows

• Need specific context assessment• What is the core problem and what is the technical

solution • Multiple problems, often multiple solutions

IBMs at Bhoj Wetlands• Land change

– Fertilizer Compost, etc – Pesticides IPM, including bio-pesticides– Riparian buffer zones (?) – Other silt control options ?– Cow dung cakes to bio-gas ?

• Options for transactions– Cost of Technical Assistance on organic techniques – Cost of group formation and maintaining Internal Control Systems

(ICS)– Payment for reduced yield in transition period (conventional to

organic)– Cost of certification (provides long term incentive to farmers to keep

using organic techniques + in-built verification system)– Credit at reduced rates from local bank– Organic inputs at reduced rates– Purchase of produce at higher rates

Bhopal – case study of the complexities

• Multiple challenges• Small scale farming – no farmer

organizations• Municipality – water rates 30% of cost• Governance – LCA – implementer,

regulator, monitor. Data not public; • Evidence of land use impacts ?• More interest in alternative dam

3. Poverty and livelihood impacts

Progress and lessons learned from markets for watershed services

IIED in Bolivia1) National institutions and laws: who’s who in Bolivia water management (A Duran and R Bustamente)2) The decentralization law and local incentives for watershed management (C H Molina)3) Municipalities, prefectures, and local incentives for natural resource management (Maria Teresa Vargas)4) Hydrological resources and the forest/water relationship in Bolivia (Robert Muller)5) A diagnostic analysis of the potential of 10 Bolivian watersheds for PES systems (Robert Muller)6) Hydrological evaluation of the Comarapa and Pirai watersheds (Jorge Seifert Granzin)7) Hydrological evaluation of the Los Negros and Quirusillas watersheds (Mauricio Auza)8) Government policies on poverty reduction and market mechanisms for watershed management (E Osinaga)9) Updated analysis of market initiatives for watershed management in Bolivia (Nigel Asquith)10)Drivers of land use change in the Santa Cruz valleys (Marco Antonio del Rio)11)The role of property rights in restricting/promoting markets for watershed management (D Pacheco)12)Stakeholder analysis in two watersheds: are market mechanisms an acceptable form of watershed management in

Bolivia’s valleys? (Cindy Michel)13)Communal watershed management schemes in Inchausi: lessons for promoting markets? (C Crespo)14)Communal watershed management schemes in Tiquipaya: lessons for promoting markets (P Pinto)15)Integrated water management in Bolivia: lessons for markets from the Rio Pirai (Juan Carlos Sauma) 16)IWM in Bolivia: lessons for markets from the San Jacinto basin (Ekaterina Pivinskaya)17)The socioeconomics of promoting market mechanisms for management in Quirusillas (Karen Garcia)18)Potential for markets for watershed management and improved livelihoods in Comarapa (Edil Osinaga)19)Potential for markets for watershed management and improved livelihoods in Quirusillas (Edil Osinaga)20)Potential for markets for watershed management and improved livelihoods in Los Negros (Esteban Cardona)21)Potential for markets for watershed management and improved livelihoods in in the Pirai river (W.Cabrera)22)Potential for markets for watershed management in the Rio Grande (Israel Vargas and Edil Osinaga) 23)Cultural aspects and vision of water use and management (Carmen Miranda) 24)Watershed Management in Bolivia, and analysis of water management in Andean watersheds (A Duran)25)Bolivia’s Water Resources: Supply, Quality and Use (Jorge Molina)26)The Association for Water Protection in Tarija and the Communities of the Tolomosa and Vitoria Watersheds (Alfonso

Blanco and Ricardo Aguilar)

Four lessons

1. As watershed services decline, inequity in allocation increases

2. PWS may be poverty-neutral and or do harm, or do good

3. Payments help but are unlikely to reduce poverty

4. Indirect effects of PWS have significant poverty-reduction potential

1. As watershed services decline, inequity in their allocation increases

• Impacts of declining watershed services are borne primarily by poorer people

• In the Caribbean, rural water users are rationed while hotels, urban residents and large-scale farmers are given priority

• The poor often bear the brunt of erosion (China/India)

• In South Africa inequitable allocation of land and water, is still very much in evidence

2. (Like any tool) PWS may be poverty-neutral and can even harm

• Tax rebates are of little use if the land practices targeted are those of poor people who pay no tax (Caribbean)

• In China farmers have been forced to abandon lands under government schemes to protect watershed areas.

• Unskilled Los Negros bee keepers may not make money selling honey

3. Payments help but are unlikely (by themselves) to reduce poverty

• Payments made at Brantas, Kuhan, and Los Negros have supplemented local livelihoods

• These payments are modest and unlikely to have significant large-scale impact on poverty

34.95.816.0102.3498.4454.0Total

791515Benito Aguiler

4520Homando Rodas

8839Pracedes Gallegos

681015Victor Uribe

47315.8Romelio Chilo

42310.576.07Alcides Caballero and Felicio Cosio

310.4213.174Matilde Castellon

4910.238.8Marcelino Ortuno

2972.923220.958Hermogenes Galvis

792.817.610.19Erasmo Ugarte

2416Diovigildo Ayala

651.127.2615.8Demetrio Godoy

8227.2621.8Asterio Ayala

6822.5Aquilina Figueroa

35101.88.026.38Semido Arevalo

2026.9580.5Albino Galvis and Mario Justiniano

30213.19Serafin Carrasco

1,05613.69170.75210.2Roberto Salguero

1757.34Demetrio Vargas

19511.0131.4530.4Esteban Peralta

2538024.32Jose Guillen

$3/ha$1.5/ha$1.5/ha$2.25/ha$2.25/ha$3/haCONSERVATION VALUE/YEAR

PermanentTemporaryMoist forest

Cloud forest

DOLLAR EQUIVALENT VALUE OF IN-KIND

PAYMENT

LENGTH OF

CONTRACT

PARAMO WITHOUT INTERVENTION

SECONDARY FOREST

(OLD)

PRIMARY FOREST WITH INTERVENTION

PRIMARY FOREST WITHOUT

INTERVENTION

Forest owners in the Conservation

System

4. Indirect effects of PWS have significant poverty-reduction potential• Building social capital - PWS can bring

stakeholders together to work through key issues and antagonisms

• Empowerment: contract-based PWS schemes have empowered previously marginalized communities (Brantas and Los Negros)

• Benefits can extend to those with few land access and use rights - poor people are now involved in increased NTFP collection linked to farmers’ conservation of water springs (Brantas)

Conclusions

1. As watershed services decline, inequity in their allocation increases

2. PWS may be poverty-neutral/ do harm/ do good

3. Payments help but are unlikely by themselves to reduce poverty

4. Indirect effects of PWS have significant poverty-reduction potential

Implications for eastern and southern Africa?

•Powerful tool, in special circumstances

•Needs skilled, innovative facilitation

•Long term Process not a short term Project

•Mainstreaming requires policy and legal change

•Careful design can help reduce poverty, but don’t overload PWS schemes with poverty reduction goals