Watershed Payment for Ecosystem Services (PES) Mechanism for

Integrated Watershed Governance

- Appendices

Hebin Lin Kyoto University, Japan

Hebin.lin@gmail.com

Final Review Meeting and International Symposium of the Integrated Lake Basin Management (ILBM)-Governance Project, November 2-7, Shiga, Japan

Appendix 1

Payment for Watershed Services in Asia: Evidence and Evaluation-Additional Information

Hebin Lin

Graduate School of Global Environmental Studies, Kyoto University, Japanhebin.lin@ht7.ecs.kyoto-u.ac.jp

Presentation in the Second-Year Review Meeting of the Integrated Lake Basin Management (ILBM)-Governance Project, February 22-28, Putra Jaya,

Malaysia

Leading Watershed-PES Research Institutes and Projects

IIED

International Institute of Environment and Development; "Developing Markets for Watershed Protection Services and Improved Livelihoods" (DMWSIL) projects in China (1), Indonesia (1), India (1), South Africa, Jamaica, Saint Lucia, Grenada, Trinidad and Tobago, and, Saint Vincent and the Grenadines, Bolivia; “Global reviews and country diagnosis of PWS projects" in Vietnam, Nepal (1), Pakistan, Kenya, Uganda, Mexico, Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Colombia, Ecuador, Peru, and Brazil.

ICRAFInternational Centre for Research in Agroforestry; "Rewarding Upland Poor for Environmental Services" (RUPES) projects in Philippines (1), Indonesia (2), and Nepal (2).

WWFWorld Wild Fund for Nature; "PES projects" in Philippines (2), Indonesia (3), Kenya, South Africa, Mexico, and Chile.

IIED, WWF and CARE

"Equitable Payments for Watershed Services”; Projects in Indonesia (4), Tanzania, and Guatemala.

World Bank Projects in (Completed) Costa Rica; (under implementation) South Africa, Mexico, El Salvador, Nicaragua, Colombia; (under preparation) Kenya, Panama, and Venezuela.

Forest Trend Katoomba Group Projects in Kenya, Uganda, Tanzania, Malawi, Madagascar and South Africa.

GTZ German Technical Co-operation, Dominican Republic; Projects in Colombia, Peru, Bolivia, and Brazil.

SDC Swiss Agency for Development and Cooperation; Projects in El Salvador, Honduras and Nicaragua.

Key ReferencesAgarwal et al. (2007); Gutman (2003); Hartmann and Petersen (2004); ICRAF (2003); Landell-Mills and Porras (2002); Leimona et al. (2007); Munawir and Vermeulen (2007); Porras and Neves (2006-28 to 2006-42); Porras et al. (2008); UNCEC (2007); WWF(2006); Zuo et al. (2005); ILEC (2005); Sun and Chen (2002); Lu et al. (2002); Jin et al. (2009).3

Issues – Incentives from Signals of Ecosystem Degradation

PES in Costa Rica (1)• Background

- Fastest deforestation rates in Latin America;- Subsidies eliminated during early 1990s during Structural

Adjustment Plan (WB/IMF);- Post-Rio with high expectations on carbon markets and bio-

prospecting options.• PES Program (PSA), created by The Law in 1996

- Clearly recognized forests as providers of biodiversity protection, water protection, landscape beauty and carbon sequestration;

- Recognized forest owners should be paid for these services.

5(Source: Porras, 2007c)

6

75

21

4151

0

10

20

30

40

50

60

70

80

1940 1987 1997 2005(Interpreted from Porras, 2007)

Watershed-PES in Costa Rica (2)

Watershed-PES in Costa Rica (3)• Initiative

- Allocates proportion of Fuel Tax revenues;- Creates the institutions (FONAFIFO) to manage the system

(charges beneficiaries of ES and uses 7% of total budget).• New development

- Water: New water tariffs that internalize the environmental cost (approved in 2006);

- Carbon: FONAFIFO has a portfolio of investment ready for specific or over-the-counter carbon sales;

- Biodiversity: Creation of a Biodiversity Conservation Fund for longer-term (or guaranteed renewal) protection contracts.

7(Source: Porras, 2007c)

8

Watershed-PES In Mexico (1) – Deforestation(Varela, 2007)

9

Watershed-PES In Mexico (2) - Overexploited Aquifer (Varela, 2007)

10

Watershed-PES In Mexico (3) – CoatepecWatershed (Varela, 2007)

Management Activities –Usually Locally Identified

12

Watershed-PES in the Caribbean (1) (Interpreted from McIntosh

and Leotaud, 2007)

Trinidad& Tobago

Saint Lucia Saint VincentJamaica Dominican Republic

Grenada

Watershed-PES in the Caribbean (2) Saint Lucia, Talvern Watershed

• Goal- Conducting a hydrological assessment of the Talvan water

catchment;- Considering the past and current land use practices, the

extent of watercourse degradation and its impact on water quality and quantity in the Talvan catchment;

- Considering the impact of the intervention activities of the Talvan Water Catchment Group (TWCG).

13(Source: Cox, 2004)

14(Source: Cox, 2004)

Watershed-PES in the Caribbean (3) Saint Lucia, Talvern Watershed (Interpreted from Cox, 2004)

15

Crop

Tree crop

Wattles (barriers against overland soil wash)

Grass barrier

Geo-textile mat with stakes (cover exposed soil on river bank)

Soil accumulation behind wattle

(Source: Cox, 2004)

Watershed-PES in the Caribbean (3) Saint Lucia, Talvern Watershed (Interpreted from Cox, 2004)

Wattles (Fascines)

• A wattle or fascine is a bundle of live woody stems when placed along the contour in direct contact with the ground, propagates to produce a dense hedgerow.

• This measure serves to arrest surface wash of eroded material upslope behind the wattle.

• A variety of plant material can be used. Gliricidia and bamboo among the species that can be easily used for this purpose.

• Wattles have been installed along the main river at Talvan as a front line defense to reduce sediment wash from adjacent cultivations.

16(Source: Cox, 2004)

17(Source: Cox, 2004)

Saint Lucia-Measure of Wattles

Stakeholders – Can Be Tailored

19

Funding – Can Be Diverse

21

Proambiente program to promote environmental sustainability with government budget.

Plantar project financed by the World Bank’s Prototype Carbon Fund to provide economic incentives for sustainable wood supplies.Ecological Value Added Tax (VAT)

for watershed conservation.

Site Selection – Not Necessarily Consistent with Richness of

Services

23

Democratic Republic of

Congo

Madagascar

Ethiopia

Cameroon

Hydroelectric capability of Africa is mainly located in its most institutionally weak nations (Adapted from Ferraro, 2007).

Watershed-PES in Africa (1)

24

UgandaKenyaTanzaniaMalawi

Madagascar

South Africa

Katoomba Group of ForesttrendsWatershed-PES Sites in Africa

Watershed-PES in Africa- (2)

(Interpreted from Katoomba group website)

25

ICRAF (PRESA project) Watershed-PES sites in Africa (adapted from Ferraro, 2007)

Watershed-PES in Africa- (3)

Appendix 2 – Looking Inside the Watershed-PES Projects

(1)India Watershed-PES: Success and Failure of Community Negotiation

(2)Indonesia: Participation for Explicit Upstream-Downstream Transaction

(3)South-East Asia: Taking into Account of Local Livelihood for Land-Water Regulating Services

27(PWS sites in India. Source: Agarwal et al., 2007)

IIED Project Watershed-PES Sites in India (Interpreted from Agarwal et al., 2007)

DMWSIL (Developing Markets for Watershed Protection Services and Improved Livelihoods)

Palampur

Bhoj

Kuhan

Suan

(1) India Watershed-PES

DMWSIL in India - 1

• Background: India is facing an acute scarcity of irrigation and drinking water both in villages and cities, particularly in summer months when springs, streams and rivers have reduced flows or dry up. Watershed protection services are perhaps the most valuable of forest environmental services in India.

• Goal: To develop and test IBMs for watershed protection services and improved livelihoods at micro- and macro-scales.

28(Source: Agarwal et al., 2007)

DMWSIL in India - 2• Site Selection Criteria (Essential)

- A watershed service related to land use is clearly discernible;- Clearly identified watershed service suppliers and receivers are

present and located in reasonably close proximity;- Receivers are facing major problems due to poor quality of

service which have a strong economic impact on the receivers;- The solution to the problem should lie in the upstream area. That

is, the management activities of the suppliers directly affect the quality of watershed service of receivers;

- There should be willingness and enthusiasm among both upstream and downstream communities to participate in a transaction with favourable political climate;

- There should be a willingness to pay by the watershed service receiver to improve the service;

- There should be no conflicts between the upstream and downstream stakeholders that could affect the process.

29(Source: Agarwal et al., 2007)

DMWSIL in India - 3• Site Selection Criteria (Desirable)

- Improving management of the watershed results in a ‘win–win’ situation for suppliers and receivers;

- There is a possibility of cooperation with line departments and other key organisations in the area;

- Watershed service can be ‘bundled’ with other services;- Presence of a facilitative organisation;- Suppliers and receivers are organised.- Certain type of transactions are already taking place

between suppliers and receivers;- Presence of traditional social linkages and mechanisms

for maintaining watershed-related services;- Existence of baseline hydrological data.

30(Source: Agarwal et al., 2007)

DMWSIL in India - 4• Characteristics and impact of incentive-based mechanisms

- Impact on livelihoods: unlikely to substantially address poverty;

- Moral authority of local-level payments: the moral value of a rupee contributed locally is significantly higher than a rupee from a government or NGO scheme;

- The process of developing an incentive-based mechanism can lead to a greater voice for the marginalised;

• Attributes affecting decision making- A match between the spatial scale of biophysical processes and

administrative areas can play an important role in facilitating agreements;

- A match between the temporal scale of biophysical processes and decision making processes can play an important role in facilitating agreements.

31(Source: Agarwal et al., 2007)

DMWSIL in India - 5• Land use changes

- Linking land-use practices to watershed services is important for any agreement, but difficult to make in practice;

- Locally generated and win–win options for land-use change are more likely to work;

• Role of local institutions- Functional local institutions reduce transaction costs;- Transparency is both required and created by IBMs.

32(Source: Agarwal et al., 2007)

DMWSIL in India - 6• The negotiation process

- Downstream buyers need to be convinced by clear benefits;

- Tactics for engaging stakeholders vary by stakeholder group;

- Endogenous champions are critical to drive the process.• Nature of the mechanism

- The nature of payments, role of stakeholders, duration of payments and contingency varies;

- An IBM process that respects and adapts to the needs of various stakeholders upstream is more likely to sustain.

33(Source: Agarwal et al., 2007)

(Source: adapted from Agarwal et al., 2007)

India

34

Payment ServicesArea Water quantity (V)/quality (Q)

A: Kuhan (360 ha.) (rural-rural, agreed)

(V) Silt load reduction in streamfor improved water quantity.

B: Suan (210 ha.) (rural-rural, failed)

(V) Increased infiltration for improved water quantity.

C: Bhoj (360 km2.) (urban-rural, potential)

(Q) Reduced nutrient runoff for improved water quality downstream.

A B

C

Watershed problems ManagementAgriculture Agriculture

A: Kuhan

Background: Under the second phase of the Changar Project (GTZ), a dam was built across the main drainage line in 2003 at the downstream village of Kuhan and an LIS (Lift Irrigation System) was installed. About 8 farmers were using this system to irrigate about 0.4 ha, mostly for vegetable cultivation, with substantial gains from this changed cropping pattern.Problem: (water) High silt load (20 tons/ha/year on the higher side of the range for the Changar area of 3.6–22 tons/ha/year) results in the rapid silting up of the reservoir that serves as the water source for the LIS.

(1) Grazing control to reduce erosion. (2) Brushwood checkdams to trap silt in stream.

B: Suan

Background: Natural springs had started to dry up in the village in the summer and the upper forest and hayland area experienced fire almost on an annual basis. Villagers want to install an LIS on the to irrigate their agricultural fields for improving livelihoods.Problem: (water) Degradation of land in the upper catchment realized by villages (1995-2000); (soil) Forest and grassland fires leave hard-baked soil with poor infiltration, which leads to greater wet season runoff and reduced dry season flows.

(1) Fire lines. (2) Timely harvesting to control fire.

C: Bhoj

Background: An interest in improving the water quality of the lake.Problem: agricultural runoff from the lake catchment into the wetlands.

(1) Organic farming. (2) Riparian buffers. (3) Composting.

35

India

(Source: interpreted from Agarwal et al., 2007)

Watershed problem Management activity

36(Source: Interpreted from Agarwal et al., 2007)

India

Perceived Governance of Watershed-PESFacilitator Demand Intermediary Supply Catchment-administration boundaries

Direct benefit to downstream (stakeholder)

Leading institution (tenure)

Consulting to upstream

Opportunity cost to upstream

Kuhan (rural-rural, agreed)

Overlapped Convincing (single)

Existed(land; long)

Adequate Small

Suan (rural-rural, failed)

Unconvincing (single)

Inadequate Large

Bhoj (urban-rural, potential)

Separated Convincing (multiple)

Absent (politics; short)

Valuation & payment

Negotiation & consensus

37

IIED Project Watershed-PES Sites in India (Interpreted from Munawir and Vermeulen, 2008)DMWSIL (Developing Markets for Watershed Protection Services and Improved Livelihoods)

Cidanau watershed (Banten province)

Brantas river (East Java province)

(2) Indonesian Watershed-PES

DMWSIL in Indonesia -1• Contents

- Facilitation of upstream– downstream transactions;- Supporting research on a demand-driven and participatory

basis;- Developing a national learning network active in issues of

watershed management and finance;- Documentation and dissemination of lessons learned from

the project nationally, regionally and internationally.• Sites

- Brantas river in East Java- Cidanau river in East Java

38(Source: Munawir and Vermeulen, 2008)

39(Source: Munawir and Vermeulen, 2008)

Indonesia

40(Source: Munawir and Vermeulen, 2008)

Indonesia

41

Brantas Watershed

Cidanau Watershed

: Ecosystem services: Payment: Facilitation

FKDC: CidanauCatchment Communication Forum

KTI: Krakatau Water Industry

LP3ES: Institute for Social and Economic Research, Education and Information

PJT1: Brantas River Basin Operator

YPP: Rural Development Foundation

(Source: Munawir and Vermeulen, 2008)

Indonesia

DMWSIL in Indonesia (2)• Lessons

- Watershed-PES as an entry point to invite stakeholders to think and take actions towards sustainable and integrated watershed management;

- Fundamental changes in how various stakeholders see their own roles are needed for PES to become widely accepted;

- Building trust is a large part of the process of developing durable human transactions;

- Large-scale land-use changes are likely to be needed to achieve changes in water quantity and quality at the scale of the whole watershed.

42(Source: Munawir and Vermeulen, 2008)

(3) RUPES (Rewarding Upland Poor for Environmental Services) Projects in Asia• Multiple donor funded RUPES-I Project (2002-2007)

supported:- 6 action research sites (Bungo, Singkarak,

Sumberjaya in Indonesia; Bakun and Kalahan in the Philippines; Kulekhani in Nepal);

- 12 learning sites in Asia (India, Vietnam, Kamboja, China).

• The project resulted in:- Pilot schemes on rewarding localized watershed-

related ecosystem services.- Tools for the rapid assessment of environmental

values.

43(Source: Leimona et al., 2007)

44(Source: Leimona et al., 2007)

RUPES (Rewarding Upland Poor for Environmental Services) Projects in Asia

45(Source: ICRAF, 2003, adapted from John Dixon et al. (2001), FAO and World Bank)

Key combinations for watershed functionsDownstream Upstream Locations1 4 Java (Indonesia); W. Sumatra (Indonesia); S. Sulawesi (Indonesia); N.

Thailand; N. Vietnam; Mindanao (Philippines); Luzon (Philippines)1 8 Thailand; N. Sumatra; SE Sulawesi (Indonesia); Laos; Cambodia; Vietnam.1 2 Scarce

46

RUPES Watershed-PES Site in Indonesia –Singkarak Lake (Noordwijk, 2007)