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1
Water FundsLatin American Water Funds Partnership
Experiences from
Scaling Up Watershed Conservation
Fernando Veiga
Rebecca Tharme
The Nature Conservancy
2
Investing in
Green Infrastructure
Ecosystems provide services to society
Growing evidence that the conservation and restoration of ecosystems are
key to guarantee water security for human needs, and in many cases
represent the most cost-effective solutions
Water funds rely on concept of ecosystem services
e.g. erosion abatement; sediment reduction; nutrient filtration;
flow regulation; flood control - clean reliable water sources
Water Funds invest in conserving watersheds to improve or maintain water-
related benefits and regulate water-related risks
3
Users Providers
Quito Ecuador
Population 2 million
Condor Bioreserve
& Surrounding farmlands
$
WATER
SERVICES
$Financial
Fund
Water Funds
Board
Water Fund
ECOSYSTEM SERVICES MODEL
WF is a conservation trust fund that finances watershed protection
Water Funds are effective
tools for watershed
conservation because they:
• Connect suppliers of ecosystem
services with beneficiaries,
providing direct benefits
downstream and improved
livelihoods upstream (efficient)
• Mitigate water scarcity and pollution
problems at the source rather than
end-of-pipe treatments (effective)
• Provide a sustained funding
mechanism with a flexible
governance structure to allow for
adaptive management of risks and
opportunities (sustainable)
5
• Most important water supply area in
Brasil - 50% of São Paulo
metropolitan area, 9 Mill people
• Poor land-use practices in sensitive
areas undermining system capacity
to serve growing demand
• Invest models estimated mean
erosion rates and sediment loads –
14 300 ha of priority areas (3% of
total area) for water fund
investments
= 50% of sediments abated
= 600 000 tons per year
• US$ 4.9 million/year of potential
reduction in water treatment and
drainage costs (excl. other potential
benefits e.g. contaminants
reduction)
Business case
São Paulo, Brasil
6
0
3
6
9
12
15
18
2006 2007 2008 2009 2010 Promedio
Producción de Caña 5 Riegos Producción de Caña 4 Riegos
Sugar cane harvest (million tons)
Source: Sugar Cane Research Centre - Cenicaña – estimations Asocaña
8.7% decrease in productivity
Loss of $33 million / year
Loss of $250 / ha / year
Sugar cane mills are main funders
- for water supply assurance
Production with 5 cycles Production with 4 cycles
Business case
Cauca Valley, Colombia
- Most important sugar cane production area in country (200 000 ha)
- Increased pressure on water resources - potential future reduction from
5 to 4 irrigation cycles with current degradation trends
7
0.0
10.0
20.0
30.0
40.0
50.0
Conservado Uso actual (con política ambiental)
Uso fuera parque (sin política ambiental)
m3/h
a/a
ño
tonela
das/h
a/a
ño
Cantidad agua
Cantidad de sedimentos
Sources: CIAT 2007, Bogota Water Fund
Water quantity
Quantity of sediments (Component of Quality)
Conserved
Area
Uses inside
Protected Area
Outside
Protected Area
m3/h
a/y
ea
r
To
n/h
a/y
ea
r Regulation significant but not quantified
10:1
Reducing sediment loads
by 2 Million tons
Projected savings
USD 3.5 M per year in
treatment costs
Feasibility Study Economic Rationale
Bogotá, Colombia
8
Proof of Concept
Quito Water Fund
Importance
• 2 million residents
• Condor Bioreserve: 2.5 million acres, exceptional
biodiversity, inc. 760 bird spp.; 28 rivers
Partners
• EMPAAQ (Quito’s Water Agency); Quito Electric Company;
USAID; Swiss Development Corporation; Cerveceria National
(beer company); Tesalia Springs Co. (water bottling company)
Fund Progress
• 2000: $21 000 start-up 2013: ~ $13 000 000
• Since 2006, 2% of the water utility revenues
• Annual investments of nearly $2-3 million (leverage)
• Páramo and forest as biodiverse natural water tower
• 80% of water for the city of Quito, Ecuador, from three protected
areas and their buffer zones
• Conversion with land pressures reducing ability to provide services
9
Proof of Concept
Quito Water Fund
Benefits to People
• Permanent support through various programs to
communities close to the water sources
• Enrolled 30 500 children in environmental education
programs
• Over 200 families engaged in community development
projects in rural basins
Conservation
Progress
• 85 000 ha of public lands protected
• 19 000 ha of private lands restored and/or
under Best Management Practices
10
Steps to establish
a Water Fund
Pre-
feasibili
ty and
Evaluati
on
Which
ecosyste
m
services?
Where is
the area
of
influenc
Design
Feasibility
studies:
Environme
ntal
Socio-
economic
Institution
al
and legal
Negotiat
ion
Instituti
onal
arrange
ment
Partner
s’
commit
ment
(financi
al and
technica
Maturity
Financial
sustainab
ility
Consolid
ation of
field
activities
and
monitori
ng
Operatio
n
Contracts
with
local
stakehol
ders
Field
activities
Fund-
raising
Monitori
ng
11
Science-based approachContribution
to aquifers
Contribution
to flows
Sediments Coverage
Highest priority areas for conservation
Biodiversity connectivity
Sistema
Área ronda del río
(250 mts cada lado)
(Has)
Área en cobertura
natural para
conservación (Has)
%
Área intervenida
para restauración
(Has)
%
Río Amaime 7.126 3.135 44 3.991 56
Río Bolo 2.210 1.414 64 796 36
Río Desbaratado 1.016 772 76 244 24
Río Fraile 2.792 2.345 84 447 16
Río Nima 1.642 1.133 69 509 31
Río Tuluá 13.234 5.426 41 7.808 59
TOTAL 28.020 14.226 13.794Water for life and sustainability
Investment Portfolio
13
Investments
Private and communal lands1. Conservation agreements
2. Best agricultural and cattle ranching practices (silvopastoral systems)
3. Riparian forests
4. Reforestation and restoration
5. Income generation
6. Environmental education
Public areas1. Implementation of management plans
2. Park guards
14
Peru
Ecuador
Colombia
Brasil
15
WATER MONITORING
Water Monitoring Sites
Precipitation
• 3 sites
Flow
• 3 sites
Quality
• 9 sites
• 9 parameters
Parâmetro AnalíticoPHTurbidezDBOCorColiformes TermotolerantesOxigênio dissolvidoNitrogênio amoniacalFósforo TotalTemperatura
Community
Engagement
16
Biodiversity Monitoring
• Importance of riparian areas
•Terrestrial monitoring
of páramos and forests also showing first
encouraging results
(e.g. forest bird species in restoration areas)
Paulo Petry
Community monitoring
4218 families benefited upstream in watershed
Monitoring of multiple
water funds ongoing
TNC, FEMSA Foundation, IDB
and GEF Launched in 2011
20
The vision
Over the next 5 years $27 million in Seed Capital will
support direct investment of $143 million
in 32 Water Funds, leveraging additionally $500 million
providing long-term payments for environmental services
to rural communities, and securing
clean and sufficient water and
effectively conserving 7 million acres
for 50 million people in Latin America
1. Support the establishment and strengthening of the WFs
2. Identify and share best practices
3. Development of regional projects
4. Support monitoring initiatives
5. Keep developing the business cases
6. Raise awareness (Where Does Your Water Come From?)
7. Support the green infrastructure approach in water sector
loans (IDB and CAF)
8. Partner with water regulators with the aim of including the
watershed conservation costs in water tariffs (ADERASA –
PE, CR, BR)
Goals
Status
15 in evaluation
14 in design
13 operating
1 mature
Opportunities
• Exchange lessons learned
• Regional players (public
and private) – reduction of
transaction costs
• Diversity and cooperation
• Upscale (implementation
channel)
• Expand to new
geographies (Africa, USA)
Water Funds as at June 2013