Around the world, more are being paid to protect water

An emerging market around the world is seeing more and more government agencies and other organisations compensating people to protect natural water resources.

The practice is called payments for watershed services, or PWS.

“While PWS may not be the only solution, … in some parts of the world it can be part of the solution,” states a new report from the Ecosystem Marketplace. “In some cases it can help change the way we value water, and it can generate the resources needed to remediate and protect our watersheds.”

“State of Watershed Payments: An Emerging Marketplace” describes how such compensation programmes are increasingly being launched in places as diverse as Latin America, China and the US to protect vital natural water resources. These programmes offer rewards to people whose behaviour can impact water quality, for better or for worse.

“Our findings suggest growing awareness by the public and private sectors worldwide of the water quality crisis, and acknowledgement that the problem is too big to be solved by traditional approaches alone,” said Michael Jenkins, president and CEO of Forest Trends, a non-profit that operates the Ecosystem Marketplace. “But the billions of dollars that are being spent on strategies aimed at protecting water resources represent only a snapshot of the potential for using market-based incentives to reduce threats to water.”

The new study finds that China and the US lead in terms of number of programmes and dollars spent. Between 2000 and 2008, for example, the number of Chinese watershed payment programmes grew from 8 to 47, and the amount paid increased from $1 billion to $7.8 billion. Many of the payments are directed toward farmers in return for them reducing pollution in and around forested areas.

In the US, watershed service payments grew from $629 million in 2002 to $1.35 billion in 2008. With new federal actions now under way to restore critical watersheds, that amount is poised to grow even larger, the report states.

While not the leader in dollars spent, Latin America has taken the most innovative approach toward watershed payments, with a total of 10 countries having initiatives of some kind under way at either the local, state or national level. In Brazil, for example, the state of Espirito Santo pays farmers for closing off certain pastures in three river basins, with compensation for each litre of lost milk production caused by the closure. Funds for the payments comes from water tariffs, oil and gas exploration royalties and hydropower product royalties.

Latin America, the report notes, “is where some of the real innovations are to be found, both in terms of how the payments are made, as well as in how their effects are measured, monitored, perfected, and replicated. In particular, the use of trust funds to channel money that is coming from both public and private sources is one Latin American innovation that could usefully spread not only throughout that continent, but to many other parts of the world, including developed countries such as the US and in Europe.”